Posted on 02/09/2005 4:31:20 PM PST by Willie Green
For education and discussion only. Not for commercial use.
CALGARY (CP) - In a shift in business strategy, natural gas shipper TransCanada Corp. plans to build a $1.7-billion-US oil pipeline to transport about 400,000 barrels of heavy crude a day from Alberta to Illinois.
The 3,000-kilometre Keystone Pipeline, announced by the Calgary company Wednesday, includes a proposal to convert one of TransCanada's existing natural gas pipelines from Alberta to Manitoba to carry oil instead. At a point southwest of Winnipeg, a new connector line would be built, taking the oilsands crude through the American Midwest and into hubs at Wood River and Patoka, Ill.
"TransCanada is in the business of connecting energy supplies to markets and we view this opportunity as another way of providing a valuable service to our customers," chief executive Hal Kvisle said in a release.
"Converting one of our natural gas pipeline assets for oil transportation is an innovative, cost-competitive way to meet the need for pipeline expansions to accommodate anticipated growth in Canadian crude oil production during the next decade."
The Keystone plan puts Calgary-based TransCanada in direct competition with hometown rival Enbridge Inc. (TSX:ENB) to find new ways to ship rising amounts of oil from northern Alberta's oilsands to new markets throughout the U.S. and beyond.
Enbridge president Pat Daniel said Wednesday that competition in both gas and oil pipelines is both inevitable and positive for the energy industry.
"The very best business environment is a competitive one - it makes us all better," Daniel said in an interview with The Canadian Press. "It's better for our customers if we have to compete and we do a better job in delivering the product."
TransCanada (TSX:TRP), the country's main natural gas shipper and a growing electricity producer, said Wednesday that getting involved in oil pipelines was a natural progression for the company.
"We are a pipeline company, we've been doing it for over 50 years and we see oil as a logical fit with our existing business competencies," said spokeswoman Hejdi Feick.
Greg Stringham, vice-president of markets for the Canadian Association of Petroleum Producers said TransCanada's first attempted forray into the oil pipeline business came as a surprise to many.
"It shows that the market is working because there are several alternatives now coming out, all looking at the potential opportunity of moving oil from the oilsands."
While Canada's oilsands is producing slightly more than one million barrels per day, that number is expected to double in six to eight years.
Feick said TransCanada believes converting a natural gas pipeline to carry oil is "not a complicated process," essentially replacing the compressor stations used for shipping gas with pumping stations needed to keep the molasses-like heavy oil moving down the line.
TransCanada said it plans to meet with oil producers and refiners to gauge interest and support for Keystone.
If the support is there, the company wants to fast-track the project, getting commitments for the line later this year and filing regulatory applications by the fall.
"We would see the system in service and operating by 2008-2009, providing we get the necessary regulatory approvals," said Feick.
TransCanada says it has already started preliminary discussions with various stakeholders, including communities, government representatives and landowners along the proposed route.
Pipeline analyst Bob Hastings of Canaccord Capital in Vancouver said it was "far from certain" whether the Keystone pipeline would ever be built, but it would now be up to the oilsands producers and refiners to select the best option for getting crude into the Midwest and beyond.
"These things get pretty competitive and you need to get producers' support," said Hastings. "It's still a long ways away, so there's lots of time for all the twists and turns to happen, but it probably has a shot."
TransCanada has a network of about 41,000 kilometres of pipeline transporting most of Western Canada's natural gas production to markets in Canada and the United States.
TransCanada has also been rapidly expanding its electricity business in recent years, owning, controlling or constructing more than 4,700 megawatts of power generation.
On the Toronto stock market Wednesday, TransCanada stock rose six cents to $30.06 in trading of nearly 1.7 million shares, while Enbridge shares rose 75 cents to $64.50.
No Molson for oil!!!
Would this reduce the natural gas supply, giving the remaining supply a premium?
They are probably getting their butts handed to them in the NG market due to new NG supplies in Southwest states such as Oklahoma and Texas.
Don't forget Saskachewan, they have oil too. One problem: NDP
Nothing new. Canada is our #1 supplier of foreign oil and natural gas.
I thought the chicoms had a lock on canadian oilsands.
What you're probably seeing here is a market-based allocation of oil supplies by source and quality. Crummy oil from Alberta will be used primarily for lubricants and potentially for diesel fuel or home heating oil, while Saudi oil will be used for gasoline due to its very high quality.
400,000 barrels per day - ZOUNDS!
They do but the US is taking oilsands for granted.
That is a cheap pipeline. The Alaska Pipeline was $7 billion and the Natural Gas Pipeline will be $20 billion at least.
I understand what you're saying. If I remember correctly its a water intensive steam extraction process and water is a real problem above the Yellowknife. Regardless, if the price of oil stays at or above $50 a barrel it will be economical. Contrary to most, I want to see the price stay high. That way there is the economic incentive to wean ourselves off Saudi oil.
"One man with courage makes a majority" -- Andrew Jackson
"Don't forget Saskachewan, they have oil too. One problem: NDP"
NDP energy policies are oil patch friendly and they are big promoters of the sector.
They were also the first to promote Oil Sands drilling technology with an International Conference on Horizontal Drilling that is now in its seventh year and attracts engineers from all over the world.
Thank you, I got that quote off of a Thomas Jefferson quote page. I must rememdy that immediately.
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