Canada: FMC’s Overview of Significant Developments in the Canadian Energy Industry - January 2006

Enbridge announced that it is expanding discussions with potential shippers for a newly announced $1.85 billion, 36-inch, crude oil pipeline from Hardisty, Alberta to Superior, Wisconsin. The proposed "Alberta Clipper Pipeline" would have an initial capacity of 400,000 bpd and would parallel the existing Canadian mainline and interconnect with the existing mainline system in the U.S. (See number 1 on map)

TransCanada announced that it now has long-term contracts in hand for the Keystone pipeline proposal. The contracts are for a total of 340,000 bpd with an average commitment of 18 years. The main shipper will be ConocoPhillips. The 3,000 kilometre (1864 mile) pipeline is expected to be in service by the fourth quarter of 2009 and will move approximately 435,000 bpd of crude from Alberta to Illinois, and possibly Oklahoma. Regulatory applications are expected to follow later this year. (See number 2 on map)

Fort Hills Energy Corporation announced plans to build an oil sands upgrading facility in Sturgeon County, approximately 40 kilometres (25 miles) northeast of Edmonton, Alberta. Petro-Canada operates Fort Hills with a 55% stake; UTS Energy has a 30% working interest and Teck Cominco has a 15% working interest. The upgrader will process bitumen from the Fort Hills oil sands mine, 90 kilometres (56 miles) north of Fort McMurray. Fort Hills will seek regulatory approval for the upgrader late this year or early in 2007. The mine portion of the project is approved for up to 190,000 bpd of bitumen production from reserves of 2.8 billion bbbl. (See number 3 on map)

North West Upgrading has filed an application to build a $4.8 billion merchant heavy oil upgrader. Like the proposed Fort Hills upgrader, North West’s upgrader is to be built in Sturgeon County and will process raw bitumen into light synthetic crude oil. The project has three phases, each of which will cost about $1.6 billion. The plant’s initial phase will have a processing capacity of about 50,000 bpd of bitumen and 27,000 bpd of diluent, either in the form of synthetic crude oil or condensate. The next two phases are expected to be built between 2013 and 2015 and will add additional capacity for 60,000 bpd of light synthetic oil and 14,000 bpd of diluent. (See number 3 on map)

Suncor has produced over 1 bbbl of oil from its oilsands facilities near Fort McMurray. It took Suncor 29 years to produce the first 500 mbbl but less than 10 years for the next 500 mbbl. Production of the next 1 bbbl should happen even more quickly as the expansion of upgrading facilities in 2005 has increased production capacity to 260,000 bpd, with plans to further expand to more than 500,000 bpd by 2010-2012. (See number 3 on map)

Kinder Morgan has reached agreements with shippers to boost the capacity of its Trans Mountain system in Canada to 300,000 bpd by 2008 at a cost of $600-million. Trans Mountain is currently the only link to the West Coast from the oilsands in Western Canada. The pipeline carries crude oil and refined products from Edmonton, Alberta to marketing terminals and refineries around Vancouver, British Columbia and Puget Sound in the State of Washington. In the future, Kinder Morgan plans to expand Trans Mountain’s capacity to as much as 1.1 million bpd and will begin a call for shipping commitments in March, 2006. (See number 4 on map)

Enbridge’s proposed Gateway crude oil pipeline is another proposed link between the oilsands and the West Coast. Enbridge plans to file regulatory documents this year and has received non-binding indications from shippers to move more than 400,000 bpd. (See number 5 on map)

National Energy Board (NEB) hearings began in January to discuss technical aspects of the proposed 1,300 kilometre (800 mile) Mackenzie Valley pipeline. Separate public hearings on the environmental and socio-economic effects of the project will begin in mid-February. The NEB will visit 25 northern communities that could be affected by the development of the pipeline. The proposal includes three of the four aboriginal groups in the Mackenzie Valley as part-owners of the pipeline with Imperial. The project would tap natural gas in the Mackenzie Delta and move it into Alberta, where it could then be moved on to U.S. markets through existing pipelines. (See number 6 on map)

Petro-Canada has revised its estimate of recoverable oil in the Hibernia field upwards to 1.2 bbbl, an increase of approximately 250 mbbl. Since Hibernia first produced oil in 1997, estimates have continued to increase. Two years ago the estimated recoverable size of the field was 750 mbbl, which was raised a year ago to approximately 940 mbbl. (See number 7 on map)

Stealth Ventures announced plans to commence coal bed methane drilling operations in Springhill, Nova Scotia. Stealth is drilling a horizontal CBM well to test productivity of natural gas from the historic coal beds of Cumberland County, Nova Scotia. The well will complete an earning obligation that increases Stealth’s working interest from 50% to 75% in the Exploration Permit, which covers approximately 177,000 acres. (See number 8 on map)

There is currently a boom of development in the Canadian wind energy industry, largely as a result of support from the Federal Government, as well as various provincial governments. Large Canadian companies usually associated with other aspects of the Canadian energy industry are now active in the Canadian wind energy industry, including Suncor, Enbridge, EPCOR, Nexen and TransCanada. The national wind energy industry has expanded from roughly 300 MW of installed capacity in 2003 to 682 MW at the end of 2005 with several thousand MW of further proposed capacity. Hydro-Quebec recently issued a call for tenders for the purchase of 2,000 MW of wind power, which would represent between $3 and $4 billion of capital investment. The Government of Ontario awarded 955 MW of procurement commitments, which will involve investments of roughly $1.5 to $2 billion. In addition, Manitoba Hydro released an invitation for expressions of interest for up to 1,000 MW of wind power projects, which could result in $2 billion in capital investment, $1 billion in operating expenditures and $7 billion in energy sales. 

^{In this newsletter, all dollar amounts are Canadian dollars. We have also used the following abbreviations: bpd - barrels per day; mmcfpd - million cubic feet per day; bcfpd - billion cubic feet per day; tcf - trillion cubic feet; bbl - barrel; mbbl - million barrels; bbbl - billion barrels; boe - barrels of oil equivalent.}

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