TransCanada is regaining a lead role in developing new outlets for crude from the Bakken and Alberta oil sands, while rival Enbridge is becoming bogged down in a series of pipeline spills compounded by yet another incident in the United States.
TransCanada has received final approval for its US$2.3 billion Gulf Coast pipeline project from Cushing, Okla., to Port Arthur and Houston and plans to start construction in “coming weeks” on the first leg of Keystone XL.
It is also attracting a “lot of interest” from major shippers in the proposed partial conversion of its underutilized natural gas Mainline to Central Canada to deliver 400,000-900,000 barrels per day of crude to Eastern Canadian refineries and possibly to Canada’s Atlantic Coast.
The Gulf Coast project, Keystone XL, if it, too, gets U.S. approval, and the Mainline conversion all offer hope of easing the bottleneck faced by Bakken producers.
Alex Pourbaix, TransCanada energy and oil pipelines president, indicated that only three months after the Mainline conversion was first announced the possible carrying capacity had been raised from 300,000-600,000 bpd.
Chief Executive Officer Russ Girling said the plan is being driven by forecasts of 2 million bpd of incremental production growth in the oil sands and 1 million bpd from the Bakken, creating the need “for a lot of transportation to move the crude to new markets.”
B.C. export pipelines wouldn’t impact conversion
He said the conversion plan would not be affected even if regulators and governments approve 1.3 million bpd of new pipelines from the oil sands to the British Columbia coast for export to Asia or 700,000 bpd to fill Keystone XL.
Meanwhile, the issuance of three key permits for the Gulf Coast project by the U.S. Army Corps of Engineers allows construction to start on that 485-mile system, which is expected to begin service in the second half of 2013, carrying 591,000 bpd to Port Arthur and 175,000 bpd on a lateral from Port Arthur to Houston – some of those volumes flowing from the Bakken.
The Enbridge-Enterprise Seaway pipeline is designed to raise its capacity from Cushing to the Texas refineries to 800,000 bpd by mid-2014 from the current 140,000 bpd.
Combined with the Gulf Coast project, that will raise capacity out of Cushing to 1.68 million bpd by the end of 2015.
Important underscored by WTI discount
The importance of those connections is underscored by Gulf Coast traders who say the persistent West Texas Intermediate discount, which was over US$16 a barrel by late July, stretches to December 2018 because of the Cushing bottleneck.
TransCanada also said it is continuing to work with the Nebraska Department of Environmental Quality to finalize an acceptable re-rerouting of Keystone XL through the state.
A U.S. Department of State review of the latest XL application is expected to be completed in the first quarter of 2013.
To soften some of its pipeline critics, TransCanada has voluntarily agreed to 57 additional safety procedures for the Gulf Coast pipeline, including more remotely controlled shutoff valves, increased pipeline inspections and burying the pipe deeper in the ground.
It will also use horizontal drilling under river crossings, allowing it to bury the pipe deeper on both sides of river banks, offering protection from floods or high river levels.
In addition, the pipe will be made of thicker steel as it crosses rivers, operate at lower pressure and be further protected by advanced non-abrasive coatings.
Crude to Irving still under consideration
The Mainline conversion plan stems partly from declining gas volumes from Western Canada which saw the pipeline post average deliveries of 4.4 billion cubic feet per day in the first half of 2012, down 1.5 billion cubic feet per day from a year earlier and about 2.6 billion cubic feet per day short of capacity.
TransCanada operates five lines as part of its 8,400-mile Mainline network from Alberta to Quebec.
It has already switched a six line to carry Canadian crude to Steele City, Nebraska, as the first phase of the Keystone system.
The company is examining a related plan to build about 50 miles of new pipe to carry crude from the end of the Mainline in Quebec to the St. Lawrence Seaway, where it could be moved by barge to Irving Oil’s 300,000 bpd refinery in Saint John, New Brunswick.
Enbridge fighting to preserve image
At the same time, Enbridge is working on a C$3.2 billion program to reverse its Line 9 in Central Canada to deliver oil sands and Bakken crude to Montreal and build new links to Eastern Canada and the U.S.
But Enbridge, fighting to protect its claims to operate safe pipelines and reeling from the scathing report by the U.S. National Transportation Safety Board of its handling of a 2010 pipeline rupture in Michigan, has been rocked by another oil spill in the U.S.
The U.S. Transportation Department’s Pipeline and Hazardous Materials Safety Administration and the U.S. Environmental Protection Agency were called to the scene in Wisconsin July 28 after 1,200 barrels leaked from its 318,000 bpd Line 14 that carries light sweet crude from Canada to Chicago-area refineries.
Two other pipelines – 400,000 bpd Line 61 and 670,000 Line 64 – were briefly shut as a result. Enbridge said the spill was contained in the field, most of which is in the pipeline’s right of way. No one was hurt.
Richard Adams, vice president of Enbridge’s U.S. operations, said the Wisconsin incident was being treated as a top priority matter, with “all necessary resources (being brought) to bear.”
But the U.S. and recent Alberta spills only provide further ammunition to the forces opposing its Northern Gateway project in British Columbia.
—Gary Park
