TransCanada Corp. is taking a big step forward with an ambitious plan for the construction of a pipeline to transport oil from western Canada to Quebec and New Brunswick, which could eliminate the dependence of Canada's eastern refineries on higher priced imported crude.
An open season process is being undertaken by TransCanada, which means the company is asking potential shippers for firm financial commitments to move oil on the proposed Energy East Pipeline.
As part of the process, TransCanada will propose a package of key terms and design parameters for the pipeline project to prospective customers and solicit bids for contracting capacity on that project.
The main purpose for holding an open season is to ensure that all interested parties are made aware of the proposed terms for the new pipeline project and to determine if there is sufficient customer interest to pursue the project.
The construction of the proposed project involves converting about 3,000 kilometres of natural gas pipeline capacity that already exists on TransCanada’s Canadian Mainline to crude oil service, as well as constructing up to 1,400 kilometres of new pipeline.
The project may create as many as 2,000 jobs during the construction phase of the pipeline.
The federal government is backing TransCanada’s decision to proceed to a binding open season for contracts.
“Our government strongly supports initiatives to construct energy infrastructure to transport western Canadian oil to the east,” said Joe Oliver, minister of natural resources.
“It is in the national interest to replace higher-cost foreign crude with lower-cost Canadian crude to consumers and refineries in Quebec and Atlantic Canada.”
The project will have the capacity to transport as much as 850,000 barrels of crude oil per day to markets in Eastern Canada. In 2012, Canada imported more than 600,000 barrels per day to supply its Eastern refineries.
The open season will begin on April 15, and will close on June 17, 2013. Interested parties may submit binding bids for transportation capacity of crude oil from western receipt points to delivery points in the Montreal and Québec City, Que. and Saint John, N.B. areas.
New Brunswick Premier David Alward is also encouraged by TransCanada’s decision to hold an open season.
“This is an important and encouraging milestone in the project,” he said.
“We are pleased that TransCanada has issued the open season in such a short period of time, and we will continue to work hard with our provincial and federal colleagues, as well as with industry, to make sure that the pipeline, which is so important to Canada and New Brunswick, comes to fruition.”
Alward said a new pipeline would alleviate Canada’s dependence on foreign oil and increase the value of Canada’s crude oil through shipping to world markets from the deep-water port of Saint John.
The largest refinery in Canada, owned and operated by Irving Oil Ltd. in Saint John, can process 300,000 barrels of oil per day.
Alward made a three day trip to Alberta in February to talk to Premier Alison Redford and oil executives about the possibility of the west-to-east pipeline.
Alberta exports most of its oil to the United States, but this country is currently experiencing rapid oil production growth.
As a result, Alberta is getting paid a little more than $50 dollars a barrel, which means oil producers are getting about $20 to $40 less per barrel than the world price.
A pipeline to the Irving Oil refinery would allow Alberta producers to charge the higher world price.
If the open season is successful, TransCanada intends to proceed with the regulatory applications for approvals to construct and operate the pipeline, which is expected to be complete in late-2017.
TransCanada is beginning Aboriginal and stakeholder engagement and field work as part of the initial design and planning work for the project.