By BEN DUMMETT
TransCanada said Friday it will proceed with a 12 billion
Canadian-dollar ($11.7 billion) pipeline project to carry crude
oil from Alberta to eastern Canada, a move aimed at opening new
markets for domestic oil producers and new supply for
refineries in Quebec and New Brunswick.
The proposed Energy East pipeline project, which needs
regulatory approval, comes as a growing transportation
bottleneck is depressing Western Canadian oil prices amid
booming North American production.
TransCanada, based in Calgary, Alberta, is awaiting US approval
of its controversial Keystone XL project, which would carry oil from
Canada's oil sands to US Gulf Coast refineries. And uncertainty
overhangs another planned pipeline that would transport
Canadian oil to British Columbia for export to Asia.
That has forced energy producers here to boost their
reliance on rail shipments. But the deadly derailment of a
crude-laden train in Quebec last month raised questions about
the safety of transporting oil that way.
The west-to-east pipeline would help Canada achieve greater
energy independence and assist in efforts to diversify export
markets, TransCanada CEO Russ Girling said. It doesn't
cancel the need for Keystone XL, he said, which is aimed at
meeting the demand from US Gulf Coast refineries for
less-expensive heavy oil from Canada and expanding the US
Refineries in eastern Canada want the Energy East project to access growing supplies
of light oil, as well as heavy crude, instead of having to
import, Mr. Girling said.
TransCanada said the 2,734-mile pipeline would enable
producers to ship up to 1.1 million bpd of oil from Alberta and
Saskatchewan to eastern Canadian refineries. The company has so
far secured long-term contracts to transport about 900,000 bpd
through the proposed pipeline.
Currently, eastern Canada imports more than 700,000 bpd of
oil -- 86% of its refinery feedstock -- from countries
including Saudi Arabia, Nigeria, Venezuela and Algeria. The
region could potentially replace these exports with oil
transported by the new pipeline, making Canada more energy
independent, Mr. Girling said.
As part of the project, TransCanada will join with closely
held Irving Oil to build a deep-water marine terminal in Saint
John, New Brunswick, from which oil could be shipped to markets
on the US Eastern seaboard, the US Gulf Coast, Europe and India.
TransCanada plans to seek regulatory approval for the
project from Canada's National Energy Board by the end of the
year, and, if it succeeds, to start construction in 2016. Service to
refineries in Montreal and Quebec City would begin the
following year and then to Saint John in 2018. The provinces
through which the pipeline would pass will have a say over the
Enbridge, another Canadian pipeline operator, has faced some
opposition in British Columbia over plans to build a pipeline
from Alberta to the British Columbia coast. The British
Columbia provincial government has said it will approve the project only if it receives
compensation and certain guaranteed environmental protections.
Alberta and New Brunswick each said Thursday they support
the proposal. Quebec's position is unclear, and a spokesman for
that province declined comment.
Dow Jones Newswires