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TransCanada pours cold water on rivals' plans to ship to Asia

Keystone protesters outside the White House were a factor in the U.S. decision to delay its ruling on the pipeline.

ANDREW HARRER/BLOOMBERG/ANDREW HARRER/BLOOMBERG

As TransCanada Corp. grows more optimistic about the prospects for its Keystone XL pipeline, the company is casting doubts on plans by its competitors to ship oil to Canada's West Coast for export to Asia.

TransCanada has been "taking a pretty hard look" at ways to send Canadian crude to one of the country's coasts, where it could be loaded onto tankers and shipped to offshore markets, Alex Pourbaix, the company's president of energy and oil pipelines, said Wednesday.

But he suggested that problems encountered by Keystone XL, which drew heated opposition in the United States, pale in comparison with what awaits those looking to build new pipelines through British Columbia.

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"In looking at a West Coast option, what we've seen at Keystone XL will be replicated and … probably be even more extreme than we've been seeing with Keystone XL," he said.

Enbridge Inc. and Houston-based Kinder Morgan are each working on projects to carry hundreds of thousands of new barrels of Alberta crude westward. Both companies have expressed confidence in their ability to build those projects.

But Mr. Pourbaix said their Achilles heel is their need to load the oil on to tankers, including very large crude carriers (VLCCs) capable of carrying two million barrels – 318 million litres, or 127 Olympic-sized swimming pools – through B.C. waters.

"That spectre of VLCCs on the West Coast is going to really generate a lot of environmental opposition," he said.

Mr. Pourbaix's prediction carries more than a hint of self-interest. TransCanada continues to see the United States as the best market for Canada's crude, and has staked a substantial amount of its future on it. Two-thirds of the company's $12-billion in capital spending plans over the next two years is tied to Keystone XL.

But his comments nonetheless constitute a warning from a senior pipeline industry executive about the challenges of sending oil to Asia, an option that has been increasingly trumpeted by Canada's political leadership.

For example, in an interview, Natural Resources Minister Joe Oliver said, "We have more resources than the U.S. can accommodate and clearly we're going to have to find other markets … That is an absolutely fundamental objective of our government. I'd call it an urgent objective."

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TransCanada continues to push for the $7-billion Keystone XL project, which involves construction in several U.S. states. It received another boost Wednesday from the Nebraska legislature, which gave unanimous first-round approval to a bill that will provide $2-million (U.S.) in financing toward a new environmental impact study.

TransCanada is now dramatically shifting its projections about the difficulty of finding a new route, saying it's unlikely to add much length to the pipeline or cost to the project. That is substantially different from the company's previous stance, suggesting either that earlier warnings were too dire, or that current assurances are too optimistic.

On Nov. 1, for example, TransCanada chief executive officer Russ Girling said changing Keystone's path could take more than three years. He also cautioned that the company could not count on oil shippers to stand by the project forever. TransCanada had originally negotiated a "sunset clause" with shippers that allowed them to bail if KeystoneXL was not built by Dec. 31, 2013.

Now, just 15 days later, TransCanada says the change in route could be accomplished in six to nine months, and says it had already renegotiated the sunset clause with some of its shippers.

Asked about the dramatic shift, Mr. Girling said previous remarks were based on an assumption of a worst-case scenario, not the more simple change in route around the Nebraska Sand Hills sought by that state's political leaders for months.

"Our concern in the past was, with an unknown scope of increased review, that process could result in a start-over from scratch," he said. But with a "narrowed definition of scope," the company believes it can "get through that in a shorter period of time."

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About the Authors
Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More

Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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