Unbottling Canada’s oil and gas exports

By Eric Watkins

LOS ANGELES, April 12 – Canada’s government, frustrated by the US decision to delay construction of Transcanada’s proposed Keystone XL pipeline, must be beaming today with word of improved prospects for exports of the country’s oil and gas.

Kinder Morgan Energy Partners, L.P. said it will go ahead with proposed plans to expand its existing Trans Mountain pipeline system following receipt of “strong binding commitments” through the recently concluded open season.

The firm said a “diverse group” of existing and new shippers submitted 660,000 b/d of binding commercial support for the open season, with all commitments for a 20-year term. That will see the proposed expansion increasing capacity on Trans Mountain to 850,000 b/d from the existing capacity of 300,000 b/d.

‘STRONG COMMERCIAL SUPPORT’

“This strong commercial support shows the market’s enthusiasm for expanding market access for Canadian crude by expanding an existing system,” said Kinder Morgan Canada President Ian Anderson.

As WWE reported earlier, Canada’s exporters have been faced with obstacles in their efforts to increase exports – especially from people opposed to the construction of new pipelines and export facilities in the region, among them First Nations.

Anderson was explicit in his awareness of the need to bring potential opponents onboard with the proposed pipeline expansion.

“We are committed to an 18 to 24 month inclusive, extensive and thorough engagement on all aspects of the project with local communities along the proposed route and marine corridor,” said Anderson, who mentioned First Nations and Aboriginal groups in particular.

Pending approval of the proposed expansion, the increased capacity will enable Asian buyers to lift and ship Canadian crude to markets across the Pacific from Vancouver where an expanded export terminal will allow more tankers to load.

NEW LNG PLANT NEAR KITIMAT

The Kinder Morgan announcement coincided with reports that Mitsubishi Corp. is in final negotiations with Royal Dutch Shell Plc, China National Petroleum Corp and Korea Gas Corp on joint production of liquefied natural gas in western Canada.

The firms are considering joint construction of an LNG terminal in the vicinity of Kitimat, British Columbia, with plans calling for the production of 12 million metric tons (mt) of LNG a year starting in 2020.

Percentages in the joint venture have not yet been decided but the Nikkei business daily reported that a “broad agreement” is expected as early as this month. Afterwards, the four firms will seek approval from local authorities.

“A four-way alliance between Japanese, South Korean and Chinese firms and a resource major will create a new force in the global market,” the Nikkei claimed, adding that the alliance will also likely help to stabilize import prices.

That will be welcome news in Japan where utility firms have seen an upswing in their imports of oil and gas in the past year following the shutdown of the country’s nuclear industry in the wake of the Fukushima disaster in March 2011.

FUEL BILL UP 60% IN JAPAN

Last month, it emerged that Japan’s five major power utilities were expected to see their total fuel bill reach roughly 5.15 trillion yen in fiscal 2011, a whopping 60% jump on the year.

Tokyo Electric Power Co (Tepco), Kansai Electric Power Co., Chubu Electric Power Co., Tohoku Electric Power Co. and Kyushu Electric Power Co. own a combined 41 nuclear reactors – with none of them operating now or for the foreseeable future.

Capacity utilization at nuclear plants sank to around 20% for fiscal year 2011, down from nearly 70% on average in fiscal 2010, with utilities ramping up operations at oil- and gas-fired power plants instead.

In March, Tepco used almost four times as much as crude oil and fuel oil combined from a year earlier and the highest monthly volume of LNG since August to make up for the zeroing out of its nuclear power generation.

Tepco used 189,700 b/d of crude oil and fuel oil combined in March, or 139,200 b/d more than a year earlier, and its LNG usage last month totaled 2.070 million mt, up 17.3% from a year earlier.

Canada’s exporters, eyeing figures like that, are clearly eager to unbottle their oil and gas export facilities just as soon as possible.

After all, there’s no telling when those nuclear reactors will start up again, is there?

© Glamma Productions 2012

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About Eric Watkins

Eric Watkins is a consultant specializing in oil diplomacy. A former journalist, Mr. Watkins's work has appeared in numerous leading publications including The Wall Street Journal, The Economist, The Financial Times, and specialist media such as Oil & Gas Journal, Middle East Economic Survey (MEES), and Lloyd's List.
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2 Responses to Unbottling Canada’s oil and gas exports

  1. Pingback: Watching World Energy: Japan | Oil Diplomacy

  2. Pingback: Watching World Energy | Oil Diplomacy

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