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Terasen toys with trust B.C. firm looks for money-raising opportunities as race to build oil sands pipelines from Alberta intensifies Gary Park Petroleum News Calgary correspondent
Terasen, Canada’s second largest oil pipeline company, has given added momentum to its pursuit of oil sands pipeline opportunities.
The Vancouver-based company said Jan. 19 it is looking at several ways to raise the billions it might need to get production from northern Alberta to the British Columbia coast.
Topping the list is the possible conversion to an income trust of its natural gas distribution unit, which accounts for about 70 percent of Terasen’s profits by supplying fuel to 95 percent of British Columbia consumers.
Terasen Treasurer David Bryson told reporters in Vancouver that the parent company would retain operating control of the unit if it decides a “partial conversion is one way of funding our plans.”
Other money-raising possibilities include selling stakes in its existing pipelines — the 250,000 barrels per day Trans Mountain pipeline from Alberta to the British Columbia coast and Washington state refineries and its Corridor pipeline from the oil sands to Shell Canada’s Scotford refinery near Edmonton.
But Bryson said the shopping list would exclude Terasen’s one-third stake in the Express line from Alberta to Wyoming that Terasen plans to boost from 172,000 bpd to 280,000 bpd in 2005.
Trans Mountain is already on the table for a possible C$2.1 billion twinning to handle oil sands production that could grow by three-fold over the next 20 years to 2.5 million bpd.
As well, Terasen is dusting off plans for a possible C$1 billion Bison pipeline project to deliver 320,000 bpd from the oil sands to Edmonton. Other funding possibilities Bryson said the other possibilities for Terasen include selling a share of the natural gas unit to a pension fund, making a straightforward equity offering or establishing a buying consortium as it did with two large pension funds to buy the Express pipeline.
Selling the pipeline units would likely fetch less than C$500 million, whereas the gas unit is worth about half of Terasen’s market capitalization of about C$2.6 billion.
The trust route has already been taken by Calgary-based Enbridge, its oil sands pipeline rival.
Last spring, Enbridge achieved net cash proceeds of C$350 million and a pre-tax gain of C$210 million by establishing a fund from its 50 percent interest in the Canadian segment of the Alliance natural gas pipeline and its 100 percent ownership of a Saskatchewan pipeline.
From the initial public offering, Enbridge held back 35-45 percent of the trust which it will reduce to 15-20 percent as additional ordinary trust unit offerings are made.
Bryson said the major pipeline expansions are long-term undertakings, but decisions will likely be made in 2005.
How much capital Terasen might need will depend “on what the financing requirements are,” he said.
Earlier this month, Terasen chose a site near Nanaimo on Vancouver Island for a planned C$100 million liquefied natural gas storage facility.
It plans to start construction in 2005 and bring the facility on line in 2007, pending approvals from several British Columbia agencies.
The LNG facility is designed to provide cheaper gas to BC Hydro’s 265-megawatt Duke Point power plant and free up space on Terasen’s natural gas lines from the mainland.
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