A decade ago, TransCanada Corp. TRP-T was reeling as the Calgary power and natural gas pipeline company had slashed its dividend and watched its stock price plunge when a rival pipeline came on the scene.
The corporate disaster came after a difficult merger with Nova Corp. At the same time, the Calgary company that had for decades enjoyed a cozy monopoly moving gas out of Western Canada suddenly faced competition from a new express pipeline from the region to Chicago built by natural gas producers.
Ten years later, most of it under the watch of Hal Kvisle, who became CEO in May, 2001, the firm has completely recovered, leaping beyond its power and gas businesses to redraw the map of oil movement in North America.
Its stock is near an all-time high, and on the ground it is on the verge of a massive transformation as it readies to become a major mover of oil, directly taking on across-the-street Calgary rival Enbridge Inc.
Enbridge, watching its entrenched lead in the oil pipeline business ebb, has opposed TransCanada at the National Energy Board, where TransCanada is trying to win approval for a new massive link called Keystone XL that would move oil sands directly from Alberta to the refineries of Texas. It would add to the just-built Keystone line from Alberta to Illinois and Oklahoma that is presently shipping oil.
At stake is dominance in the oil-moving business. Enbridge can ship upward of two million barrels a day from Alberta to the Chicago region and some more farther south. It also wants to build a big new link from Alberta to the northwest British Columbia coast for export to Asia.
TransCanada – which has backing from oil shippers – stands in the way and Enbridge now complains there'll be too much empty space in the pipelines, which could make oil shipping more expensive for everyone.
TransCanada, whose combined Keystone lines could move 1.1 million barrels a day by 2013, concedes there could be several years when there is spare capacity on Canada's pipeline network – but as oil sands development continues, the space is expected to fill.
“We concluded that the Houston market, the Gulf Coast, is better than going offshore to the Pacific. It's better, frankly, than sending more oil into a Chicago market that's already oversupplied,” Mr. Kvisle said in a year-end interview. “Rather than going to Chicago and sort of zigzagging backward to the Gulf Coast market, we came up with a project that goes straight to the Gulf Coast.”
The Houston region is the biggest refining hub in the U.S. Though demand for oil products in the U.S. appears to have peaked – it topped out in August, 2005, and is down 19 per cent since then – the hope for Canadian producers and TransCanada is to replace and displace production from the traditional suppliers of hard-to-refine oil from Mexico and Venezuela. There is potential competition from Saudi Arabia and Brazil and also regulatory risk as the U.S. Congress looks at capping greenhouse gas emissions, which could be a blow for the oil sands.
Mr. Kvisle, however, said he believes Canadian oil sands production compares well with other sources, especially from a security-of-supply perspective, but also environmentally, noting standards in a country such as Venezuela pale in comparison with Canada's.
“The U.S. would not reduce its carbon emissions at all by cutting off the flow of crude oil from Fort McMurray,” Mr. Kvisle said. “It's simply a spin that's been put out there by various environmental groups. I would have confidence that U.S. government officials in due course will land on the right answer.”
At the end of 1999, when its stock was around $10, down from more than $30, TransCanada posted revenue of $11.9-billion for the year, a loss of $70-million, and reported assets of $25.1-billion.
