* Price for Alberta oil has dropped on supply problems
* Arctic pipeline would face some serious challenges
By David Ljunggren
OTTAWA, April 26 Canada's oil-producing province
of Alberta, trying to deal with a lack of pipeline capacity to
the Pacific Coast and the United States, is mulling the idea of
building a line north to an Arctic port, the province's energy
minister said on Friday.
Ken Hughes said he has been talking to the government of
Canada's Northwest Territories, which lie directly north of
Alberta, about a pipeline to a port such as Inuvik or
Tuktoyaktuk on the Beaufort Sea, a section of the Arctic Ocean.
The government of landlocked Alberta has hired a
Calgary-based consultant to produce a feasibility study on such
a pipeline. It expects the study to be delivered by the end of
Delayed pipeline projects and an excess of supply mean
Alberta's heavy crude often has been selling at a deep discount
to world prices, although the price gap has narrowed recently.
"We need access to tidewater, to the ocean, in order to
secure world prices ... any rational economic option will be
explored, and this is part of our oil market diversification
strategy," Hughes told Reuters in a phone interview.
Another possibility might be to ship oil by rail to the
Valdez oil terminal in Alaska, he said.
An Arctic pipeline would face serious challenges from
environmentalists as well as possible resistance from aboriginal
communities along the route. There would also be the threat that
unpredictable ice conditions in the Beaufort Sea could block
"It's quite possible that at the end of the day a pipeline
for oil to the Arctic Ocean doesn't make sense in the immediate
next decade or two," Hughes said. "But I'd rather be
well-informed based upon science and economics."
He denied the Arctic oil plan had been prompted by the
delays facing TransCanada Corp's proposed Keystone XL
pipeline from Alberta to refineries in Texas, which is still
awaiting approval from U.S. President Barack Obama.
"The Gulf Coast in America is simply one point of access ...
we need to be more diversified," Hughes said.
Canada's Conservative government, keen to boost oil exports
to China and other Asian markets, backs private-sector plans to
boost pipeline capacity from Alberta to ports in the Pacific
province of British Columbia. These proposals, however, are also
Green activists and aboriginal bands strongly oppose
Enbridge Inc's proposed Northern Gateway pipeline to
the West Coast, and there are increasing doubts about whether
the project will ever be built.
And this week, the leader of the opposition party most
likely to win next month's election in British Columbia
expressed major doubts about Kinder Morgan Energy Partners LP's
plan to more than double the capacity of its existing
Trans Mountain pipeline from Alberta to Vancouver.