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TransCanada east-bound oil pipeline gains traction

Pipeline-giant would convert its natural gas mainline to ship crude oil to refineries in eastern Canada and the US.


October 31, 2012
by The Canadian Press

CALGARY—An early-stage proposal to ship as many as one million barrels a day of western crude to eastern refineries seems to be gaining traction, executives with pipeline giant TransCanada Corp. say.

In recent months, the Calgary-based company has been floating the idea of converting part of its natural gas mainline—the eastbound main artery for natural gas out of Alberta—partly to oil service to serve refineries in eastern Canada and the US Eastern Seaboard that currently rely on pricey crude from overseas.

“We’ve now determined this project is both technically and economically feasible,” CEO Russ Girling told analysts on a conference call.

“Discussions with potential shippers and other stakeholders are underway to determine if this is a project that the market wants to see—and based on early indications, we believe that it is.”

The project, 80% of which would comprise existing pipe, could ship between 500,000 and one million barrels of oil per day, depending on demand.

A preliminary estimate puts the project’s price tag at roughly $5 billion, but a lot still needs to be worked out.

TransCanada would need to add new pump stations along the length of the pipeline and undertake a lot of work to make sure pipe is in good enough shape to ship oil.

It’s not clear yet whether the line would stop at refineries in Montreal or extend all the way to the east coast. Nor is it known yet how much appetite there is to ship the crude offshore to Europe or Asia via a marine terminal in Quebec or the Maritimes.

The “obvious” market is in eastern North America, said Alex Pourbaix, TransCanada’s president of energy and oil pipelines.

Eastern Canadian refineries process between 600,000 and 700,000 barrels a day and the US Eastern Seaboard refines another million barrels on top of that.

Those refineries are geared to process light sweet crude, so TransCanada would likely be shipping them synthetic crude oil from Alberta’s oilsands—rather than tarry bitumen that hasn’t been upgraded—as well as high-quality oil from the lucrative Bakken formation, which stretches through parts of Saskatchewan, North Dakota and Montana.

In time, those eastern refineries may choose to reconfigure their equipment to handle heavy oil from Alberta, Pourbaix added.

©The Canadian Press