A First Nations-led consortium proposed on Monday 14
April to build an alternative project (to Enbridge’s Northern Gateway project)
that would link Alberta’s oil sands to the British Columbia coast. Eagle Spirit Energy Holdings
Ltd. and Vancouver-based Aquilini Group say they have signed non-disclosure
agreements with a “substantial number” of First Nation groups in northern B.C.,
including some “staunchly opposed” to the Enbridge project.
The proposed
one-million barrel-per-day pipeline has a tentative start date of 2020 and it is
contingent on securing a “social license” from First Nations to operate. However, the Eagle Spirit project proposes
to ship synthetic crude
oil (SCO) (light crude) instead of bitumen, after being refined in an
upgrading project. This business model is very much on the lines of a plan
outlined in my blog of 27 January 2014 (CANADIAN PIPELINE PROJECTS IN LIMBO? NO
WORRIES, HERE IS AN ALTERNATIVE SOLUTION!)
The above proposal is a win-win
for all parties and makes a lot of sense in view of following:
·
It would be
First Nations’ headache to secure the ‘social license’ and all the required
approvals to build and operate the pipeline.
·
Transportation
of SCO (light crude) in the pipelines will be more acceptable to local
population (in BC) than bitumen.
·
An
upgrader can be suitably located in either Alberta or Saskatchewan to be able
to feed SCO for shipping overseas through West Coast and/or for pumping to
refineries in Quebec, Ontario and New Brunswick.
·
Building of
an upgrader will squelch the criticism that by exporting bitumen to other
countries many jobs (that could have been potentially created in Canada if
there was an upgrader) would also export jobs overseas.
·
There will be
less worry about Keystone XL’s outcome.
Now to the question of financing
the projects:
Financing of the Pipeline: The Aquilini Group is reportedly
willing to underwrite the cost of the pipeline as long as it gets support of
all First Nations through whose territory the pipeline would travel. To some it
may seem far-fetched or unrealistic, still, once the First Nations endorse the
proposed project, financial analysts would get the chance to get down to the
brass tacks regarding financing.
As a suggestion, why should Enbridge not like to collaborate on this
proposal? They could
possibly hedge their bets by investing in this project and carry on with their
efforts on their Northern Gateway project despite number of First Nations bands
informing NEB that they are not in favor of the project and the unbinding rejection
of the project by the Kitimat city plebiscite.
Financing of the Upgrader: As suggested in my above
cited blog dated 27 January 2014, the Provinces of Alberta and Saskatchewan and
Mr. David Black (the BC billionaire who claims to have investors ready for
investing in a refinery in Kitimat) could possibly share the cost of an
Upgrader. Suncor and/or Total could revisit
their economic models to fit in some investment sharing for this upgrader.
Even TransCanada can think of diversifying and investing in this project depending
upon the outcome of KXL project clearance by the US government.
Summary: All in all,
the above pipeline project proposal predicated on an upgrader (in Alberta or
Saskatchewan) seems to be a viable proposition and should be pursued by the
various stakeholders and potential investors with great vigor and urgency. After all, the window of
opportunity for oil and gas exports from Canada will not remain open for a long
time. The Federal and Provincial governments should act as facilitators and
help smoothen the path forward. Mind you, running with
the above proposal does not mean that other viable proposals (e.g. Kinder
Morgan pipeline twinning) cannot be pursued alongside. What may happen is
that other projects may have to tweak some aspects, if and as necessary.
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