UPDATE 2-TransCanada ramps up East Coast pipeline plan as Keystone stalls
Aug 1 (Reuters) - TransCanada Corp on Thursday said it would move ahead with a $12 billion oil pipeline to ship Western Canada's oil sands crude to refiners on its east coast and beyond, scaling up the project as its U.S.-bound Keystone XL line stalls in Washington.
TransCanada, Canada's No. 2 pipeline company, said it would push ahead with a 1.1-million-barrel-per-day Energy East Pipeline after "strong market support." That is more than the 850,000 bpd capacity TransCanada mentioned in April, when it first began seeking customer commitments for the project.
The conduit, which will convert an under-utilized natural gas line for much of its route, should be in service by late 2017 for deliveries to Quebec and 2018 for New Brunswick.
It would be the largest project yet to deliver oil sands crude to Canada's coasts for export or refining, as energy companies fret about the regulatory hurdles and market limitations of pumping more oil to the United States, currently Canada's only major customer.
The project may raise more questions about the fate of TransCanada's Keystone XL, the 800,000 bpd Canada-Texas pipeline that has been awaiting U.S. State Department approval for years, although the company said both lines were important.
President Barack Obama is expected to make a final decision on the line by later this year, but the lengthy delays have forced shippers to seek other outlets.
"Energy East is one solution for transporting crude oil, but the industry also requires additional pipelines such as Keystone XL to transport growing supplies of Canadian and U.S. crude oil to existing North American markets," TransCanada Chief Executive Officer Russ Girling said in a statement.
"Both pipelines are required to meet the need for safe and reliable pipeline infrastructure and are underpinned with binding, long-term agreements."
The company said it received 900,000 bpd worth of firm, long-term contract commitments to use the Energy East line, more than enough to replace imports to Canada's own refineries.
"It looks like they got far more interest than they were initially expecting," said analyst Sandy Fielden of consulting firm RBN Energy in Austin, Texas. "It also solves two problems for the company as they have this large natural gas pipeline that has been made largely redundant."
Shares of TransCanada were up 2.6 percent at C$48.16 in late morning trading.
APPLAUSE FROM OTTAWA
Canadian Natural Resources Minister Joe Oliver welcomed the announcement as a way to lower prices for refineries and reduce their reliance on foreign suppliers.
The pipeline project would be subject to an environmental and regulatory review, Oliver said.
The company said it would seek regulatory approvals early next year. The pipeline will convert 3,000 kilometers (1,900 miles) of TransCanada's existing main natural gas line to carry crude oil, and build approximately 1,400 kilometers (870 miles) of new pipeline.
Canada imported more than 700,000 bpd from abroad last year, according to the National Energy Board, to supply six refineries east of the Ontario-Quebec border.
Oil sent on the planned line could supplant much of those imports and give oil sands producers access to high-priced Atlantic markets for the first time.
The pipeline will ship crude from Alberta and Saskatchewan to in Montreal and the Quebec City region, and terminate at Canaport in Saint John, New Brunswick, where TransCanada has formed a joint venture with privately owned Irving Oil to build, own and operate a new deep water marine terminal.
The line would probably diminish the need to ship oil by rail to East Coast refiners, a trend under fire since the derailment of a crude-laden train in the lakeside town of Lac Megantic, Quebec, that killed 47 people.
But TransCanada is also likely to face stiff resistance from some groups over the construction of the line. Similar projects to Canada's West Coast have faced delays due to objections by First Nations groups and environmentalists.
The proposal is the latest in a series of planned pipelines and expansion projects as a flood of crude from the oil sands and the Bakken shale oil field stretches the existing networks.
Along with TransCanada's 830,000 bpd Keystone XL line, Enbridge Inc is seeking approval to build the 525,000 bpd Northern Gateway pipeline to take crude from Alberta to an Kitimat, British Columbia for export. It also plans an expansion of its mainline system, which carries the bulk of Canada's oil exports to the United States.
Kinder Morgan Energy Partners LP wants to almost treble the size of its Trans Mountain pipeline, which carries oil from Edmonton, Alberta, to Vancouver and Puget Sound, to 890,000 bpd from 300,000.
Enbridge CEO Al Monaco said on Thursday that all the lines were needed. "There's a lot of crude that will have to find a home," Monaco said on a conference call.