TransCanada Corp. postponed its Energy East pipeline by at least a year and ruled out its preferred site for an oil-export terminal in Quebec, as sharply lower crude prices force a major rewrite of industry growth plans.
The Calgary-based company on Thursday said it is studying alternative sites for the export facility in the province after scrapping designs for a marine terminal at Cacouna, Que. amid concerns the project would harm beluga whales. As a result, the company said the $12-billion pipeline to carry oil sands crude as far as Canada’s east coast would start up in early 2020, more than a year later than originally planned.
The delay marks another setback for efforts to expand markets for Alberta’s landlocked oil sands deposits, which have been hit hard by the steep plunge in benchmark crude prices since last summer.
For years, efforts to tap richer global markets from Canada’s coasts have been stymied, as multibillion-dollar pipelines encounter stiff resistance from environmental and local groups. Now, some analysts are questioning whether so many outlets are needed and by when, as oil companies cut billions from capital budgets and shelve longer-term expansions to cope with one of the worst downturns in years.
Some 500,000 barrels per day of new oil sands capacity – equivalent to roughly 45 per cent of Energy East’s total capacity – has already been shaved from energy sector growth forecasts since last June, according to industry data.
“The market today suggests there’s a need for pipe, but that need only grows with the production profile,” said Michael Wojciechowski, analyst at Wood Mackenzie.
He said rival projects, including TransCanada’s stalled Keystone XL pipeline, could sap commercial support for Energy East if they get built first, an assertion the company rejects.
If built, Energy East would convert portions of TransCanada’s under-used natural gas mainline system to ship up to 1.1 million barrels per day of mainly oil sands crude to Irving Oil Ltd.’s refinery in Saint John, N.B. From there, the crude could be exported to global buyers.
TransCanada spokesman Tim Duboyce said the project serves a different market than Keystone XL. Both are underpinned by firm customer support, he said. “The contracts are in place. And that supports the projects themselves and their viability,” he said.
TransCanada aims to file a project amendment with regulators for Energy East detailing how it plans to proceed in Quebec by the end of the fourth quarter this year, he said. Critics say the National Energy Board review should be halted until the application is complete.
The company suspended work on Cacouna on Dec. 1, immediately after the Committee on the Status of Endangered Wildlife in Canada recommended the beluga population in the St. Lawrence be declared endangered with full protection of their habitat. The Cacouna area is a migration and calving spot for the whales.
Four months later, the company concluded the site was not workable.
Quebec’s Liberal government expressed frustration on Thursday that the company still hasn’t submitted a definitive project for the province to review. Questions about possible oil supply to Quebec refineries run by Suncor Energy Inc. and Valero Energy Corp., as well as a dispute with natural gas distributors, remain outstanding, said natural resources minister Pierre Arcand.
Scrapping the Quebec terminal entirely would weaken the economic benefit argument in the province because fewer permanent jobs would be created. But it wouldn’t necessarily quash Quebec’s support for the project, he said.
“There are also construction and maintenance benefits and maybe an office in Montreal. Whether it’s enough, we’ll analyze that,” Mr. Arcand said in an interview.
TransCanada has already completed an initial assessment of eight potential sites for a marine terminal in Quebec, taking into account seaway navigation conditions, proximity to the main pipeline as well as environmental considerations and local support. Only three were judged appropriate: Cacouna, East Lévis across the river from Quebec City and Baies-des-Sables, just north of Mont-Joli.
At East Lévis, the narrow channel in front of the terminal site would limit the size of tankers that could call at the port, the company said. To use the Baies-des-Sables site would require building another 160 kilometres of pipeline, which would add to the project’s already hefty cost.
http://www.theglobeandmail.com/report-on-business/industry-news/energy-a…