TransCanada has done everything but clear the way for a new pipeline route from the Bakken and Western Canada to refineries in Eastern Canada and on the U.S. Atlantic Seaboard.
Speaking to analysts Oct. 30, Alex Pourbaix, the company’s president of energy and oil pipelines, said TransCanada believes that converting part of its natural gas Mainline to carry crude is technically and economically feasible.
He said a final decision on the option is now expected in early 2013, estimating the conversion would cost C$5 billion to serve Montreal and another C$200 million to reach Quebec City, but said no estimates have been developed for pipelines to Saint John, New Brunswick, or the eastern U.S.
“Discussions with potential shippers and other stakeholders (on the conversion plan) are under way to determine if this is a project the market wants,” TransCanada Chief Executive Officer Russ Girling said. “And based on early indications, we believe that it is.”
Eastern markets target
Pourbaix said the conversion could carry 500,000 to 1 million barrels per day to eastern markets, where it could feed U.S. seaboard refineries using 1 million bpd and a 500,000 bpd Canadian refining market in Ontario and Quebec.
He said those refineries are configured to handle lighter blends which are imported from the North Sea, offshore Africa and Saudi Arabia.
Those sources could be displaced by synthetic crude from Alberta and light sweet crude from the Bakken in Saskatchewan and North Dakota.
“Longer term there is obviously the potential to see some capital investment in those refineries to allow them to run the heavier Alberta crudes,” Pourbaix said.
But neither Pourbaix nor Girling would be drawn into a detailed discussion on whether the project would open the door to shipping Canadian crude to Europe and Asia.
Girling said shipments across the Atlantic would depend on whether prospective customers were interested in buying Canadian crude, an indirect reference to political opposition from Europe to the use of crude from the Alberta oil sands.
He said that while discussions are under way with shippers it is “too early to share details.”
The Mainline delivers Western Canadian gas to Ontario and Quebec, but has been operating far below capacity in recent years as gas production has shrunk in Western Canada and new supplies have come on stream from the Marcellus shale.
Pourbaix noted that the Mainline has built-in advantages to handle a conversion, including the fact that “80 percent of the pipe is already in the ground.”
He said TransCanada is currently concentrating on proceeding with delivery systems within Alberta, including its newly announced Northern Courier and Grand Rapids projects, to establish connections from the oil sands to the Heartland region near Edmonton and the Hardisty hub in central Alberta.
Laurie Smith, an attorney with Bennett Jones who works with energy companies, said TransCanada believes it can deliver crude to China from the North American Atlantic seaboard at a competitive cost compared to shipments from the Pacific Coast.
He said that option is being very actively explored “right now.”
TransCanada has estimated it would cost about C$8.50 per barrel to send crude from the Canadian East Coast to China, compared with the C$5.20-C$8.20 cost of shipping to Shanghai from Enbridge’s proposed Northern Gateway system.
