Oil firm may go with the flow
Company considering $3.8-billion expansion plan after positive feedback
CALGARY— Kinder Morgan Energy Partners LP said on Tuesday it has received enough binding commitments from shippers to begin design work on a proposed $3.8 billion project that would double the size of its 300,000-barrel-per-day Trans Mountain oil pipeline from Alberta to Vancouver.
Thecompany,whichhasbeenconsidering the project since 2004, said a recent open season held to gauge shipper interest in expanding the pipeline had received support from a diverse group of customers. Kinder Morgan will make a final decision on moving the line’s capacity up to 600,000 bpd by the end of March.
“The response to our open season was very encouraging,” said Ian Anderson, president of Kinder Morgan’scanadianunit.“thestrongsupport now allow us to complete initial project design and planning.”
Canadian oil producers have been urging development of a line to let them tap high-paying Asian markets and U.S. West Coast refineries. Most of Canada’s oil exports currently flow to the U.S. Midwest, where a glut of crudeatthecushing,oklahoma,storage hub has depressed prices.
Production from Alberta’s oilsands, the world’s third-largest crude-oil reserve, is set to nearly double to three million barrels per day by 2020.
Trans Mountain, which takes oil to theportofvancouverandrefineriesin B.C. and Washington state, is the only pipeline carrying Alberta oilsands crude to the Pacific. Space on the line has been rationed for months as customers look to ship more oil than the line can handle.
Buttheproject,whichcouldbecomplete in 2017, faces a rival proposal. Enbridge Inc. is seeking approval for its 525,000 bpd Northern Gateway pipeline to take oilsands crude to a deepwater port at Kitimat, on the northern coast.
Enbridge also expects to complete Northern Gateway in 2017. However the project is in the early stages of a two-year regulatory process and is bitterly opposed by some Canadian aboriginal groups and environmental organizations, suggesting it could be subject to further delay.
“Together [the two projects] would add about 800,000 barrels per day of extra capacity,” said Chad Friess, an analyst at UBS Securities. “But Gateway’s timeline of 2017 is the optimistic scenario. If they encounter continued resistancefromthenativecommunity it could be even longer than that.”
The federal government considers expanding Canada’s oil export capacity to Asia and other markets to be in the national interest and says it will introduce new regulations to streamline the lengthy review process.
Natural Resources Minister Joe Oliver declined to comment on whether the Trans Mountain project would benefit from new rules, but said he believed there was room in the marketforbothnortherngatewayandan expanded Trans Mountain line.
“There are 170 billion barrels in the oilsands. It will take more than a couple of pipelines to accommodate the volume created by expansion [of production],”hesaid.likenortherngateway, Kinder Morgan’s proposal will face stiff resistance, particularly from groups opposed to tanker traffic along B.C.’S coast.
“They’regoingtogetasimilarreception to what Enbridge is getting now,” said Mike Hudema, an anti-oilsands campaigner at Greenpeace.
“There’s very strong opposition to bringingtankerstob.c.’scoast,whether it’s the northern part or the southern part of the coastline. So I don’t think Trans Mountain is going to get a very friendly reception at all.”
Along with the expansion, Kinder Morgan is mulling plans to boost the size of its Westridge Dock facility at the Port of Vancouver.
The dock can now only accommodate Afromax tankers with a capacity of 650,000 barrels and new facilities could allow million-barrel Suezmax tankers to load at the port.