Touted gains from Gateway oil pipeline questioned

Tue Sep 18, 2012 5:12pm EDT

* Opponent's lawyer says Enbridge uses rosy forecast

* Study calls for C$3.36 bln in benefits by 2020

* Enbridge says production outlook difference not relevant

By Jeffrey Jones

CALGARY, Alberta, Sept 18 (Reuters) - The financial gains Enbridge Inc forecasts will flow from its proposed Northern Gateway pipeline to Canada's West Coast are based on rosier oil production predictions than the company shares with its own investors and analysts, a lawyer for a native group opposed to the project said on Tuesday.

Hana Boye, attorney for the Haisla First Nation, whose lands encompass the end-point of the C$6 billion ($6.2 billion)pipeline's route, told a public hearing that Enbridge's calculation of benefits to the oil industry are based on the Canadian Association of Petroleum Producers' (CAPP) output forecast.

That study, prepared for Enbridge by Dallas-based Muse Stancil, projected a C$3.36 billion benefit to the Canadian oil sector in 2020, a year and a half after the planned startup.

However, Enbridge's in-house outlook lags that by about 500,000 barrels a day by 2020, Boye said, citing a company executive's presentation to investors in 2011. She asked Northern Gateway President John Carruthers to provide all of the assumptions used in that forecast.

"That creates a material difference in terms of the benefits affected by the supply," Boye said during a sometimes testy exchange at the proceedings before a federal Joint Review Panel in Edmonton, Alberta.

The current phase of the hearings into the contentious 1,177-km (731-mile) Northern Gateway pipeline across the Rockies are delving into financial aspects and economic benefits.

The Haisla are among several British Columbia native groups that oppose the 525,000 barrel a day project, which the industry hopes will open up new supply lines to Asia for oil sands-derived crude from Alberta.

A big part of the projected benefit is a higher price for all Western Canadian crude as a result of Northern Gateway volumes being priced against higher-value oil in Asian markets and not just discounted to North American supply, as is the case today.

During Enbridge's investor day in Toronto on Oct. 4, Steve Wuori, head of the company's liquids pipelines division, said the CAPP forecast, a much-quoted tally calling for 4.47 barrels of western Canadian crude a day by 2020 was more "bullish" than the company's own.

"I think they have a 5.2 percent growth rate for the Western Canadian basin over this period of time to 2020. Our forecast is a little more muted, 4.4 percent is what we are forecasting," Wuori said, according to a transcript of his presentation.

Members of Enbridge's witness panel said the discrepancy would not mean a relevant difference to the benefits, as forecasts change each year with developers adding or changing plans for projects. In addition, the "uplift" to prices would vary by grade of crude.

Carruthers disagreed with Boye that the 500,000-barrel-a-day discrepancy in the forecast suggested that Enbridge did not believe Northern Gateway is needed.

"Within our application we outline the forecast that we're using to establish what the supply would be. There will be fluctuations that change, our predictions will change over time and even change if the project is approved and constructed," he said.

"Fundamentally the project is designed to access new, larger foreign markets. There's very significant supply in the Western Canadian basin, but prior to going into service that will be validated by long-term shipping commitments by credit-worthy parties."

Neil Earnest, vice-president of Muse Stancil, said he believed the CAPP forecast to be credible, having used it in analysis for several years.

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