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TransCanada's Growth Strategy Tied to North American Shales

If its Keystone XL oil pipeline is the foundation, major U.S. oil and natural gas shale plays will be the drivers for TransCanada Corp. greatly expanding its North America footprint, the Calgary-based company's senior executives said during recent investor conferences in Toronto and New York City.

Shale plays, and unconventional oil particularly, are at the heart of TransCanada's long-term growth strategies, according to presentations by CEO Russ Girling and Alex Pourbaix, the company's president for oil and energy.

"In addition to our focus on connecting growing Canadian supplies to U.S. markets, we also very much intend to add supply from U.S. shale play regions to some of the most desirable market regions in the United States," Pourbaix said. "We're not just going to concentrate on connecting supplies, but we intend to provide new growing markets for U.S. and Canadian producers."

The executives acknowledged that TransCanada intends to pursue a number of opportunities (storage and pipelines) in its home-based Alberta region, but it also will sees tremendous opportunities in the U.S. shale areas. Most immediately, the Bakken has its attention on both sides of the international border.

"We see the Bakken area as an excellent growth area for us, and we are going to continue to compete for volumes there -- both in North Dakota and Saskatchewan, and as we speak, TransCanada has started discussions in North Dakota to create incremental access points for producers. We feel the Bakken will eventually provide opportunities for as much as $400 million incremental investments leading to in-service [operational] dates by 2014."

"As we see these developing shale plays in North America, we look to be part of those opportunities, many of which can be easily connected to the Keystone XL pipeline system.

"We think shale oil, much like shale gas is already, could be a game-changer in the oil industry. Obviously, the Bakken formation is the most developed, but the others are coming quickly, and we intend to compete in all of these regions to deliver those new sources of American crude to market."

TransCanada is attempting to position its system as a vital component of a program to build ever-greater energy security in the United States and Canada. They want to be the key link between these new domestic supplies and what it touts as the best U.S. refining markets.

Greg Lohnes, TransCanada's top gas executive, said that company has "good connections" already with all the major shale plays in Canada and the United States. Lohnes called the potential "quite significant" for his company in all of the areas. He also said TransCanada is well positioned in Mexico where recent projections of a major shale find surfaced (see Shale Daily, Nov. 14).

"On the supply side, we are really talking about the 'shale story' that everyone has heard of by now," Lohnes said. "We expect more conventional declines -- both in western Canada and along the Gulf Coast and other areas in the United States -- replaced by U.S. shales, and particularly people are focused on the wet gas shale plays." He said TransCanada is well positioned to tap both dry or wet shale gas plays.

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