The Canadian energy company TransCanada Corp announced today, Thursday, its decision to move forward with the Energy East Pipeline, a 2,740-mile project that would transit between 500,000 and 850,000 barrels of oil per day (bpd) from western to eastern Canada. Some longer-term estimates see the possibility of eventually ramping volumes up to 1.1 million bpd.
Oil arriving through the Energy East Pipeline would feed refineries in Quebec and New Brunswick that at present get 86 per cent of their crude supply from the international market at much higher prices than they would pay for crude from Alberta. Conversion of the existing Canadian Mainline natural gas pipeline for carriage of crude oil would account for slightly over two-thirds the projected length. The remainder would be new construction. Cost estimates range up to $12 billion, excluding the transfer value of the Canadian Mainline.
Related article: Canada Threatens U.S. with Oil Trains if Keystone XL Not Built
The announcement follows by three weeks the signature by Alberta province of a memorandum of understanding to pay up to $5 billion in tolls for transportation of its crude oil to eastern Canada, if a pipeline is built. The proposal still requires regulatory approval, but the conditions in favor of this have been lining themselves up for some time.
The company anticipates beginning the regulatory process next year, with first oil flowing to Montreal and the Quebec City region by 2017, and to Saint John, New Brunswick, by 2018. TransCanada and IrvingOil have formed a joint venture, to construct, own, and operate a new deep water marine terminal at Canaport in Saint John.
Company officials say that construction of the Energy East Pipeline would not exclude use of the Keystone XL Pipeline if the latter is ever built. Canada's oil sands are the third-largest crude deposit in the world, estimated at 170 billion barrels.
U.S. President Barack Obama's November 2011 postponement of a decision on the construction of the Keystone XL Pipeline produced political and economic momentum in Canada to seek other markets.
Keystone would feed multiple US refineries in the Midwest and Texas Gulf Coast with product from Alberta's Athabasca oil sands. However, the decision on Keystone is still in limbo and there are in addition a number of court cases in the U.S. that contest different aspects of it.
Related article: Keystone XL's Goose is Cooked
Canadian companies have also explored possibilities of building a pipeline from there westwards to British Columbia's Pacific Ocean coast for export to Asia. At present, Canadian oil is sold to U.S.
companies at about $30 per barrel below world market prices, simply because there are no export pipelines from Canada to take the oil anywhere else.
TransCanada is one of the largest energy companies in North America.
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It is developing one of the continent's largest oil delivery systems and already operates a natural gas pipeline network of more than 42,500 miles with over 400 billion cubic feet of storage capacity.
By. Robert M. Cutler of Oilprice.com
