February 9, 2012 / 6:53 AM / in 6 years

Enbridge won't offer natives better terms

BEIJING (Reuters) - Canada’s Enbridge Inc will not offer better financial terms to aboriginal bands standing in the way of a major oil pipeline from energy-rich Alberta to the Pacific Coast, the firm’s chief executive officer said on Thursday.

Pat Daniel also told Reuters that while he was prepared to look at alternate routes for the Northern Gateway pipeline -- which is crucial to Canadian plans to export oil to China -- he felt the current routing plan was the best.

The C$5.5 billion ($5.4 billion) Northern Gateway would run 1,177 km (731 miles) from oil-rich Alberta across the Rocky Mountains to Kitimat on British Columbia’s Pacific Coast. At Kitimat, the oil would be loaded on supertankers and shipped to the Pacific.

Canada’s Conservative government strongly backs the pipeline, which it says would help diversify exports away from the dominant U.S. market. But greens and some aboriginal bands oppose the pipeline on the grounds that a spill either on land or at sea would be disastrous.

Enbridge says it will give aboriginal bands 10 percent of equity in the project and C$1 billion of community development money in exchange for support. It says this would help provide much-needed jobs in often remote and impoverished communities.

The firm was embarrassed last month when its sole public deal with a native group along the route of the proposed pipeline collapsed. The failure prompted some industry observers to predict Enbridge might have to sweeten its offer.

“We think the financial package we’re offering is very, very strong, so we don’t have any intent (or) consideration on changing that,” Daniel told Reuters in a 25-minute interview during a business trip to Beijing.

As part of a regulatory process, Enbridge needs to consult with a total of 45 native communities along the proposed route. Daniels said he hoped to have the support of two-thirds of the bands by the middle of 2012.

Daniel said Enbridge was prepared to look again at the routing and cited an earlier plan to run the pipeline to Prince Rupert on the Pacific Coast, which the firm abandoned because it would run parallel to a major river.

“We will relook at (Prince) Rupert, we will do whatever we can to find the best solution for Canada, but our information and our engineering studies and environmental studies suggest that Kitimat is the best location,” he said.

The firm estimates the regulatory process -- which began last month -- will last two years and construction of the pipeline will take another three years. Critics say this is optimistic and cite the likelihood of court challenges.

Daniel dismissed the suggestion that regulatory delays and court action could kill off the pipeline.

“I can’t imagine that scenario based on current fundamentals of significantly growing demand in China and significantly growing supply in Canada,” he said.

As much as half of the initial planned flow of 550,000 barrels a day would probably go to China, with the rest split between Asian markets such as Japan, South Korea and Singapore.

China has already made clear it is very interested in importing Canadian crude to fuel its booming economy. In the last seven months alone Chinese firms have bought more than C$5.5 billion worth of Canada energy assets.

“The main point that has been made to me ... is that China very anxiously wants to diversify its supply of crude oil (away from the Middle East),” said Daniel.

The Enbridge chief also said he did not know when he might get enough commitments from shippers to make it worthwhile to reverse the flow of the firm’s Line 9 to allow Quebec and Atlantic Canadian refineries access to western crude.

Daniel said it was too early to predict the results of the open season for shippers to reserve space on the Flanagan South and Seaway pipelines, both of which will be reversed.

“We’re very optimistic,” he said. The open season ends on Feb 10 and it will take two weeks to produce final results.

($1=$0.99 Canada)

Reporting by David Ljunggren; Editing by Ken Wills

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