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Enbridge emerges from the shadows with a northern route plan Declares its intention to participate in either or both Arctic pipelines, drawing on its experience as the only pipeline company operating inside Canada’s Arctic Circle Gary Park PNA Canadian Correspondent
Until now, Enbridge Inc. has kept a studiously low profile on the Arctic pipeline debate, beyond the occasional insistence of chief executive officer Pat Daniel that the decision on routing should be left to producers.
That neutrality changed with a jolt on Jan. 30, when Daniel, in an interview with the Toronto Globe and Mail, said Enbridge would go solo, with a plan to build, own and operate a US$15 billion “over-the-top” line.
He said his Calgary-based energy services company was pitching what it viewed as the most logical, cost-effective and environmentally friendly system for delivering gas from the North Slope and Mackenzie Delta.
“I think the producers and owners of the resource would rather evaluate the alternatives and conclude what they think is best without having the public pressure and shareholder pressure in this,” he said.
Having kept its cards close to its chest over the last two years, while Calgary-based Foothills Pipe Lines Ltd. and Houston-based Arctic Resources Co. have done the bidding with their rival proposals, Enbridge has apparently decided to show its hand.
Its version of a northern route system is physically similar to that unveiled last month by Arctic Resources and its Canadian affiliate, ArctiGas Resources Corp. Twinned 36-inch lines The concept involves two, twinned 36-inch-diameter lines connecting the North Slope and Delta with pipelines buried under the Beaufort Sea and running about four miles off the coast.
From the Delta, the system would run down the Mackenzie Valley into Alberta, where it would feed into the Alliance pipeline, which ships 1.5 billion cubic feet per day from northern British Columbia to Chicago.
Enbridge is a 21.4 percent stakeholder in Alliance, whose other partners are Coastal Corp. 14.4 percent, Fort Chicago Energy Partners LP 26 percent, The Williams Companies Inc. 14.6 percent and Westcoast Energy Inc., soon to be taken over by Duke Energy Corp., 23.6 percent.
Regardless of the stiff opposition to a northern route from the Alaska and Yukon governments and environmentalists, William Lacey, an analyst with FirstEnergy Capital Corp. in Calgary, rated the Enbridge proposal as having a fair chance of success.
He noted that Enbridge, which carried an average 2.196 million barrels per day of crude on its pipelines to eastern Canada and the United States in 2001, has the advantage of strong relationships with producers.
Offsetting that is the partnership with such pipeline giants as Dynegy Inc. and Duke Energy that favors TransCanada PipeLines Ltd., the joint owner with Westcoast of Foothills. Multiple lines required But Lacey downplayed talk of a rivalry, arguing that no single pipeline company would have either the means or the desire to take on Arctic gas shipments alone.
He predicted that a final arrangement would likely involve a consortium of pipelines and producers.
In speaking to a New York energy conference last year, Daniel indicated that Enbridge’s careful approach to Arctic development should not be interpreted as a lack of interest or ambition.
“Our approach is to work with the producers and provide a service to them to help them evaluate which route is best, rather than being out there proposing one over the other,” he said. “We’re afraid that will only create confusion in the regulatory process.
“We’d rather work with the producers in the background rather than being out pounding our fist on the table and suggesting a particular route.”
To that end, Enbridge has been in discussions with both North Slope and Delta producers.
“We intend to be involved in either or both pipelines and that’s based on our relationships in the North and the fact that we operate in the North. We’re the only Canadian pipeline that does that,” Daniel said, referring to the Norman Wells oil pipeline and a small gas link from the Delta to Inuvik, Northwest Territories.
In other comments, Daniel has said that “probably cost will win out in the long run in the interest of southern consumers.” Higher cost in two pipelines He said two pipelines would be in Enbridge’s interests, but, given the higher costs, wouldn’t necessarily favor consumers.
As the race to secure pipeline rights in Canada tightens, TransCanada PipeLines Ltd. is promoting its “master plan” for getting Arctic gas to Lower 48 markets.
TransCanada chief executive officer Hal Kvisle told the Toronto Globe and mail last month that TransCanada’s extensive pipeline network in Alberta would need only minimal help to carry whatever volumes are produced in Alaska or the Northwest Territories.
He said that means a new pipeline would be required only to the Alberta border, not right across the province to the U.S. border.
“Our existing infrastructure, given the size of it, can accommodate significant incremental volumes,” Kvisle said.
“And with relatively modest expansion, we can accommodate a lot more. Alaska gas for $10 billion Under TransCanada’s plan, Alaska gas could be brought on stream for US$10 billion — $8 billion for a pipeline from the North Slope to Alberta and another $2 billion for upgrades and additions to the Alberta system — far less than the $17 billion Alaska’s producers have projected for a standalone pipeline carrying 4.5 billion cubic feet per day from the North Slope to Chicago.
Kvisle said even another 1 bcf per day from the Mackenzie Delta could be handled by TransCanada’s Alberta pipelines.
In addition to cost savings, the TransCanada plan — advanced on behalf of Foothills Pipe Lines, the joint venture of TransCanada and Westcoast Energy Inc. — “offer the huge advantage of providing for different scenarios,” he said.
The master plan, which was presented to Alaska producers last month, “is really founded on flexibility,” Kvisle said.
He said the TransCanada and Alliance Pipeline Ltd. system already have about 2.5 bcf per day of spare capacity.
If gas production from the Western Canada Sedimentary Basin falls faster than it already is, because of maturing fields, that surplus space will only increase, he said.
But even if another 2 bcf per day is required that cold easily be achieved through capacity additions to TransCanada pipelines — a decision producers would not have to make for some time.
The only downside, Kvisle said, is that current gas prices make it difficult for Arctic producers to commit to such a massive undertaking.
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