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Enbridge pulls out pipeline stops Partners with ExxonMobil to explore U.S. Gulf Coast market for Alberta crude; shrugs off cost overrun for Alberta Clipper Gary Park For Petroleum News
Enbridge has teamed up with ExxonMobil to add another possible leg to its pipeline links from the Alberta oil sands to the United States.
The two companies have agreed to jointly explore the commercial development of a line from Patoka, Ill., to Beaufort, Texas, and eventually to Houston.
If it gains sufficient shipper backing, the 700-mile line would carry 400,000 barrels per day to the U.S. Gulf Coast market, handling oil sands output scheduled to come on stream by about 2010.
The line would likely carry blended bitumen and some synthetic crude and could find space for growing production in Montana and North Dakota which needs new markets.
ExxonMobil already has rights of way along its Pegasus pipeline, which links Patoka with the Gulf.
Although a cost estimate has not been disclosed, Enbridge is counting on the long life of the oil sands to recover the significant construction costs.
Enbridge Chief Executive Officer Pat Daniel said in a statement that the capabilities and experience of the two companies “lend strength to the proposal and will be complementary to Enbridge projects that are under development,” including Southern Access and Alberta Clipper.
Enbridge proceeding with Alberta Clipper The announcement closely follows an Enbridge announcement that, despite a 30 percent rise in capital costs, it is proceeding to the regulatory phase of Alberta Clipper, to deliver 450,000 bpd of Western Canadian crude to refineries in Wisconsin, with the ability to expand to 800,000 bpd.
It has filed an application with Canada’s National Energy Board to start construction on a 1,000-mile expansion of the mainline in Canada and the Lakehead system in the United States in 2008, targeting an in-service date of mid-2010. Work is under way filing applications with U.S. authorities.
The budget has climbed to C$2 billion for the Canadian segment from last year’s projected C$1.5 billion, while the U.S. portion has increased to C$1.07 billion from C$850 million.
But Daniel said Alberta Clipper, along with the company’s Southern Access system, which is under construction, will offer eventual capacity of 1.2 million bpd from Alberta to the U.S. Midwest.
Clipper will “ensure that timely new pipeline capacity is available to meet producers’ needs to transport growing supplies of crude oil from Alberta’s oil sands and the northern United States to refinery markets in the Midwest,” he said.
Costs rising in major infrastructure projects The jump in costs is no surprise at a time of rapid cost inflation in all major infrastructure undertakings.
A coal-fired power plant to be built in Alberta by 2011 is expected to cost 2.4 times what the same plant would have cost in 2005, according to Bob Hastings, an analyst with Canaccord Adams, who attributed the worldwide surge to the price of steel and construction materials, general labor, project operators, contractors and engineers — all of them in high demand globally.
However, some blotches are showing on the horizon as Enbridge and TransCanada push ahead with major pipeline ventures.
A National Energy Board review of TransCanada’s proposed 400,000 bpd Keystone pipeline from Alberta to Illinois started June 4 in the face of union opposition.
The Alberta Federation of Labor and the Communications Energy Paperworkers Union say it is not in the national interest to ship raw bitumen for upgrading and refining in the United States.
They say Keystone would deprive Albertans of thousands of high-paying, long-term jobs.
Aboriginal land claims unresolved In addition, Enbridge and TransCanada have been warned by aboriginal communities that pipelines proposed to cross southern Saskatchewan and Manitoba cross traditional lands where claims are unresolved.
First Nations in both provinces are intervening in the Keystone hearing and plan similar action relating to other pipelines.
Enbridge Pipelines President Leon Zupan registered his company’s concern in December 2006 when he wrote to federal Indian Affairs and Northern Development Minister Jim Prentice urging a timely settlement of outstanding land claims, noting that a failure to reach agreement could adversely affect projects that “Are very important to Enbridge and to the North American energy industry.”
Prentice replied that his government is pledged to deal with land claims and has appointed a former federal cabinet minister as a special representative to deal with issues in Manitoba.
TransCanada has held discussions with various First Nations, but insists resolution of the claims is strictly a matter for the government and the aboriginals.
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