Enbridge to raise cost estimate on Pacific pipeline
Tue Oct 6, 2009
CALGARY, Alberta, Oct 6 (Reuters) - Enbridge Inc (ENB.TO) expects to raise the cost estimate for the Northern Gateway pipeline, last pegged at around C$4 billion ($3.77 billion), when it seeks approvals for the oil sands export line later this year, it said on Tuesday.
Enbridge, the biggest shipper of Canadian crude to the United States, expects to look for environmental and regulatory approvals for the planned line by year-end and will revise its budget for the 525,000 barrel-per-day project then, the head of the company's major projects group said.
"The original cost estimate ... was originally established in 2005," Al Monaco said on a conference call with reporters. "You can expect that naturally the cost will be higher."
The planned line will carry crude from the oil sands to a deepwater port on northern British Columbia's Pacific Coast, where tankers will take the oil to refineries in Asia or the U.S. West Coast. A second line will carry 193,000 barrels of ultra-light crude from the port to the oil sands, where it can be blended into gooey bitumen so that it can be shipped on pipelines.
The line, expected to be operational around the middle of the next decade, will be the first able to ship Canadian crudes to markets outside North America, giving oil sands producers access to other markets where prices may be more robust than those offered by Canadian and U.S. refiners.
Indeed, Enbridge said a group of Canadian oil producers and Asian refiners has provided about C$100 million to fund the early development costs for the project.
Northern Gateway was also initially backed by PetroChina (0857.HK) , which in 2005 signed a memorandum of understanding with Enbridge, agreeing to ship oil on the line.
That memorandum has never been finalized and Enbridge said it has not had any formal talks with the Chinese state-controlled firm since August, when it paid C$1.9 billion for a 60 percent stake in two planned oil sands projects.
"We have not had any detailed conversations with them," since the deal was announced, said Guy Jarvis, Enbridge's senior vice-president for business development, liquids pipelines. "They've elected to stay focused on getting that deal through its approval and closing process and we suspect we'll be suspect we'll be (talking) once that's complete."
Enbridge shares rose 2 Canadian cents to C$41.13 late afternoon on Tuesday on the Toronto Stock Exchange. ($1-$1.06 Canadian) (Reporting by Scott Haggett; Editing by Frank McGurty)
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