Gateway go bye-bye?
COMMENT: The Gateway Pipeline proposal by Enbridge is two pipelines. One would move Alberta oil sands crude oil from Edmonton to Kitimat, the other would move imported "condensate" - used to thin oilsands bitumen so it can be pumped through a pipeline - to Alberta. Gateway is just one of a number of proposed pipelines intended to transport increasing oilsands production to markets. All of these proposals are reviewed in Fill'er Up!, in Watershed Sentinel.
http://www.watershedsentinel.ca/
http://www.sqwalk.com/blog2006/000867.html
On November 2, Enbridge announced its third quarter financial results and used the occasion to announce that Gateway would henceforth be "taking a back seat" in the company's pipeline expansion plans.
Is this a death knell for Gateway? What else can we discern from the Q3 announcement, and the analyst conference that followed?
Gateway takes a back seat
Enbridge Inc. will delay a planned pipeline running from Alberta to the Pacific in favour of expanding and accelerating new lines to U.S. markets, the Canadian pipeline company said yesterday as it announced its third-quarter profit rose 40 per cent
Scott Haggett, Globe and Mail, 02-Nov-2006
http://www.sqwalk.com/blog2006/000888.html
Pat Daniel - Enbridge - President and CEO
At this point, it would appear that Alberta Clipper will precede Gateway, unless there's a shift in current market sentiment. So with that in mind, turning to Gateway. We now have spent approximately $80 million to date on developing this project,and we are going to continue our development efforts, but not at the same accelerated pace as the Alberta Clipper project, of course, due to the push to move that crude east. Western Canadian producers and southeast Asian refiners continue to be very supportive of the Gateway project, in that it provides significant supply and market optionality to them. Gateway will also be a significant value add for the province of Alberta. Having access to markets that are independent of U.S. Midwest pricing dynamics will ensure that we receive full world price for our particular crude oils coming out of Western Canada.
Maureen Howe - RBC Capital Markets - Analyst
Pat, can you tell us what happened to the Chinese? I mean, are they gone, are they looking elsewhere, and looking for cheaper oil?
Pat Daniel - Enbridge - President and CEO
We continue to have very significant discussions with all three of the Chinese companies, and there could be a deal done at any point. But as you know, until there is one, we really don't have an anchor shipper.
Q3-2006 Earnings Call
http://www.enbridge.com/investor/pdf/2006_11_01_Transcript.pdf
COMMENT: The most telling comment is the last - without an anchor shipper, Gateway won't happen. Elsewhere in the conference call, Daniel also says the fate of the condensate line is pretty much tied to the crude oil line. Gateway's present grief is a function of a number of things, each of which contributes to increased risk with the project. The Chinese are looking for a reliable supply of oil, but aren't going to commit to or invest in anything unless they can be sure it will deliver. With the Haida, Carrier-Sekani Tribal Council, moratorium and the rugged vulnerable environment itself all adding risk to Gateway ever delivering, the Chinese would be nuts to sign.
This is no time for any of those "risk-factors" to relent on the pressure.