TransCanada CEO Believes East Coast Oil Line Possible

August 2012, Vol. 239 No. 8

Russ Girling, CEO of TransCanada Corp., said a new line to carry oil sands crude to Canada’s Atlantic coast could also serve markets in Europe and the U.S. Eastern Seaboard.

TransCanada is considering a line to move crude to refineries in Eastern Canada that now rely on expensive foreign imports. It could convert an underused natural gas line to oil service to take oil as far as Quebec and then build new pipe to the line’s terminus. It would be similar to the first phase of its Keystone pipeline.

TransCanada, Enbridge Inc. and Kinder Morgan Energy Partners LP are all proposing new pipelines to carry production from the oil sands and the Bakken oil field to new markets. Output from the oil sands is forecast to rise by 2 MMbpd bpd by 2021 to 3.7 MMbpd. Meanwhile, oil from the Bakken and Three Forks shale in North Dakota could double from the current 545,000 bpd level over the next two decades.

“If you can get to New Brunswick and load large-sized vessels you can go to the Gulf Coast relatively economically and you can access Europe relatively economically,” Girling told investors at a Toronto conference sponsored by BMO Capital Markets and reported by Reuters. “I’d say there is a fair bit of market pull.”

TransCanada’s line could potentially serve Canadian refineries that process as much as 600,000 bpd, including Canada’s largest refinery, the 300,000 bpd Irving Oil Ltd. facility in Saint John, New Brunswick. But the line could also profitably ship oil sands crude to Atlantic Basin refineries for the first time.

TransCanada believes converting one of its under-used gas lines is technically and economically feasible. It must figure out what tolls it will charge customers to ship on the line and whether there is sufficient demand for the project, though Girling believes that rising oil production will justify the line.

Producers “are going to need multiple outlets and this would be a very viable one,” he said.