Oil and Gas

UPDATE 3-TransCanada moves forward on West-East oil pipeline plan

* TransCanada begins to seek commitments for pipeline plan
    * Plan could eliminate import needs of eastern refineries
    * Pipeline could come into service in late 2017
    * Shares rise 0.7 pct

    By Scott Haggett
    CALGARY, Alberta, April 2 (Reuters) - TransCanada Corp
 on Tuesday pushed ahead with plans to take Western
Canadian crude to eastern refineries and Canada's busiest oil
port as it seeks new markets beyond those it wanted for its
stalled Keystone XL pipeline project.
    TransCanada said it will give shippers two months to sign
contracts to use its proposed 4,400 kilometer (2,700 mile)
Energy East Pipeline project, Canada's longest oil pipeline,
which could take as much as 850,000 barrels per day to Montreal,
Quebec City and Saint John, New Brunswick. 
    Canada imported more than 700,000 barrels per day 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 while giving oil sands producers access to high-priced
Atlantic markets for the first time.
    The line, with a targeted end-2017 opening, would also allow
Canada to diversify its oil markets beyond the United States,
which currently takes nearly all Canadian oil exports at a
discount. As recently as January, U.S. refiners were paying half
the world price for Canadian crude.
    "Because of a lack of pipeline capacity, Canadian oil is
selling at a considerable discount to the international price,"
Joe Oliver, Canada's natural resources minister, told reporters.
"Some C$50 million every day is lost to the Canadian economy."
    Canada now produces about 3 million barrels per day of
crude. But Canadian, American, European and Asian producers are
planning to invest billions to increase output from Alberta's
oil sands, the world's third-largest crude reserve.
    According to the Canadian Association of Petroleum
Producers, production is set to grow to 4.7 million barrels a
day by 2020, raising the possibility that an already squeezed
pipeline network taking Canadian crude to the U.S. Midwest could
be overwhelmed, further cutting into the country's oil price. 
    "Some of the system is overwhelmed already," said Steven
Paget, an analyst with FirstEnergy Capital. "The more heavy
(crude) we can get out of Chicago the better."
    The search for shippers, called a binding open season,
begins April 15 and ends on June 17. If there is sufficient
interest, TransCanada will then seek regulatory approvals for
the project.
    The plan to ship Alberta crude to markets in Eastern Canada
took on even more significance as the U.S. government delayed
approval of TransCanada's Keystone XL pipeline that would ship
crude from Alberta oil sands to Texas. 
    Enbridge Inc's planned Northern Gateway line, a
pipeline that would ship oil to Canada's Pacific coast for
export to Asia, also has generated strong opposition, and there
is no clue when it might go ahead.
    Canada's land-locked Western province of Alberta is home to
the tar sands, one of the world's largest crude oil deposits,
and conventional oil production is also on the rise.
    TransCanada said its project would convert some 3,000
kilometers (1,865 miles) of its under-used mainline pipeline
system, which takes natural gas from Western Canada to Ontario,
Quebec and the U.S. northeast, to transport oil. 
    It would build 1,400 kilometers of new line to take the
crude from the Hardisty, Alberta, storage terminal to the
mainline in southeastern Alberta, and then from the main line's
end in Cornwall, Ontario, through Quebec to Saint John, New
Brunswick, home to the Irving Oil Ltd refinery, Canada's
largest, and a deepwater port that can handle the world's
largest oil tankers.
    TransCanada shares were up 33 Canadian cents at C$49.62 by
midafternoon on the Toronto Stock Exchange.
    Rival pipeline operator Enbridge is also planning to get
Western Canadian crude to Montreal and beyond by reversing the
flow of a pipeline that runs to Sarnia, Ontario.
    TransCanada said it is beginning talks with aboriginal
groups and with other stakeholders and starting initial design
and planning work for the project.