Companies vie to build pipeline through B.C.

Oil sands production is growing, and producers need secondary markets. Is Asia the answer?

October 01, 2005

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Marco Polo began a journey in the 13th century that shaped a trading link between Europe and Asia; his travels along the Silk Road are legendary. For Alberta’s oil sands producers, the road to China’s voracious energy markets crosses the Rocky Mountains. The lure of trade with the world’s fastest growing economy has two of the country’s pipeline companies competing to build Canada’s black-gold road to Asia.

Both Terasen Pipelines Inc. and Enbridge Inc. are vying for the prize to carry growing oil sands supplies to new markets and are ramping up resources to garner producer commitment. Depending on shipper commitment, the winner will have a host of regulatory, environmental, local and Aboriginal issues to deal with before pipe is laid in the ground.

Although a bag full of uncertainty exists, one thing is certain: oil sands production is growing rapidly, and producers need growing secondary markets. By 2010, one million extra barrels from oil sands production have been forecasted. California demand is increasing, while at the same time, its own domestic source, oil from Alaska’s North Slope, is in decline. And China’s phenomenal industrial growth has that country searching for supply security.

In 2001, Enbridge Inc. began to study the idea of an export pipeline targeting Asian markets via a deepwater port from northern British Columbia. Through its operating company, Gateway Pipeline Inc., Enbridge’s original plan was to build a $2.5 billion, 1,200-kilometre crude oil pipeline to push 400,000 barrels of oil a day to this northern port. The scope of the project has since widened.
What has emerged as a key component of the Gateway project is the construction of a 16-inch pipeline to import dwindling supplies of condensate into the Western Canadian Sedimentary Basin. In mid-October Enbridge chose Kitimat as the end-site location for Gateway, after producers enthusiastically responded to an ‘Open Season’ on the condensate line. Support for the 150,000 bpd line was so encouraging that the company has now opted to install a 20-inch diameter line across BC, in anticipation of further interest.

“We’re close to filing a preliminary information package with the regulator,” said D’Arcy Levesque, Enbridge vice-president of government and regulatory affairs. Condensate would be imported using SuezMax vessels—weighing160 dead-weight tonnes—into berths at Kitimat, and onward to facilities in Edmonton. The condensate would be used as diluent, watering-down increasingly heavy crude production, and thereby enabling its transport.

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