Enbridge Inc. has lined up
enough support from a clutch of Asian refiners and Canadian oil
producers to revive its $4-billion plan to build a pipeline from the
oil sands to the West Coast, just months after China pulled out of the
project.
Enbridge has now turned to Southeast Asia to find customers for its
Gateway pipeline and attracted enough funding from refiners there to
accelerate work on winning regulatory approval, says Enbridge chief
executive officer Patrick Daniel. "The pull from the other end of
Gateway, initially, was primarily from the Chinese, but in this
initiative the Chinese are not participants," Mr. Daniel told investors
at a conference in Whistler, B.C., yesterday.
The project was shelved last year when PetroChina Co. Ltd. - a
Chinese national oil company that had said it would buy half the
Gateway crude - withdrew and rebuked Ottawa for not doing enough to
support the project.
Mr. Daniel has travelled to Asia regularly, leading Enbridge teams
seeking to woo potential customers. Now, he said, customer demand for
the pipeline "ranges from Japan down to Singapore - so [there is a]
much broader Southeast Asian interest."
The Enbridge pipeline would enable Canadian oil sands producers to
tap into a new and fast-growing market. The U.S. Midwest accounts for
most oil sands exports, putting producers at risk if that market
becomes saturated and prices plummet.
Oil sands producers have been leaning heavily on pipeline builders
such as Enbridge to connect Alberta to new markets, including the U.S.
Gulf Coast. Some producers had cooled on Asia as a potential
destination as U.S. refiners showed they were willing to take on more
Canadian production. Enbridge is looking for support to build a
pipeline from Illinois to Texas that would allow Canadian crude to
reach markets further south.
But interest for an Asian outlet seems to have returned. Kinder
Morgan Canada already operates a medium-sized pipeline from Alberta to
British Columbia's coast that it plans to expand. It usually supplies
crude to California or the U.S. Northwest.
Last year, a record amount of that crude - as much as seven oil
tankers, or about 550,000 barrels of oil - travelled to buyers in Asia
last year, according to the National Energy Board, Canada's energy
regulator.
The increased shipments suggest that Asian firms have been testing
both Canadian heavy crude and light synthetic crude in their refineries
to see how well they work, with a view to taking more in the future.
"The crude needs to be tested in refineries, and that's what is
happening," Ian Anderson, chief executive of Kinder Morgan Canada, said
in a recent interview.
"It will take some time until there's a meaningful [Asian] market
developed that producers will commit significant portions of supply to.
But in the next several years we'll see Canadian crude penetrate that
market more and more, until there's a critical mass that would underpin
both producers making a commitment [to Asia] and a significant pipeline
expansion," Mr. Anderson said.
While Enbridge would not say which countries or companies have
committed to Gateway, South Korea would likely join Singapore and Japan
as customers.
Enbridge is still in talks with some Chinese firms about getting
involved in Gateway, spokeswoman Jennifer Varey said. She wouldn't say
how much funding customers have committed to the project.
