TransCanada Corp. seeks permit to build $983M gas pipeline in Alberta
at 16:24 on November 21, 2007, EST.
THE CANADIAN PRESS
CALGARY - A TransCanada Corp. (TSX:TRP) subsidiary is seeking permission to build a 300-kilometre natural gas pipeline in Alberta at an estimated cost of $983 million, largely to transport fuel to oilsands operations in the province's northeast.
TransCanada said Wednesday that Nova Gas Transmission's application to the Alberta Energy and Utilities Board comes after 11 years of considering the North Central Corridor.
"Regardless of gas price, locations of supply and demand shift around on the system and we have to add capacity to ensure that we meet the market needs," spokeswoman Shela Shapiro said in an interview.
Natural gas is a key power source for oilsands developments. It is used as fuel to heat the steam that liquefies tar-like bitumen in steam-assisted gravity drainage projects. It's also a source of heat and hydrogen in mining and in upgrading bitumen into synthetic crude oil.
A National Energy Board report last year predicted the volume of gas consumed in oilsands production will triple by 2015 to 2.1 billion cubic feet per day.
The oilsands should take advantage of other extraction methods, like gasification technology, to free up natural gas resources for better uses, a senior policy analyst with the Pembina Institute.
"Natural gas is the cleanest burning fossil fuel we have. There are opportunities to use it for generating electricity rather than building new coal-fired plants and ultimately that would be a better use than using it to extract more oilsands," Dan Woynillowicz said in an interview.
He adds the planned pipeline for the North Central Corridor is "a bit of a signal that business as usual is continuing in terms of the oilsands appetite for natural gas."
TransCanada's proposed pipeline would connect gas-producing areas in the northwestern Alberta system at the Meikle River compressor station to the northeast portion at Woodenhouse. In addition, 26 megawatts of compression capacity would be added at Meikle River.
The North Central Corridor pipeline could eventually link up with a controversial proposed natural gas pipeline in the Northwest Territories, said Woynillowicz.
"This could very well be the missing piece of the puzzle in terms of how gas from the Mackenzie Gas project could ultimately make its way to fuelling Alberta's oilsands."
Subject to regulatory approval, TransCanada expects construction is to begin in late 2008 and the first segment of the pipeline is to be completed in April 2009. The second segment is expected to be in service in April 2010.
The corridor "is the most cost-effective facility to accommodate evolving gas supply and market dynamics both within and outside Alberta," said TransCanada CEO Hal Kvisle.
The company said it will build the line along existing corridors as much as possible to minimize environmental impacts.
"TransCanada consulted extensively with landowners, First Nations communities and other interested stakeholders located in the area regarding the pipeline route and has received no objections from these groups," it stated.
"TransCanada also conducted extensive consultation with customers."
The project is "a positive for TransCanada in terms of providing a source of organic, relatively low-risk growth and bodes well for their ability to source new growth projects in the future," Desjardins Securities analyst David Shteyn said in an interview.
While upstream natural gas producers "live and die by commodity prices," TransCanada is "actually immune from both commodity price risks and volume risks," Shteyn said.
Under Alberta's regulatory framework, companies that build energy infrastructure, like TransCanada, are guaranteed returns on capital invested in projects.
"Every new opportunity to deploy capital under the terms of TransCanada's regulatory framework implies increased earnings power when the asset is commissioned," Shteyn said.
TransCanada's network of pipelines extends more than 59,000 kilometres, tapping into virtually all major gas supply basins in North America.
TransCanada shares closed Wednesday at $38.86, down four cents or about one-tenth of a per cent, on the Toronto stock market.
