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OTTAWA AND CALGARY — Western Canadian oil producers fear that a growing glut of light oil in their traditional market will drive down the value of their crude, and are looking to TransCanada Corp.’s proposed west-to-east pipeline as a route to world prices for their oil.
While political proponents of the cross-country pipeline say it would bring cheap western crude to Eastern Canadian refineries, the oil companies are clearly eyeing the line as a way to get their oil into markets that are paying the world price.
“Any access to the Eastern Canadian refinery markets, to Europe or Eastern Seaboard refineries, that is a plus for the industry as a whole,” said Murray Nunns, chief executive officer of Penn West Petroleum Ltd.
TransCanada has won the endorsement for its $5-billion pipeline plan from New Brunswick Premier David Alward, who will travel to Alberta next month to visit Premier Alison Redford and put some political momentum behind the project. TransCanada says it is confident the project will be competitive with other proposed new routes, but still must line up shippers willing to make long-term commitments to justify its investment.
Western Canadian producers have been frustrated by the inability of companies to win approval for new pipelines in the United States or across British Columbia, even as they face a surge of new production in the northern United States that is competing for existing capacity to their markets in the Midwest.
“The No. 1 issue facing the industry is time,” Mr. Nunns said. “How long is it going to be before projects are ready and we have access to world pricing? There’s going to be interest in projects that have time and certainty on their side.”
From that perspective, TransCanada’s plan to convert an existing, underused natural gas line is a mixed blessing. The east coast project is far behind others, including Keystone XL and Northern Gateway, in the regulatory process, but faces less opposition.
Jackie Forrest, a Calgary-based analyst with IHS Cera Inc., said the pipeline to Eastern Canada would be an important outlet for producers of light oil and companies that upgrade oil sands bitumen to synthetic crude.
“We think there is a need for it,” Ms. Forrest said.
“From the perspective of Canadian producers of light crude who are going to face increasing competition going into the U.S. market due to growing supply of tight oil, it makes sense.”
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