Canada finds new market for her oil

[Guest]

West Coast pipeline deal shows Chinese interest in oilsands


CALGARY (CP) - In the biggest display to date of China's keen interest in Canada's vast oilsands resources, pipeline giant Enbridge Inc. and PetroChina announced a preliminary deal Thursday to anchor a new $2.5-billion oil pipeline on the West Coast.
The memorandum of understanding, signed in Beijing by Enbridge president and chief executive Pat Daniel, has China's largest oil company targeting about half of the so-called Gateway Pipeline's shipping capacity, or 200,000 barrels of day, of oilsands crude.

Gateway would be a nearly 1,200-kilometre pipeline taking oilsands crude from the Edmonton area, across the Rocky Mountains and to a deep-water port either at Kitimat, B.C. or Prince Rupert for export to Asia and the California markets.

"This is a positive step forward on a project which will have major benefits for Enbridge, for oilsands producers and for Canada, as well as for consumers in China and other offshore markets," Daniel said in a release.

"However, there remains a great deal to be accomplished before the Gateway Pipeline can be a reality."

Long-term agreements for the sale of crude to PetroChina still need to be negotiated, along with smaller deals with other shippers to fill capacity on the proposed 400,000 barrel per day line.

Although Enbridge believes the pipeline could be in service by the end of the decade, that would call for an aggressive timeline. The company would need to hammer out definitive agreements with oilsands producers and refiners before the end of the year.

And it would need to line up community, aboriginal and environmental support before proceeding with an official regulatory filing at some time in 2006.

China has a huge appetite for crude to fuel its rapidly growing economy. Chinese oil companies are major players in the offshore oil business in Southeast Asia and have been looking outside the region to secure steady supplies of oil into the future.

The northern Alberta oilsands have been expanding rapidly and are expected to soon produce the bulk of Canada's crude. With a long list of new projects about to come on stream, production is forecast to nearly double to two million barrels per day within the decade.

Factoring in the oilsands, Canada holds the second-largest supply of remaining energy reserves in the world behind Saudi Arabia.

Several major state-owned Chinese energy companies have been eyeing the oilsands closely. Earlier this week, CNOOC Ltd., also known as China National Offshore Oil Corp., attained a toehold in the sector by purchasing nearly 17 per cent of privately held Canadian oilsands company MEG Energy Corp. for $150 million.

Pipeline analyst Brian Purdy with Calgary-based FirstEnergy Capital, said the preliminary deal should give Enbridge the "critical mass" it needs to move forward with the project and sign other smaller deals to fill the pipeline.

"This pipeline obviously shows China's demand for oil and what they're willing to commit to."

Enbridge (TSX:ENB) is one of Canada's biggest energy companies, operating the main oil pipeline that takes Alberta crude to eastern markets. The company also owns Canada's largest natural gas distributor, the former Consumers Gas based in Ontario.

Enbridge has an array of new, multibillion-dollar projects in the works to take the expanding oilsands crude to new markets on both sides of the U.S. as conventional oil supplies continue to wane.

Rival pipeline company, Terasen Inc. (TSX:TER) is also keen to supply oilsands crude to new markets in Asia and has been looking at a series of major expansions to its existing pipeline that takes oil from the Edmonton area to B.C.'s Lower Mainland.

But Purdy believes Thursday's Enbridge announcement will make it much harder for Terasen to get the commitments from producers that it needs.

"They're well behind, given this announcement - it's going to be difficult to get that critical mass that they need to justify a project of this size," he said.

"You don't go ahead with a $2.5-billion project without a good portion of that capacity tied up before you start."

In Thursday trading on the Toronto Stock Exchange, Enbridge shares rose 51 cents to $63.63, while Terasen shares fell 37 cents to $28.18.
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Well looks like our surplus oil may be headed to Asia.

Matter of time before we find new markets for our timber and beef.

You reap what you sow. It would appear that america has not planted a crop in Canada.

Foreign policy can bite you on the ass some time. Nice to have another resource hungry nation out there to sell too.

Laird

[AAAhmed46]

Yeah, alberta could really benefit, with the Mad cow crisis and all. We really needed this

[Ted Dinwiddie]

I understand that much of the oil the U.S. gets and will get (ANWR) is sold to Asia.