Pipeline builder hints at eastbound line to relieve expensive imports.
April 30, 2012
by The Canadian Press
CALGARY: The CEO of TransCanada Corp. confirmed late last week that the pipeline builder is in the early stages of weighing a plan to ship Western Canadian crude to eastern refineries that currently rely on expensive imports from overseas.
“We have a lot of work to do technically. We have a lot of work to do in conversations with our shippers. But at the 30,000-foot level, it seems to make sense to people,” Russ Girling said following the company’s annual general meeting. “So we’re going to actively pursue it and see if we can turn it into an opportunity for both the oil and gas industry and for TransCanada.”
Eastern Canadian refiners have asked TransCanada whether it’s feasible to send Western Canadian crude their way so that they don’t have to buy a raw product based on higher international prices.
Girling said it was premature to discuss the specifics of what such a plan would entail, but that one option could be to convert part of its natural gas-carrying Mainline to oil service.
There are “integrity issues” that come from switching a natural gas pipe to an oil pipe, but it’s something TransCanada has experience doing in building its base Keystone system, which currently delivers Alberta crude to refineries in Illinois and a big storage hub in Cushing, Okla.
“I think it’s likely technically feasible that we can make something like that work,” he said.
TransCanada rival Enbridge Inc. is looking to reverse the flow of part of its Line 9 oil pipeline in Ontario, which could lead to more western crude flowing east.
There are also potential benefits for Canadian oil producers who are eager to get their crude to open water. Currently, much of that crude is landlocked, leading to a steep price discount between West Texas Intermediate, the North American benchmark, and international varieties like Brent produced in the North Sea.
That’s the driver behind West Coast pipeline proposals like Enbridge’s controversial Northern Gateway project to Kitimat, BC, and Kinder Morgan’s expanded Trans Mountain pipeline to the BC Lower Mainland.
TransCanada has been in the news recently amid controversy over a US$7.6-billion proposal to expand its Keystone system and extend it to refineries on the U.S. Gulf Coast.
Critics of Keystone XL say the project would increase US dependence on “dirty” oilsands crude and cause harm to the American heartland in the event of a spill.
Supporters say the project will offer a big boost to the US economy and reduce the amount of crude the United States has to import from unfriendly countries.
In January, the US government denied a permit for the project, but left the door open for TransCanada to apply for a new one.
TransCanada has since broken the project into two parts.
Meanwhile, TransCanada intends to refile a new application for the northern portion of the line that runs form the Canada-US border to Steele City, Neb. That milestone is “imminent,” Girling said Friday.
TransCanada recently came up with a new route through Nebraska to skirt the environmentally sensitive Sand Hills region, which the state government is now reviewing. That state process would take place parallel to the upcoming federal review, Girling said.