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No easy route to Asia for oil sands Enbridge Northern Gateway project from northern Alberta to Kitimat, B.C., draws opposition from First Nations, conservationists Gary Park For Petroleum News
The closer Enbridge moves to placing an application for an Alberta-to-Asia link for oil sands production before Canadian regulators, the more resistance to the project seems to build.
Its Northern Gateway project, involving a pipeline link from northern Alberta to northern British Columbia’s deepwater port at Kitimat for tanker delivery to several possible Asian markets, is high on Enbridge’s “areas-of-opportunity” shopping list beyond 2012.
With forecast capital spending of C$12.5 billion over the 2008-12 period, the company is looking for ways to continue steady and sustained growth post-2012.
“Make no mistake, the oil sands resource will be developed,” Chief Executive Officer Pat Daniel told shareholders at Enbridge’s annual meeting.
“North America needs the energy. It’s as simple as that and North America places a high value on a reliable, secure supply of energy and there are no better, more responsible people in the world than Canadians to develop that resource.”
With that conviction in mind, Daniel has a list of pipeline ventures he hopes Enbridge can “win” against competition from pipeline companies such as TransCanada and Kinder Morgan.
The race features shipping rights from Fort McMurray to Edmonton for Imperial Oil’s C$8 billion-plus, 300,000-barrels-per -day Kearl oil sands project, which is designed for startup volumes of 100,000 bpd and is likely to get corporate approval by mid-2009; the 200,000 bpd pipeline from the Sunrise project, a joint-venture by Husky Energy and BP; a combination of debottlenecking at Cushing, Okla., and the prospect of building new capacity to the Gulf Coast; and an opportunity in the U.S. Midwest to satisfy refinery expansions Marathon Oil and Husky have under way.
NEB application expected At the outer edge of this next phase of Enbridge’s dreams is Northern Gateway, which Daniel expects to result in an application to Canada’s National Energy Board this year for the 525,000 bpd export leg and a twin pipeline to import 193,000 bpd of condensate to improve the pipeline flow of oil sands production, with an in-service date of 2014-15.
The project has lurched from highs to lows since it was first mooted, making a sharp descent when PetroChina scrapped its efforts to aggregate 200,000 bpd of Alberta production, then making a strong reappearance last year.
Western Canadian producers and Pacific Rim refiners have now signaled their confidence in the project by committing C$100 million to obtain equity approval and will probably be ready to front up even more money, if it’s needed.
Northern Gateway, seen by some as a chance to buy insurance for producers should the U.S. restrict oil sands-related imports, is described by Daniel as “more and more a pricing play and optionality play for producers.”
Resistance grows But the support of industry for the concept is also being accompanied by growing resistance from several interest groups, notably aboriginals, environmentalists and landowners.
In an effort to win over some of those opponents, Enbridge has indicated it is ready to offer equity stakes in the pipeline for First Nations and communities along the route.
At Enbridge’s annual meeting, a number of British Columbia First Nations voiced their concerns about the aboriginal consultation process and the risks to river and water course crossing from potential leaks.
Daniel told the speakers Enbridge “does not want to be involved in a project that is opposed by and of concern to others. I want to be able to work with you along with my management team to make sure we can design a project that meets your needs and ours.”
But he challenged one speaker to “consider the broader importance of delivering energy to people who need it, whether they are here or in Southeast Asia or Africa. Energy is absolutely critical to our survival and our way of life.”
Shareholders defeated two resolutions relating to Northern Gateway that also lacked support from Enbridge’s board.
One from Ethical Funds asked directors to assess the costs and benefits of a policy requiring the consent of affected aboriginal communities before proceeding with construction of projects.
Board Chairman David Arledge said Enbridge believed it was up to regulators to decide whether projects should proceed.
He said those decisions were “based on a determination of whether a project is in the Canadian public interest, which requires a balancing of all the costs and benefits of all segments of society, with none having a veto.”
The second resolution wanted the board to report by Sept. 1 on the chances and liability of product spills associated with Northern Gateway pipelines, facilities and tankers.
Arledge argued that information should be part of the regulatory process under the National Energy Board and other regulators.
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