More pipeline capacity needed

New lines worth $23B may be on way

Reuters, Calgary Herald
Friday, June 27, 2008

Capacity is tight on Canada's crude oil pipelines, but as much as $23 billion in new lines could be on the way to help supply current and as-yet-untapped markets, the country's energy regulator said Thursday.

The National Energy Board said new pipeline space is needed to handle rising production from the oilsands and to give producers flexibility in where they can ship their crude.

In a report on the 45,000 kilometres of oil and gas pipelines it regulates, the NEB said there was some rationing of space in 2007 on Enbridge Inc.'s 1.9 million barrel a day system to the U.S. Midwest and beyond, and that the system ran at or near capacity in this year's first quarter.

The industry will get some relief in November when Kinder Morgan Energy Partners is slated to have a 40,000 barrel a day expansion of its Trans Mountain system to the West Coast completed, the board said.

The Canadian Association of Petroleum Producers estimated last week that the country's production could nearly double to 4.5 million barrels a day by 2020, as a host of new oil sands projects start up.

That has the oil industry considering new markets, such as the U.S. Gulf Coast, California and Asia.

Pipeline projects currently under development include Enbridge's 450,000 barrel a day Alberta Clipper project to Superior, Wisc., from Hardisty, Alta., and TransCanada Corp.'s 590,000 barrel a day Keystone line to Southern Illinois and Oklahoma from Alberta.

Keystone is scheduled to be in service late next year and Alberta Clipper in 2010.

Among longer-term proposals, TransCanada is considering a 750,000 barrel a day pipeline to Texas as well as a 400,000 barrel a day line to California.

Enbridge has rekindled plans for the 400,000 barrel a day Gateway line, which would ship Alberta crude to the West Coast, where it could be loaded on tankers bound for Asia.

It is also studying the re-reversal of Line nine between Sarnia, Ont., and Montreal to give Quebec refiners access to western Canadian crude.

Use of natural gas pipelines, meanwhile, declined with waning western Canadian gas production and increased competition with western U.S. supply basins in 2007, the NEB said.

"Pipeline capacity is adequate across the country although there may be occasions of short-term limitation at some points depending upon markets, storage and seasonal shifts," it said.

© The Calgary Herald 2008