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Alberta Takes Capacity on TransCanada Mainline Conversion

The Alberta government has stepped forward as a customer for the planned conversion to oil service of one large pipe of the six parallel pipes that comprise TransCanada Corp.'s natural gas Mainline, which has suffered severely declining gas transport volumes (see NGI, April 29).

The Alberta Petroleum Marketing Commission, which handles the province's royalty share of production, announced a 20-year commitment to ship up to 100,000 b/d on the Energy East scheme. The agreement covers nearly one-eighth of the project's proposed capacity for up to 850,000 b/d.

Energy East would claim the largest (42-inch diameter) of the six parallel lines that are the Mainline. The rest would remain committed to natural gas. The natural gas traffic on the Mainline from Alberta to Ontario, Quebec and export crossings into the United States has fallen precipitously. Evidence presented during the regulatory process showed that traffic on the 7 Bcf/d Mainline has fallen an average to 2.4 Bcf/d from 6.8 Bcf/d in 2000.

The Western Canadian gas, previously a mainstay of Eastern Canada and the U.S. Northeast, has lost a substantial part of those markets to gas from the Marcellus Shale. TransCanada last month lost in its latest attempt before the NEB to hike tolls to remaining shippers to make up its losses from departing customers (see NGI, June 17).

Discussions continue between TransCanada and potential Energy East shippers following a spring open season for potential oil capacity on the conversion. The pipeline described preliminary results as encouraging. The eastward-heading pipe would have a capacity slightly more than the 830,000 b/d that TransCanada is proposing to send south in the currently stalled Keystone XL pipeline.

The commission's interest grows out of a government policy of encouraging projects that obtain value for the royalty share of production from provincially owned oil and gas deposits, and encourage economic development. The commitment to Energy East is described as support for widening access to markets beyond traditional oil export outlets in the U.S. Midwest. The Energy East project involves converting natural gas capacity in 1,864 miles of the existing Canadian Mainline to crude service and constructing up to 870 miles of new pipeline. The new project would reach refineries in southern Ontario and western Quebec, marine facilities on the St. Lawrence Seaway, and potentially the Atlantic Seaboard via a proposed extension of the TransCanada Mainline.

While the exact route would only be determined after public and regulatory review, the planned starting point in Alberta at a new tank terminal in Hardisty. Three other terminals would be built along the pipeline's route in Saskatchewan, the Quebec City area and n the Saint John, NB, area. The Quebec City and Saint John facilities would allow marine tanker loading. The project would also deliver oil to existing Quebec refineries in Montreal, near Quebec City and in Saint John. Pipeline would be built in Alberta, Saskatchewan, Manitoba, Eastern Ontario, Quebec and New Brunswick.

Costs of booking 100,000 b/d of capacity on Energy East for two decades are estimated to be about C$5 billion. However, royalties from a single year of current bitumen production are higher and output is steadily rising. By 2030, the provincial royalty share of output is forecast to exceed 500,000 b/d.

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