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Energy East close to lock-up TransCanada expects deals with shippers within days; project offers company, Bakken producers, hope amid Keystone XL stalling Gary Park For Petroleum News
Openly frustrated with the time being taken by the Obama administration to decide on the future of Keystone XL, TransCanada is on the verge of some good news, indicating it is within days of finalizing agreements with prospective shippers for its Energy East project.
Both are primarily designed as outlets for crude from the Alberta oil sands, but both could offer relief to Bakken producers in the United States and Canada who are hamstrung by the shortage of pipelines out of their region.
While Keystone XL continues to stall and splutter, accompanied by speculation that it could face a further delay, TransCanada has been “pleasantly surprised” by commercial response to an open season to carry 850,000 barrels per day from the oil sands and North Dakota to refineries in Quebec and possibly Irving Oil’s 300,000 bpd facility at Saint John, New Brunswick, said Alex Pourbaix, the company’s president of energy and oil pipelines.
He said that satisfaction is reinforced by the special interest of shippers in moving crude all the way to East Coast destinations in North America.
The final investment decision hangs on negotiating “terms and conditions” with those who have made commitments to Energy East, he said.
Company ‘very positive’ Chief Executive Officer Russ Girling told the same analysts’ call that TransCanada feels “very positive” about the East Coast initiative as the most efficient and safest way to transport crude and “push out unstable imports” of 700,000 bpd to Eastern Canada and possibly some of the 900,000 bpd imported to the U.S. East Coast.
The comments coincided with politically charged discussions at Niagara-on-the-Lake, Ontario, among Canada’s 10 provincial premiers and three territorial leaders.
They discussed TransCanada’s plans to convert one of its underutilized natural gas pipelines covering 1,870 miles and add 870 miles of new pipe to reach the Irving refinery.
Energy East could also offer crude feedstock for the Suncor Energy refinery in Montreal and Valero Energy’s plant in Quebec City.
Quebec wavering Alberta Premier Alison Redford and New Brunswick Premier David Alward are the strongest backers of the project, but wavering by Quebec Premier Pauline Marois has increased since the July 6 crude train derailment at Lac-Megantic.
Redford and Alward told reporters July 25 they were “bullish” about the chances of agreement among the political leaders because the pipeline would have a “positive impact on Canadians.”
Girling was unwilling to suggest that Quebec accident, which has claimed an estimated 47 lives, strengthened the argument for pipelines over rail.
“We all have to step back, understand what occurred and implement remediations, with a focus on moving (oil) as safely as possible,” he said.
TransCanada said its potential in-service date for Energy East is late 2017, but a cost estimate will not be released until a final investment decision is made.
Blunt comments on XL In contrast, Girling made some of his bluntest comments yet on delays in obtaining a Presidential Permit for Keystone XL, noting that U.S. regulatory reviews have taken 1,800 days, triple the time taken on the existing Keystone pipeline, which carries 590,000 bpd of Canadian crude to U.S. Midwest refineries.
“In our view, now is the time to bring this project to a conclusion,” he said.
Girling said it is “patently false” for critics of Keystone XL to claim that the pipeline’s crude from the oil sands and Bakken will be exported from the Texas Gulf Coast, but if refined products such as diesel are exported that would not change the existing equation.
He said the objective of Keystone XL is to reduce the 4 million bpd of offshore crude imported to meet the Gulf Coast refinery needs of 7 million bpd.
The political debate Gary Doer, Canada’s Ambassador to the United States, also took a swipe at Obama, telling the Globe and Mail that the U.S. can either approve the pipeline or face a sharp increase in cross-border shipments by rail.
He said Obama’s choice is to have the crude “come down by a pipeline that he approves, or without his approval, it comes down by trains. That’s the raw common sense of this thing and we’ve been saying it for two years and we’ve been proved correct.”
But Obama keeps adding to his negative assessment of Keystone XL, telling the New York Times Keystone would create only 2,000 construction jobs, which he described as a “blip relative to the need” for employment growth in the U.S.
He also reiterated his promise to evaluate the project on whether it “significantly” contributes to growing greenhouse gas emissions, suggesting Canada could “potentially do more to mitigate carbon release” from the oil sands.
However, Obama did concede there would be a benefit to the U.S. shifting its crude reliance to a “reliable” ally like Canada as opposed to importing from the Middle East or Venezuela.
Dispute on numbers TransCanada quickly defended its claim that Keystone Xl would be a major source of new jobs and disputed Obama’s numbers.
It estimates direct employment on the pipeline would total 13,000 jobs, but would not provide a breakdown between part-time and full-time.
A company spokesman said it’s not logical to think a $7.6 billion infrastructure project stretching (the length) of the continental U.S. wouldn’t employ thousands of (manufacturing and construction) workers.
TransCanada said it had invested $1.9 billion on the project up to June 30.
Pourbaix said there are some sunset dates for shippers who have committed to taking space on Keystone XL, although TransCanada is confident all of the shippers “are fully committed to getting the project over the starting line” and does not anticipate any will exercise their right to withdraw.
He also said TransCanada has not changed its thinking that the pipeline would be constructed within two years of final approval.
Girling was emphatic that Keystone XL would not increase greenhouse gas emissions from levels associated with crude imports to the Gulf Coast that it would displace.
A decision on whether to build Keystone XL “would be unlikely to substantially affect the rate of extraction or combustion of Canadian oil sands crude and its global impact,” he said.
Obama said in June that the U.S. should only approve the project if it is certain the pipeline will not “significantly exacerbate” those emissions.
TransCanada has argued that Canada currently accounts for only 2 percent of global GHGs and the oil sands make up only 5 percent of that total.
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