Terasen taking on the big boys

Gary Park

Canada’s two lesser-known energy pipelines are making aggressive moves to join the major leagues, occupied by TransCanada and Enbridge.

Already immersed in a large-scale expansion of its Trans Mountain crude oil network from Edmonton to Vancouver and Washington state, Terasen Pipelines is now throwing out a challenge to Enbridge in the pursuit of California and Asian buyers for oil sands production.

Meanwhile, Inter Pipeline Fund is making a big splash only two years after converting the Canadian pipeline business of privately held Koch Industries into a publicly traded trust.

Terasen quietly injected itself into the contest to link the oil sands with British Columbia’s deepwater ports at either Prince Rupert or Kitimat by disclosing plans for a possible 550,000 barrel per day leg, with an in-service date of 2011, as part of a possible 850,000 bpd addition to its system.

If markets in California and possibly Asia open up, Terasen Pipelines President Rich Ballantyne told a conference call in late July, a 570-mile connection is possible from Rearguard, British Columbia, to a northern port, where shippers could take advantage of the lower costs of very large crude carriers.

The current Trans Mountain pipeline to the Vancouver area is scheduled to increase capacity by 30,000 bpd to 225,000 bpd within two months.

So long as firm shipper commitments are received, two more stages of 100,000 bpd are planned — one for 2008 and one for a future date, with each stage costing C$700 million.

Ballantyne said the key element is Terasen’s belief that the markets for Canadian crude on the West Coast are California and Washington.

By moving in stages, Terasen allows production from the oil sands to match the timing of pipeline capacity and the development of West Coast markets.

If all three projects proceed, Terasen would offer capacity of 850,000 bpd out of Edmonton and should Asian demand become a significant part of oil sands expansion, the northern line could be built.

Enbridge working Gateway project

Enbridge President and Chief Executive Officer Pat Daniel said that an April trip by company executives to China “generated some very serious interest” by prospective buyers, who have since sent several delegations to Calgary.

He said the best current guess for an instate pipeline tariff on Gateway would be $1.75 per barrel, which would equal or beat a “competing project to Vancouver.”

Daniel said the northern port could handle tankers three times the size of those using Vancouver, which would result in unit savings to Asia of $2 per barrel.

Ballantyne was not prepared to concede any ground to Enbridge, insisting Terasen’s expansion phases could be “more competitive than the alternatives that are out there.”

Information provided to shippers by Terasen suggests tolls for the second and third phases of its Trans Mountain pipeline would be rolled into the existing system.

Inter Pipeline is staking a large chunk of its future on the oil sands, as well, as it builds on 3,000 miles of pipeline that carries 460,000 bpd of oil sands bitumen, conventional crude and gas plant condensate.

Its pipeline from the Cold Lake heavy oil area of northeastern Alberta moves 245,000 bpd, drawing on EnCana and Imperial Oil projects.

The fund has also just wrapped up a C$715 million deal to buy interests in three natural gas liquids extraction plants with combined capacity of 137,000 bpd in southern Alberta from Williams Cos., setting it up to become a major player in the NGL extraction business.

Inter Pipeline has assembled a strong web of pipelines from the oil sands region to the Edmonton refinery area and south to the U.S. border.