Gateway would be a nearly 1,200-km pipeline taking oilsands crude from the Edmonton area, across the Rocky Mountains and to a deep-water port either at Kitimat, BC, 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. “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 still need to be negotiated, along with smaller deals with other shippers to fill capacity on the proposed 400,000brl/d line. Although Enbridge believes the pipeline could be in service by the end of the decade, this will require an aggressive schedule, and the company will need to finalize definitive agreements with oilsands producers and refiners before the end of this year. It will also 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 SE 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 2 million brl/d within the decade, and several major state-owned Chinese energy companies have been eyeing the oilsands closely. CNOOC Ltd (the China National Offshore Oil Corp.) has attained a toehold in the sector by purchasing nearly 17% of privately-held Canadian oilsands company MEG Energy Corp. for $150 million. Pipeline analyst Brian Purdy with Calgary-based First Energy 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,” he said.
Rival pipeline company Terasen Inc. is also keen to supply oils ands 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 BC’s Lower Mainland. But Purdy believes the Enbridge announcement will make it much harder for Treason 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.”