There is room for two new oil pipelines on B.C.'s north coast, says the head of the proposed Gateway pipeline project.
"When you look at the oilsands, our forecasts would indicate that you're looking at an incremental one million barrels a day coming out of the oilsands over the next four to five years - certainly very large volumes," Art Meyer, president of Enbridge Gateway Pipelines Inc., said following a recent speech to the Vancouver Board of Trade.
"We're only looking at taking a portion of that. I'm sure there will be many projects coming forth to transport those volumes."
Calgary-based Enbridge is proposing to build a $4 billion, 1,250-kilometre oil pipeline and secondary condensate line between Strathcona County near Edmonton to the deepwater port of Kitimat in northwestern B.C. The oil pipeline would be used to export 400,000 barrels of oil per day from Alberta's oilsands to Asia and California, while the condensate line would transport imported condensate to the oilsands.
Condensate is a gasoline-like product that is used to dilute the heavy tar-like bitumen that is produced in the oilsands, so that it can be shipped through pipelines and processed in refineries.
Construction on the Gateway project is slated to commence in 2008 following a regulatory approval process in 2006-'07, and liquids are expected to commence movement by 2010.
"Ultimately, we will require commercial certainty before we proceed," said Meyer.
While Enbridge pursues its project, Calgary-based Kinder Morgan Canada, formerly Terasen Pipelines Inc., is planning to expand its Trans Mountain pipeline between Edmonton and the Vancouver suburb of Burnaby.
Kinder Morgan's line, known as the TMX project, would loop its existing pipeline between Edmonton and Burnaby, creating a dual pipeline system. The TMX project also calls for a potential connector to Kitimat.
Meyer did not mention Kinder Morgan when he was asked, during a question-and- answer session following his speech, about who his project's competitors were. He later told reporters he does not view the TMX as a rival.
"I knew they've talked about (connecting) to Kitimat but, really, the proposals that we've seen to date have been more focused on expanding the existing pipeline to the Vancouver area," said Meyer.
Enbridge plans to transport its oil overseas via very large crude carriers (VLCCs) and use ships that fit within the Suez Canal to transport condensate to Kitimat. But the size of ships used may be subject to future dispute.
The federal government introduced a moratorium on supertankers along the West Coast in the early 1970s, but Enbridge has maintained the moratorium no longer applies. The Calgary-based Pembina Institute and the West Coast Environmental Law group in Vancouver are among groups that may challenge the legality of the size of ship used.
"We have an initial capacity of 400,000 barrels (bbls) per day on the oil line," said Meyer. "That can be increased to 850,000 (bbls) per day. On the 400,000 (bbls) per day, PetroChina has expressed an interest on up to 50 per cent of that, or 200,000 (bbls per day.) The remaining volume we would see being taken up with exports to California or, certainly, Asia Pacific."
Meyer said negotiations with respective customers are under confidentiality agreements, so he could not speak further about any potential deals. He sidestepped a question of whether PetroChina could be interested in purchasing an interest in the pipeline, adding the Chinese government-owned firm approached Enbridge about using the pipeline.
Enbridge is a common carrier, so it would not tie into specific oilsands projects. Oilsands producers would deliver to a central terminal from which Enbridge would distribute oil.
But a recent CIBC World Markets report by analyst Matthew Akman expresses doubts that Enbridge will keep Gateway on schedule, considering 42 First Nations reside along the line, and seven of the groups have expressed opposition to Ottawa's approval process.
The Carrier Sekani Tribal Council, which is based near Kitimat and has land covering about one-third of the Gateway stretch, has also issued a scathing report that expresses concerns about potential pipeline bursts, impact on Stewart River salmon and a lack of employment opportunities for tribe members.
Harry Pierre, the Carrier Sekani's tribal chief, has said he does not see any economic benefits at all.
But Meyer said Enbridge is committed to engaging with First Nations on the project. He noted the company has been consulting with First Nations groups on Gateway since 2002 and, during his speech, he announced Enbridge is committing $200,000 to the University of Victoria's national chair in Aboriginal economic development.
The money is in addition to $4 million which UVic has already received, including $2 million from Industry Canada, $1 million from the province, and $1 million from Calgary-based EnCana Corp., Canada's largest independent oil and gas producer, which helped launch the chair and its program.
Meyer said Gateway will generate $4 billion worth of new economic opportunity in B.C. and Alberta, and $2 billion in direct labour income in the two provinces combined.
Alberta and B.C. municipalities will also receive $25 million per year in property taxes, he added.
The proposed Kitimat terminal is expected to cost $200 million and result in approximately 85 permanent jobs.
Kitimat Mayor Richard Wozney told Business Edge he is encouraged by the company's plan to involve First Nations and submit its formal application for regulatory approval later this year.
The application will be based on a preliminary information package submitted last November to the National Energy Board, other federal departments involved in regulatory reviews of the project and the Canadian Environmental Assessment Authority.
"In the last couple months, Enbridge has been very quiet and low key," says Wozney. "So it's good to hear what he had to say."
Wozney adds Kitimat is "very supportive" of Gateway and hopes it succeeds in gaining regulatory approvals. The pipeline will also create an atmosphere of people wanting to invest in other types of industries related to energy, such as an oil refinery or chemical plant, he says.
"From our perspective, the sooner that it does happen, the better, because it'll mean 50-80 direct jobs in our community, and they're high-paying jobs, so that's a benefit for any community," says Wozney.
Enbridge and Kinder Morgan are not the only companies vying to capitalize on pipeline opportunities to Kitimat.
Calgary-based Pembina Pipeline Corp. is proposing to connect a condensate line between Kitimat and Summit Lake near Prince George, where it would connect with the company's western pipeline system.
Pembina, not affiliated with the environmental group of the same name, was previously involved with the TMX project, but has since decided to work independently of Kinder Morgan.
EnCana, through its wholly owned subsidiary EnCana Midstream and Marketing, has partnered with Methanex Corp. to import condensate via the existing Methanex marine terminal at Kitimat.
According to the five-year deal, Vancouver-based Methanex is providing terminal services, and EnCana has an option to purchase the facility during the life of the agreement.
Methanex's marine terminal now connects to pipelines via truck and rail, but EnCana, which has expressed plans to import up to 25,000 barrels of diluent per day, is looking into the possibility of putting a pipeline there, says Wozney.
In other words, Enbridge's rivals may soon want to test whether there is room for more than two new pipeline operators on B.C.'s north coast.
(Monte Stewart can be reached at email@example.com)