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Providing coverage of Alaska and northern Canada's oil and gas industry
May 2006

Vol. 11, No. 19 Week of May 07, 2006

TransCanada, Enbridge back at it re. Alaska gas and oil sands

From their head office towers, which sit across the street from each other in downtown Calgary, TransCanada and Enbridge have resumed sniping at each other over their rival plans to get Alaska natural gas and Alberta oil sands to market.

After a prolonged quiet period, the tit-for-tat exchanges have resumed, with TransCanada Chief Executive Officer Hal Kvisle saying his company is best placed to carry North Slope gas through Canada and to open up new links from the oil sands to the U.S. Midwest.

His counterpart Pat Daniel begs to differ, especially on the oil sands front, arguing Enbridge has “many advantages, the prime one being significantly lower tolls.”

Kvisle said Canada’s largest gas pipeline company is best placed to get North Slope production to the Lower 48 and, just for good measure, put TransCanada in the driver’s seat in the race to the Midwest.

Kvisle: producers will choose TransCanada

Speaking during and after his company’s annual meeting April 28, Kvisle said ExxonMobil, BP and ConocoPhillips will ultimately choose the TransCanada option for carrying their gas across Canada because it has the most to offer.

He said five years of discussions have assured the Alaska producers that TransCanada can get their gas to market “more quickly and cheaper than anyone else can and that is the essence of our discussions.”

If a deal is concluded between the producers and the Alaska government, TransCanada will be eager to start “more urgent discussions … on how that gas would move through Canada,” Kvisle said.

TransCanada and Enbridge have locked horns over who should regulate and who should build the Canadian segment of the Alaska gasline.

Kvisle said the dispute has already been decided in TransCanada’s favor under the Northern Pipeline Act.

Enbridge: NPA too old

Enbridge and the producers have countered that so much time has passed since that decision the pipeline should be re-opened for bidding and placed under the jurisdiction of Canada’s National Energy Board, allowing a modern-day project to proceed.

The former Canadian government under Prime Minister Paul Martin promised to clarify its position, but never had a chance before it was defeated in January.

The new Conservative administration has only indicated it wants to settle unresolved matters facing the Mackenzie Gas Project before dealing with the Alaska issue.

Kvisle said he is worried that delays and a long regulatory process that have slowed the Mackenzie project could even stop the C$7.5 billion undertaking.

He said Canada’s first attempt to open up Arctic gas “hit a wall 25 years ago … and we have got to be prepared that that could happen again.”

TransCanada has a Memorandum of Understanding with the State of Alaska to build the Alaska portion of the line, but Gov. Frank Murkowski has focused instead on doing a deal with the North Slope producers.

The races to ship oil

On the race between TransCanada and Enbridge to ship more oil from Alberta to the Midwest, Kvisle said the “heartland of America” is the “most attractive long-term for Canadian crude.”

And TransCanada’s planned 435,000 barrel-per-day Keystone project “is the quickest way of getting a significant amount of new oil to market in the 2009-2010 timeframe.”

He said there are “no other projects of that magnitude … that could get that much oil into the market as quickly as we could.”

Enbridge is working on an even more ambitious plan, starting with 400,000 bpd of incremental volumes for its Southern Access system due to start service in 2009, followed by its 400,000 bpd Alberta Clipper pipeline that is now before potential shippers for a response.

Daniel reiterated in a May 3 conference call what he said in a March interview that Alberta Clipper will be the line of choice for oil sands producers chasing markets in the Midwest.

“If you put the two side-by-side, we don’t think Keystone can stand up to Clipper,” he said, arguing Clipper would gain a critical advantage by using a route alongside Enbridge’s existing Canadian mainline right of way to produce “significantly lower tolls” and would, among other things, provide a verity of products and shipping options.

He told the conference call that Clipper offers “significantly lower tolls.”

Kvisle fired back that the right of way is not a significant issue and “not a big deal at all” for the residents of North and South Dakota and Nebraska, where the Keystone would be built.

TransCanada has filed with regulators in the U.S. and expects to take an application to the National Energy Board soon.

—Gary Park






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