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CALGARY HERALD: Pipeline demands mount: Enbridge

Alberta needs at least three, utility says
SHAUN POLCZER CALGARYHERALD

At least three new pipelines will be needed to move Alberta’s growing oilsands production to new markets in the United States and overseas, a senior official with Enbridge Inc. said Wednesday.

Those are on top of a 400,000barrel per day (bpd) link to the U.S. Gulf Coast and a proposed 300,000 bpd hook-up to Kitimat, B.C., said Rick Sandahl, Enbridge’s senior vice-president of market development.

“There’s a need for significant infrastructure changes going forward,” he told a Calgary oilsands conference.

“Getting to existing markets isn’t adequate — you need to have pipelines to get to new markets.”

According to industry forecasts, oilsands production is expected to triple to about 3.5 million bpd by 2015, requiring at least two million bpd of incremental transportation capacity out of Western Canada.

Sandahl said Enbridge has received strong interest from American refiners keen to access more Canadian oil.

In addition to the Gulf Coast, other potential new markets include California — which could be supplied from Kitimat — and the eastern seaboard, which would require a $1.4-billion line from Chicago to move Canadian oil into places like Philadelphia, Baltimore and New Jersey.

An eastern pipeline could also access refineries on the Canadian side of the border, particularly in Montreal.

Companies like

Shell Canada Ltd. and Petro-Canada have speculated on building or modifying facilities in eastern Canada to process Alberta heavy crude.

However, Sandahl noted the east coast line is the “most speculative” proposal in Enbridge’s $15-billion project inventory. If it goes ahead, the pipeline could be built and in service by 2012.

But the Gulf Coast remains the big prize for Canadian shippers.

It has the largest concentration of heavy oil refineries in North America and is looking to diversify supply sources that come mainly from Venezuela and Mexico.

Venezuelan president Hugo Chavez has threatened to reduce exports to the U.S. while Mexico’s oil production is in decline.

Other proposed export pipes from Canada include a 250,000-bpd bullet line to Texas currently being advanced by Altex Energy Ltd.

Altex is a private company responsible for building the Alliance natural gas pipeline to Chicago in 2000. Altex proposes to ship raw bitumen to U.S. refineries capable of upgrading.

Acknowledging the debate over value-added processing at home, Crawford said the pipeline would serve as a hedge against rising costs for labour and materials in Alberta.

Andrew Kuske, a pipeline analyst with in Toronto, said Enbridge stands to gain from future expansion projects.

“Enbridge’s asset position is likely to fuel a significant portion of highly visible corporate growth over the next five years,” he said in a research note.

Despite increasing its dividend seven per cent on Tuesday, Enbridge shares fell 69 cents in Toronto, to close at $38.45.

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