Canada's largest liquids pipeline project is about to cause worldwide ripples.
The $4-billion Gateway Project will bring socio-economic benefits to Alberta and British Columbia of about $3 billion during its construction phase and an annual benefit of $160 million to both provinces once construction is completed, proponents say.
The pipeline, which will run from Edmonton's eastern boundary at Strathcona County to Kitimat, B.C., will open the door to oilsands product being shipped to China and other foreign markets.
"China has the most interest at this time, but others do as well," says Enbridge's Jim Russell, vice-president of regulatory for Gateway Pipeline Inc. "Japan and South Korea are also very interested in this project."
Gateway will consist of two pipelines running along a 1,200-km right-of-way. It is expected to begin construction in 2008 and be in service in 2010, pending regulatory approval. Application for approval will be filed next year.
"This enormous undertaking will fundamentally change the way liquid energy moves across Canada," Russell told the Edmonton Chamber of Commerce at the downtown Chateau Lacombe hotel last week. "This will be the largest liquids pipeline in Canada and as far as I know, in North America."
The project is especially significant, he added, because "until this point, we had very limited capability to export any of our oil products to any market other than the United States."
The two pipelines - a 30-inch version to export 400,000 barrels of oilsands product per day and a 20-inch counterpart that will be used to import 150,000 barrels of condensate per day (used to dilute heavy oil) - are expected to create 5,000 construction jobs during the peak build period. Once in operation, 75 permanent jobs will be generated in pipeline operations and maintenance.
Russell said he expects that there will be sufficient construction crews available - if no other major Canadian pipelines are built at the same time. "It's our plan to develop a construction plan or strategy, working with the industry, to ensure that there are sufficient resources available."
Russell also said there is a memorandum of understanding with PetroChina for half the capacity of the pipeline's supply. He added the condensate imports will likely come from the Middle East and Indonesia, where its value is not as high as it is in Alberta.
With the new marine tank terminal at Kitimat, it will be almost the same distance to get Canadian oil to China as it will be to ship oil from the Middle East to China. But Enbridge isn't just looking at expanding overseas access, Russell noted.
"The Gateway pipeline project is only one part of the expansion project that we have and we've got other plans to move oil in higher volumes down and in the U.S. Midwest as well," he said, adding that the timelines for these projects south of the border will likely be similar.
"Essentially, we're putting in enough pipeline capacity to meet the expanding production as it's coming out of Fort McMurray, and that's to ensure that there is sufficient pipeline capacity when all this new production comes on. So there will be some pipeline expansions on our mainline system and there will some extensions off our mainline system into new market areas such as the Gulf Coast."
The Edmonton region was chosen as origin point for Gateway as most oil in Western Canada is delivered into the Edmonton area by pipeline and then exported.
"Edmonton is really the hub for that, so that's why it's strategic that Edmonton be the origin of the export pipeline that we're proposing as Gateway," said Russell.
As for selecting Kitimat last month, Russell said Enbridge looked at a number of potential port locations, but needed deepwater access for incoming ships. That in turn brought the decision down to a choice of two: Kitimat and Prince Rupert.
"Primarily the cost of building out to Prince Rupert was prohibitive as compared to going to Kitimat," said Russell.
(Laura Severs can be reached at laura@businessedge.ca)
