Canada’s National Energy Board has opened the door for Western Canadian crude to reach U.S. Gulf Coast refineries.
The breakthrough came with approval for ExxonMobil and Enbridge to reverse the flow of two mothballed U.S. pipelines that previously shipped crude to the Chicago refinery area.
Enbridge expects to start delivering 120,000 barrels per day from Chicago to Cushing, Okla., by late this year or early 2006, while ExxonMobil will extend the connection when it reopens a 660-mile pipeline to carry 65,000-80,000 bpd from Patoka, Ill., to Nederlan, Texas, on the Gulf Coast.
Finding new markets is crucial to oil sands producers as they embark on a growth phase that could see output climb from 1 million bpd to 2.6 million bpd by 2015 and 3.7 million bpd by 2020, using a base case developed by the Canadian Energy Research Institute.
An unconstrained growth scenario would result in 4 million bpd by 2015 and 4.7 million bpd by 2020.
Other hopes rest with Enbridge and Terasen, who are vying to build pipelines to the British Columbia coast, opening sea links to Asia and California.
Terasen working with Shell Canada
Terasen President John Reid told a conference call earlier in May that his company is now working with Shell Canada on a possible C$900 million loop to its Corridor pipeline between the Fort McMurray area and Edmonton to handle a doubling of output from Shell’s Muskeg River mine to 300,000 bpd by 2009.
If the negotiations are successful, Terasen expects to file a regulatory application in 2006.
Reid said Terasen is in talks with potential shippers in Canada and overseas to secure a commercial and tolling framework prior to holding an open season as early as June or July to expand its Trans Mountain system from Edmonton to Burnaby, British Columbia.
He said Terasen is involved in “active negotiations” with prospective Chinese buyers as part of its head-to-head competition with Enbridge, which is hoping to reach long-term commercial deals by year’s end for its proposed 400,000 bpd Gateway pipeline from Edmonton to a deepwater terminal at either Prince Rupert or Kitimat.
Enbridge has MOU with PetroChina
Enbridge Chief Executive Officer Pat Daniel told reporters after his company’s annual meeting earlier in May that although the deals are not locked up “we are confident that we are in a very strong position” to achieve a start-up in 2009 or 2010.
A memorandum of understanding has already been signed with PetroChina to cooperate on the pipeline development and obtain crude supplies.
Plans for Gateway include shipping 200,000 bpd to China, 100,000 to Japan, South Korea and other markets and 100,000 bpd to California.
Daniel said Enbridge feels positive about its efforts so far to secure “refining capacity and consumers, particularly in China.”
Although there is still public consultation and environmental work to be completed, he said a “good relationship” has been established with landowners that should avoid the right-of-way problems Imperial Oil has encountered with aboriginals in the Northwest Territories over the Mackenzie Valley pipeline.
