August 1, 2013

TransCanada to build oil pipeline to Atlantic Coast

By Rob Gillies / The Associated Press

TORONTO — Pipeline company TransCanada said Thursday it will go ahead with a $12 billion plan to ship 1.1 million barrels of oil per day from Western Canada to the country's Atlantic coast that would replace foreign oil in Eastern Canada and allow for Canadian crude to be exported to Asia and Europe.

TransCanada said the pipeline could help replace all imported oil to Eastern Canada and said foreign shippers have expressed interest. The pipeline will end in Saint John, New Brunswick, where TransCanada and Irving Oil will build a new deep-water marine terminal. Irving Oil said it will allow Canadian producers direct access to world markets for exporting Canadian oil via the world's largest crude-carrying vessels.

TransCanada CEO Russ Girling said Canadian producers want access to international markets but said the primary purpose will be to supply refineries in Eastern Canada which imports 750,000 barrels of foreign oil a day. He also noted that Canadian oil could be shipped to the U.S. Eastern seaboard, Asia, including China and India, and Europe.

"It's a bit farther to get to Asia from the East Coast than the West Coast but it can be competitive," Girling said.

The announcement of the Energy East pipeline comes as TransCanada faces stiff environmental opposition to its proposed Keystone XL pipeline from Alberta to refineries to Texas. U.S. President Barack Obama's initial rejection of Keystone XL went over badly in Canada, which relies on the U.S. for 97 percent of its energy exports.

The Canadian government has since stepped efforts to diversify energy exports, but a proposal by Enbridge to build a pipeline from Alberta to Canada's Pacific Coast also faces stiff environmental opposition. All three pipelines require regulatory approval.

TransCanada's Energy East pipeline has garnered support from both federal and provincial leaders and faces far less opposition than Enbridge's proposed Northern Gateway pipeline to Canada's Pacific Coast where the fear of oil spills is especially acute in British Columbia, with its snowcapped mountains and deep-ocean inlets.

New pipelines are critical to Canada, which needs infrastructure in place to export its growing oil sands production from northern Alberta. The region has the world's third largest oil reserves, with 170 billion barrels of proven reserves. Daily production of 1.5 million barrels from the oil sands is expected to increase to 3.7 million in 2025. Only Saudi Arabia and Venezuela have more reserves.

A lack of pipelines and a bottleneck of oil in the U.S. Midwest reduced the price of Canadian crude in recent years and led to a boom in transporting oil by train. A fiery train derailment that killed 47 in Quebec last month highlighted the danger of moving oil by rail.

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