Enbridge rekindles oilsands pipeline plan
Jeffrey Jones, Reuters Published: Thursday, February 21, 2008
CALGARY -- Enbridge Inc. has rekindled plans for a $4-billion pipeline to Canada's West Coast in response to demand from producers and refiners wanting oilsands-derived crude shipped to Asia, Enbridge's chief executive said Thursday.
Enbridge, the country's second-largest pipeline operator, has convinced enough potential customers to fund the remaining costs to get the Gateway pipeline project to the regulatory approval stage, CEO Pat Daniel said.
The company put the 400,000 barrel a day proposal on the back burner in late 2006 to concentrate on expanding its crude oil pipeline network in the United States.
Now, demand for the line across the Rocky Mountains is coming from a more diverse group than before, Mr. Daniel told investors at a conference in Whistler, B.C.
"The pull from the other end of Gateway initially was primarily from the Chinese, but in this initiative the Chinese are not participants, and the pull ranges from Japan down to Singapore -- so much broader Southeast Asian interest," he said in Webcast remarks.
Enbridge has now offered 50% of the equity in the project to shippers involved in getting Gateway back on track and is garnering "good uptake," Mr. Daniel said.
In 2005, PetroChina signed a deal to co-operate with Enbridge on the project to ship extra-heavy crude from Alberta's vast oil sands deposits to the Pacific Coast. It also agreed to consider signing up for half the capacity.
Enbridge spokeswoman Jennifer Varey declined to say whether that memorandum of understanding remained in effect or to name other Asian refiners now interested in Gateway.
The pipeline company has spent $80-million to $100-million getting Gateway toward its approval. Ms. Varey said the company has kept up its consultation with landowners, governments and native groups over the past 14 months despite the slowdown.
The cost estimate for the project has not been updated in about two years, but it is likely higher now, she said.
The in-service target remains between 2012 and 2014.
Plans call for the proposed 1,200-kilometre pipeline to extend to a terminal in Kitimat, B.C., from Strathcona County in Alberta. An adjacent line would move condensate in the other direction.
At Kitimat, as many as 20 tankers a month, including six very large crude carriers, would load the oil and ship it across the Pacific and possibly down to California.
In November 2006, Enbridge said it was easing up on Gateway in response to customer demand to increase capacity for moving crude to the U.S. Midwest and beyond to Oklahoma.
It concentrated on such projects as its 450,000 barrel a day Alberta Clipper line to Superior, Wis., which is expected to be in service in 2010.
Last summer, a China National Petroleum Corp executive surprised a Calgary business audience by saying the state-run firm was shifting its focus from Canada, blaming delays in the Gateway pipeline.
However, in an apparent move to play down those comments, CNPC said a few days later that it planned to strengthen its ties with companies involved in Canadian energy development.
Enbridge shares fell 54 cents to $40.70 on the Toronto Stock Exchange Thursday.
© Reuters 2008
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