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Kinder Morgan tests waters Calls open season to double capacity of Trans Mountain to 600,000 bpd, fueling competition with Enbridge on routes to Asia-Pacific Gary Park For Petroleum News
Quietly operating below the radar while its Canadian rivals TransCanada and Enbridge are entangled in raging pipeline controversies, Kinder Morgan Canada is taking another step towards offering Alberta oil sands producers greater access to the Asia-Pacific region.
It has launched an open season that expires Jan. 19 to test shipper response to a proposed 300,000 barrels per day doubling of capacity on its Trans Mountain system from Alberta to the Port of Vancouver and Puget Sound in Washington state.
If it receives sufficient commitments for a project that could cost C$3.8 billion, Kinder Morgan will have strongly positioned itself to either fill the void should Enbridge’s Northern Gateway project unravel, or go head-to-head against its competitor.
Currently, it is the only pipeline operator serving the emerging Asian market through small shipments from the Westridge marine terminal in Vancouver.
Planned in-service date of 2017 The open season aims to expand the role of that terminal by seeking binding 15- and 20-year transportation agreements on the 715-mile Trans Mountain system, with a planned in-service date of early 2017.
Although Kinder Morgan is putting its emphasis on expanding Trans Mountain’s long-established southern route, it has not ruled out a second line to the deepwater port at Kitimat, on the northern British Columbia coast.
Kitimat is also Enbridge’s planned terminal location for the 525,000 bpd Northern Gateway pipeline, which is facing a possible two-year hearing process before a joint panel of the National Energy Board and Environmental Assessment Agency.
The pressure is already on Kinder Morgan to enlarge Westridge. The Trans Mountain system is currently oversubscribed by up to 50 percent, partly because a pipeline leak in Alberta during the summer led the NEB to order a 20 percent reduction in volumes, forcing Kinder Morgan to restrict shipments to 44 percent of nominated volumes in November. Of the accepted nominations of 280,920 bpd, 44,877 bpd are destined for Westridge.
Ruling by end of year The NEB is expected to rule before year’s end on a Trans Mountain application to provide 54,000 bpd of firm dock service out of 79,000 bpd of dock capacity at Westridge, leaving the balance for spot shippers. That proposal is in response to an oversubscribed open season last year.
Kinder Morgan said 25 percent of the crude on the three or four tankers leaving Westridge every month is destined for Asia, compared with about 10 percent a year ago, and the rest for the U.S. Pacific Coast, strongly hinting at growing producer interest in accessing the Far East.
Cenovus Energy, one of Alberta’s leading oil sands developers, has openly identified Asia as one of its likely alternative if the TransCanada Keystone XL pipeline from Alberta to the Texas Gulf Coast loses its struggle for approval by the Obama administration.
Kinder Morgan is confident it can use the existing Trans Mountain right of way for an additional 300,000 bpd without posing additional environmental concerns and said it has strong backing from First Nations, unlike the Northern Gateway proposal.
But Enbridge has countered that Northern Gateway could operate tankers out of Kitimat with twice the capacity of those using Westridge. Tankers out of Vancouver Although tankers from Westridge use a narrow and shallow channel through the densely populated center of Vancouver and close to the city’s scenic treasures, Kinder Morgan has attracted only limited interest from environmentalists compared with the opposition facing Northern Gateway.
However, those days may be drawing to a close as municipal and federal politicians start to discuss the risks.
Derek Corrigan, mayor of Burnaby, where the Westridge terminal is located, said his community doubts Kinder Morgan’s ability to manage an emergency situation, while federal Natural Resources Minister Joe Oliver is being pressured to hold a full consultation on the project.
So far, Oliver has said only that every major proposal will be reviewed by regulators and his government “respects the regulatory process.”
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