CALGARY, Alberta (Reuters) - Pipeline company TransCanada Corp (TRP.TO) and shippers on the Canadian gas mainline system are closer to reaching an agreement on a new toll structure, the chief executives of Canada’s two biggest natural gas producers said on Thursday.
TransCanada has launched an open season to gauge interest in new proposed tolls on the system, which transports western Canadian gas to the Dawn hub in Ontario, offering shippers rates as low as 75 Canadian cents a gigajoule if they sign up for a 10-year commitment.
That is lower than a toll of 82 Canadian cents per gigajoule originally proposed by TransCanada, which both Canadian Natural Resources Ltd (CNQ.TO) and Encana Corp (ECA.TO) said was too high given the length of the contract.
In an interview with Reuters, Canadian Natural Resources president Steve Laut said of the negotiations: “I think we are getting closer to something that works for everybody, that is in the best interests of TransCanada and the natural gas industry here in Alberta, British Columbia and Saskatchewan.”
While Laut said he was confident a deal would be reached, it was “not the end of the world if we don’t get something.”
Western Canadian natural gas struggles to compete with production from northeastern U.S. shale plays such as the Marcellus because the greater distance to market makes transportation costs higher.
Encana chief executive Doug Suttles said he was pleased with the progress of discussions and 75 Canadian cents per gigajoule was in the right zone.
“Even lower would almost certainly generate success. It would be great to continue to capture those eastern markets with western Canadian gas,” Suttles told Reuters.
The current toll on the mainline is roughly C$1.41 a gigajoule to ship natural gas from western Canada to the Dawn hub in Ontario.
TransCanada spokesman Mark Cooper said the company would continue to work through the open season and would have more to say once it closes on Nov. 10.
Reporting by Nia Williams; editing by Grant McCool