TransCanada moves forward on West-East oil pipeline plan

Tue Apr 2, 2013 3:14pm EDT
 
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By Scott Haggett

CALGARY, Alberta (Reuters) - TransCanada Corp (TRP.TO: Quote) on Tuesday pushed ahead with plans to take Western Canadian crude to eastern refineries and Canada's busiest oil port as it seeks new markets beyond those it wanted for its stalled Keystone XL pipeline project.

TransCanada said it will give shippers two months to sign contracts to use its proposed 4,400 kilometer (2,700 mile) Energy East Pipeline project, Canada's longest oil pipeline, which could take as much as 850,000 barrels per day to Montreal, Quebec City and Saint John, New Brunswick.

Canada imported more than 700,000 barrels per day from abroad last year, according to the National Energy Board, to supply six refineries east of the Ontario-Quebec border.

Oil sent on the planned line could supplant much of those imports while giving oil sands producers access to high-priced Atlantic markets for the first time.

The line, with a targeted end-2017 opening, would also allow Canada to diversify its oil markets beyond the United States, which currently takes nearly all Canadian oil exports at a discount. As recently as January, U.S. refiners were paying half the world price for Canadian crude.

"Because of a lack of pipeline capacity, Canadian oil is selling at a considerable discount to the international price," Joe Oliver, Canada's natural resources minister, told reporters. "Some C$50 million every day is lost to the Canadian economy."

Canada now produces about 3 million barrels per day of crude. But Canadian, American, European and Asian producers are planning to invest billions to increase output from Alberta's oil sands, the world's third-largest crude reserve.

According to the Canadian Association of Petroleum Producers, production is set to grow to 4.7 million barrels a day by 2020, raising the possibility that an already squeezed pipeline network taking Canadian crude to the U.S. Midwest could be overwhelmed, further cutting into the country's oil price.   Continued...