By CHIP CUMMINS and JUDY McKINNON
TransCanada Corp., taking another a step to help alleviate a glut of Canadian crude in landlocked Alberta, said Tuesday it will seek commitments from shippers interested in capacity on a pipeline-conversion project to send Western Canadian oil to eastern Canadian refining markets.
TransCanada has been mulling the plan publicly for months, amid a growing glut of oil in Western Canada that has depressed prices there. The plan involves converting part of an existing natural gas pipeline, TransCanada's Mainline network, for crude-oil service, and building about 870 miles of new pipeline.
Depending on shippers' interest, the project could have a capacity of some 850,000 bpd. TransCanada said that Canadian crude could displace some 600,000 bbl of foreign oil that Canadian refiners currently import along the east coast.
TransCanada said the line, subject to regulatory approval, could be up and running by 2017. TransCanada said it would commence an "open season" later this month, during which shippers could express binding interest for capacity on the proposed line.
The project, called the Energy East Pipeline, would transport crude oil from Alberta and other points in western Canada for delivery in Quebec and New Brunswick.
The open season is the latest move by Canadian pipeline companies, oil producers and North American refiners to try to circumvent a growing bottleneck of oil that's depressed prices of western Canadian crude.
Amid growing Canadian production, particularly of heavy bitumen from the country's vast oil-sands developments, shippers have struggled to move all the new oil to refining markets in the US.
More recently, a surge in US production has competed with Canadian crude for pipeline space, exacerbating the bottleneck. Earlier this year, the price for Canadian crude fell sharply compared to US and international benchmark oil because of the difficulty producers had in getting their product to market.
More recently, that discount has eased somewhat. But Canadian government officials, industry executives and analysts say they expect price volatility as long as capacity on pipelines out of Alberta remains tight. In addition to about a half dozen proposals for new or expanded pipelines, producers and refiners have started to move large volumes of Canadian crude on railroads.
Separately, TransCanada is awaiting final US approval for its proposed Keystone XL oil pipeline, which would carry heavy crude from Alberta through the US to Gulf Coast refineries.
Dow Jones Newswires