TransCanada natgas Mainline no substitute for Asian markets
By Ethan Lou
CALGARY, Alberta (Reuters) - Transcanada Corp's move to lower tolls for its Mainline pipe raises the competitiveness of Canadian natural gas for the near future, but access to Asian markets is the key to the long-term survival of the landlocked industry, industry insiders say.
Canada's C$45-billion ($34 billion) gas industry relies solely on North American demand and domestic producers have been increasingly squeezed from the lucrative eastern market by U.S. rivals who have lower transportation costs.
TransCanada said last week it will seek regulatory approval for a discount in tolls of nearly 50 percent for western Canadian producers to use the Mainline to send their output to markets in the east, a move that had broad industry support.
But the North American market will get crowded in the near future, with flat demand and increasing U.S. output, according to a report released on Monday by the Conference Board of Canada think tank. It painted a bleak outlook for the industry, projecting U.S. output to eat into Canadian market share.
The think-tank warns that U.S. pipelines including Energy Transfer Partners LP's Rover that target the same areas Mainline serves does not bode well for Canadian gas.
"This is a worrisome development for Canadian producers," according to the report.
Even with the Mainline, Canadian producers, whose product trades at a discount, still need to look to new markets in Asia, industry executives said.
Canadian Natural Resources Ltd, which will be a shipper on the Mainline, said while the lower toll is a "positive step," the company still supports accessing new markets. Continued...