TransCanada Corp.’s proposed Energy East pipeline could give western oil producers back-door access to Asian markets at a reasonable transportation cost if it reaches Saint John.
While politicians have focused on the provision of Canadian crude to eastern refineries, Saint John’s ice-free, deep-water port would allow crude to be loaded onto the largest tankers, providing an economical route to India at least, and perhaps China, Bank of Nova Scotia senior economist Patricia Mohr said Tuesday.
“The [west-to-east] pipeline certainly compares favourably to other options for moving crude, especially by rail to the east coast,” Ms. Mohr said in an interview. “The line would provide vitally needed new export outlets for Western Canadian oil producers, especially to the U.S. east coast, Europe and, interestingly, to India, which is a growth market.”
TransCanada is expected to announce soon whether it intends to proceed with the pipeline, which would ship up to 850,000 barrels a day to Eastern Canada. Word could come as early as this week – and company executives have sounded bullish on its prospects for bringing western crude not only to Quebec but all the way to Saint John.
In a report Tuesday, Ms. Mohr estimated transportation costs for various routes. She said Alberta-to-Saint-John costs would be $7 (U.S.) a barrel by pipeline, versus $15 a barrel to reach the city’s Irving refinery by rail from Western Canada. Pipeline costs to the U.S. Gulf Coast would be comparable to those of Energy East, at $6 to $8 a barrel, while the proposed North Gateway pipeline through B.C. would carry a transportation cost of $3.30 a barrel.
Ports in Quebec are eager to provide export capacity for western producers. Both Montreal and Quebec City currently offload imported crude for refineries in those cities, but that traffic would largely be lost if TransCanada proceeds and Enbridge Inc. wins approval to reverse its Line 9, which currently carries imported crude from Quebec to refineries in Southwestern Ontario.
Quebec City can handle large tankers, but not the ultra-large ones that could dock at Port Saint John. Pipeline access to Saint John would make it commercially viable to ship diluted bitumen to India’s west coast, home to a large and complex refining sector led by multinational Reliance Industries.
At this early stage, the TransCanada proposal has so far not run into the stiff political resistance that has plagued the company’s proposed Keystone XL pipeline from Alberta to the Gulf Coast or Enbridge’s Northern Gateway project, though resistance could grow in Quebec and elsewhere.