Enbridge looks east: N.B. pipeline now a Gateway alternative – by John Ivison (National Post – November 29, 2012)

The National Post is Canada’s second largest national paper.

Al Monaco puts a brave face on the prospects of Enbridge’s Northern Gateway pipeline becoming a reality.

“We’re in the middle of the regulatory process, so I don’t want to presume anything. But we’re optimistic and committed to it,” the company’s new chief executive said over breakfast in Ottawa Wednesday.

Yet he remarked on more than one occasion, “it’s not just about Gateway,” as if he’s resigned to the idea Enbridge’s plan to build a pipeline to connect Canada’s supply of heavy crude to demand in Asia is doomed to failure, thanks to the opposition.

Enbridge’s strategy is to diversify Canada’s markets, so it is no longer a price taker — a captive supplier selling heavy crude to the U.S. market at a discount that costs the country $60-million a day.

The average discount in the first three quarters of this year was $27 a barrel, which was a major contributor to Canada’s increased deficit. Mr. Monaco, who was in town to talk to politicians in all parties, was more keen to emphasize Enbridge’s other market access initiatives.

The first is establishing access to eastern Canada by reversing the flow of an existing line to ensure Western crude will reach Montreal. This would allow Ontario and Quebec refineries to access lower-cost western oil at some price between the $75 a barrel producers get at the moment and the $113 a barrel being paid for Brent crude from foreign producers.

From there, he said it’s possible a new pipeline could be built to Saint John, N.B., from where the oil could be exported. “We’ve had discussions with New Brunswick,” he said.

The second initiative is the company’s Gulf Coast access program to send Canadian oil to refineries in Texas, where it could also command a price of more than $100 a barrel. Enbridge has paid $1.5-billion for a half share in the Seaway pipeline that stretches from the Gulf Coast to Cushing, Okla.

Yet by Mr. Monaco’s own admission, the most transformative project for Canada’s landlocked energy industry is the Northern Gateway.

“This is a pretty important project for our producers and all of Canada,” he said. “The West Coast has access to half the world’s population — a region with an expected GDP growth of 7%-8%.”

One eye-popping statistic about the potential for oil (and aluminum) demand from China, is that only 70 out of every 1,000 people own vehicles, compared to 793 in the United States. This at a time when U.S. oil consumption is flat at best.

For the rest of this article, please go to the National Post website: http://fullcomment.nationalpost.com/2012/11/28/enbridge-looks-east-for-gateway-alternative/

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