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TransCanada Offers Capacity on Proposed Mainline Oil Conversion
TransCanada Corp. Tuesday gave a name and targets to its promised plan to convert part of its aging, half-empty natural gas Mainline to oil service.
In announcing an open-season capacity auction to drum up financial support and design guidance from potential shippers on the proposed Energy East Pipeline, TransCanada said deliveries could begin as early as fall 2017.
Bookings will be accepted for up to 850,000 b/d, TransCanada said. The open season, which follows years-long discussions with western producers, marketers, eastern refiners and Canadian governments, will run from April 15 through June 17.
The scheme has been a discussion topic since use of the 3,000-kilometer (1,800-mile) Mainline for natural gas deliveries from Alberta to Ontario, Quebec and export points to the United States began to taper off five years ago (see Daily GPI, July 31, 2012).
Like proposals by Canadian pipeline rivals Enbridge Inc. and Kinder Morgan Canada for new routes to tanker terminals on the Pacific Coast of British Columbia, Energy East rose to the top of the industry agenda as a result of U.S. delays in approving TransCanada’s Keystone XL project for oilsands deliveries to refineries on the coast of the Gulf of Mexico.
In addition to converting some of the six gas conduits in the Mainline right-of-way, Energy East includes about 1,400 kilometers (840 miles) of new pipeline from the end of the gas Mainline across eastern Quebec and out to the Atlantic coast in New Brunswick.
The main potential destinations identified to date are refineries and tanker docks at Montreal and Quebec City, giving marketers a window on the sea via the Saint Lawrence Seaway, and the New Brunswick capital of Saint John, where Irving Oil owns Canada’s largest refinery and a tanker terminal.
While Canadian branches of environmental resistance against growth of fossil fuel use in general and oilsands production in particular have dug in for a fight against the east-west pipeline schemes, the projects are praised by pro-development political leaders.
The Energy East scheme immediately drew applause from federal Natural Resources Minister Joe Oliver and New Brunswick Premier David Alward.
Oliver called Energy East “a positive step” as a job creator that would “contribute to the energy security of Canada and all of North America.”
Alward, addressing Irving refinery employees as TransCanada announced Energy East, called the project fuel for high economic hopes: “We envision New Brunswick as Canada’s next energy powerhouse and Saint John as the anchor of that powerhouse.”
The announcement follows a landmark ruling on TransCanada’s gas tolls and shipping practices by the National Energy Board (NEB). The March 28 decision rejected a business restructuring blueprint that would have piled costs of excess gas capacity onto the western supply side of the Canadian market, directed TransCanada to cut tolls in long shipping contracts on the Mainline, and allowed offsetting rate increases for competitive short services.
Evidence before the board showed that Canadian gas markets can afford to turn over to oil a potentially high proportion of the Mainline’s capacity. Annual average gas traffic on the Mainline has fallen to 2.4 Bcf/d from 6.8 Bcf/d in 2000 due to competition from U.S. shale production, declining western Canadian output and rising Alberta industrial consumption by thermal oilsands projects. The Mainline share of the market for transportation service for western Canadian gas production — as opposed to other routes, notably the Alliance Pipeline that started up in 1999 — has fallen from to 18 per cent from 42 per cent in 2000.
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