Kinder joins Enbridge in race
DAVID EBNER
December 13, 2007
CALGARY -- The race to deliver Alberta oil sands output to Texas for refining is intensifying, with a plan for a multibillion-dollar pipeline proposed by Kinder Morgan Inc. emerging for the first time yesterday, going up against a different plan backed by Enbridge Inc. and Exxon Mobil Corp. Final decisions from oil sands firms on how to move their product are expected soon, possibly this month and at least by the end of March, with major firms such as Canadian Natural Resources Ltd. preparing to make long-term shipping commitments.
"The producers need to have new markets, just because of the [amount of new oil sands] production coming on," said Bill Henderson, a vice-president at Kinder Morgan Canada, which is in talks with producers for its 3,300-kilometre Chinook pipeline plan that would link Alberta with Texas, running through Wyoming and Oklahoma.
Most exported Canadian oil is currently moved on the Enbridge Inc. system from Alberta to the Chicago region, where it is refined into gasoline. But with large increases expected from the oil sands, producers are fearful of flooding a single market and have pushed pipeline companies to expand their networks to move the oil farther afield.
Pipeline proposals have a tendency to die on the drawing board and the stakes in the race for Texas is high, as industry players say likely only one big project will proceed--at least for now.
There is one small link from Illinois to Texas, which has been moving about 100,000 barrels a day since opening last year and is owned by Exxon Mobil.
Kinder Morgan, which said its Chinook pipeline would cost several billion dollars but less than $5-billion, wants to carry more than 300,000 barrels a day starting in 2012.
Enbridge, in a partnership with Exxon, wants to deliver 400,000 barrels a day starting in 2011 on the proposed Clydesdale line, which would be built alongside Exxon's existing small link.
"I like [Clydesdale]. It's sponsored by two gigantic companies," Réal Cusson, senior vice-president of marketing at Canadian Natural, said in an interview in late November, adding that his company was ready to sign a long-term shipping deal to ensure one project moves ahead.
Canadian Natural typically does not sign such contracts. Mr. Cusson said the firm wants significant access to Texas - a huge refining hub - to happen because it means it will get better prices for its barrels.
Beyond the Kinder Morgan/Enbridge-Exxon fray, there are several other significant players in the arena.
TransCanada Corp., archrival of Enbridge, is moving ahead with a $5.2-billion pipeline to move oil sands product to Illinois and to Oklahoma, with a possible connection to Texas.
Then there's upstart Altex Energy Ltd., a privately held firm that built a major natural gas line in the 1990s from British Columbia to Chicago. In 2005, CEO Jack Crawford and Altex were the first to publicly promote an Alberta-Texas oil sands connection.
"It's nice to see your ideas validated," Mr. Crawford said. "We do still think we have the inside track."
The Altex pipeline could cost $5-billion, run about 3,000 kilometres and carry roughly 300,000 barrels a day, but because of the competition, details are in flux, Mr. Crawford said. "I think decisions on [shipping contracts] will get made pretty quickly here."
Kinder Morgan is working with Teppco Partners LP, a Houston pipeline firm, which would be in charge handling the Oklahoma-Texas portion of the overall Chinook project.
Other ways to move Canadian crude to new markets involve expansion of a line between Edmonton and Vancouver owned by Kinder Morgan, which gets the oil to a port, where it can be moved by tanker to California or Asia. Longer term, Kinder Morgan and Enbridge would like to connect Edmonton with the northwest coast of B.C., for export to Asia.
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