Kinder Morgan ramping up pipeline plans
Dormant northern leg being revived
Jon Harding, Canwest News Service
Published: Wednesday, July 02, 2008
CALGARY -- A second large shipper of oil from Canada to the United States has confirmed interest is heating up between Canadian producers and refining customers in Asia and along the United States' West Coast.
As a result, Kinder Morgan Canada began two months ago to ramp up internal planning work on a long-talked-about -- but basically dormant -- northern leg concept for the company's Trans Mountain pipeline expansion project, according to chief executive Ian Anderson.
The proposed northern leg, a concept Kinder Morgan has had in the wings for years, would stretch in British Columbia from Valemont to a deep-water port at Kitimat on the West Coast, passing by Prince George on the way.
Kinder Morgan is in the midst of expanding its system between Edmonton and Vancouver, and will have completed the looping of its anchor line by the end of the year to boost capacity between Edmonton and Valemont to 300,000 barrels of oil a day.
In an interview this week, Anderson said interest in a West Coast crude outlet is growing. Anderson also talked about progress being made in Alberta around carbon capture and storage and the movement of carbon dioxide, via pipeline, from large emitters to either storage locales or to companies ready to use the CO2 for enhanced oil recovery.
American parent Kinder Morgan Inc. is the largest transporter of CO2 in the U.S.
Q: So what's your take the "dirty oil" talk emanating from the United States and does it pose a threat to the Canadian oilsands industry?
A: Our views are that ultimately producers will look for optional markets
. . . . The political rhetoric coming out of the U.S. is just that, largely posturing (around a U.S. presidential election) and the right conclusions will be reached. I think it's important for the producers, the Alberta and Canadian governments to have their eyes on it and be responsive to it, though.
Calmer heads will ultimately prevail. In the long run, it's the largest market in the world and (Canada's oilsands) are right next door to it.
Q: Has the mood at all changed on either side of the border about doing business together, with Canadian oilsands producers on one side and refiners based in the United States on the other?
A: I think there is increasing interest in the West Coast. I don't know if that is only or directly attached to the "dirty oil" conversations in the U.S. We're in the midst of expanding to the West Coast (Vancouver) today, we have our rout to Kitimat as well, just like Enbridge does. By this fall, we'll be looped right through those parks (Jasper National Park and Mount Robson Provincial Park) to Valemont and Valemont is the takeoff point to go to Kitimat. That infrastructure is to serve a northern route as well, so we'll have pipe in the ground if that's where the market wants to go.
Q: Why, from your standpoint, did the West Coast pipeline option turn quiet two years ago?
A: Supply contracts couldn't reached and they (producers and customers) still aren't underpinning it. It's in the business development phase. What we saw in the last 12 months was a more concerted attention looking at the U.S. Gulf Coast and the pipelines responded. Now it's reverting back to the West Coast again, which is where it was a couple of years ago.
Q: How can a deep-water port be developed at Kitimat when there is an oil development moratorium in place that some believe includes a ban on oil supertanker traffic off the West Coast of Canada?
A: That's debatable. Whether the offshore moratorium on development includes, as it does in some people's minds, tankers. It's a political debate. We have an Aframax (a type of smaller oil tanker) -sized facility in Vancouver that, given the economics today on oil, after transportation is facilitating producer business developments overseas.
Q: Why then have you been working with the B.C. government, First Nations communities and talking with Alberta producers about the TMX's northern leg in the last two months?
A: With all the Gulf Coast alternatives out there for consideration, what market access is the next wave? I think the West Coast is it and I think we're very well-positioned with existing assets and relationships to advance expansion to the West Coast.
Q: How large and how expensive would a northern leg pipeline be?
A: It would carry 400,000 barrels a day. We did a cost estimate 18 months ago, but I wouldn't want to speculate now.
We've seen pipeline construction costs, steel costs probably go up by 20 to 25 per cent in the last year to 18 months.
© The Vancouver Sun 2008
