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Canada has been so stuck on the idea that energy development depends on boosting exports to the United States and Asia that the obvious other option, increasing domestic use, has been getting less attention than it deserves.
That option will be thrust to the top of the national agenda if TransCanada Corp. moves ahead with plans to convert parts of its underutilized Canadian Mainline system from gas to oil transportation, which could be ready for takeoff by the end of the year.
The conversion would send a river of Western Canadian oil — up to one million barrels a day — to Central and Eastern Canada, pushing out 700,000 barrels a day of crude imports from countries such as Saudi Arabia, Libya and Nigeria. It would build on smaller, similar plans by competitor Enbridge Inc.
The Mainline conversion would be so large in scope and bring so many benefits — lower gasoline prices and lower heating bills in the East, more profitable refineries, a secure market for Canadian oil, more jobs and more government revenue — it would truly distribute Canada’s oil wealth.
Why hasn’t it been done sooner? It used to be cheaper to import oil than to move it across the country. But with world prices now exceeding Canadian prices by as much as a third, controversies dogging new projects and the $6-billion Mainline at risk of becoming a stranded asset, recycling existing pipe is making a lot of market sense.
After more than a year of behind-the-scenes planning to determine whether the project is feasible, Alex Pourbaix, president of energy and oil pipelines at TransCanada, said in an interview his company is confident the conversion can be pulled off technically and that it would offer competitive tolls relative to other options.
Now TransCanada is moving to a more public phase to lock up market support.
“When news first came out that TransCanada was considering this kind of a project, there was a fair bit of interest … but [shippers] felt that it was a challenging project,” he said. “Here we are, 12 or 15 months later, and the interest has grown, not diminished, and the view of potential shippers is that this is a very compelling option to get crude to market — Alberta, Saskatchewan and Bakken crude.”
Indeed, support rose once potential shippers realized the pipeline is already 80% in the ground, won’t face controversial regulatory processes such as U.S. State Department approval, and would supply a secure market that is now paying high world oil prices. In addition, the pipeline, which could end in Montreal or on the East Coast, could take Western oil to tide water and enable exports to the U.S. East Coast and Gulf Coast, Europe, India and China.
For the rest of this column, please go to the National Post website: http://business.financialpost.com/2012/10/12/converting-part-of-transcanadas-mainline-could-fuel-domestic-use/