From the Globe & Mail – Feb 3, 2011

by Nathan Vanderklippe

CALGARY — Kinder Morgan Canada is
accelerating plans to boost deliveries of Alberta crude to the West
Coast, pressing ahead with new pipeline capacity that raises the stakes
in a high-profile race to export Canadian energy to Asia.

The company is preparing to accept bids for a substantial expansion
of its 1,150-kilometre Trans Mountain pipe, which connects Edmonton with
British Columbia’s Lower Mainland. There, oil can be loaded on ships
and sent to destinations in China, South Korea and California.

If built, that new capacity will provide an important new outlet for
Canadian energy companies. The industry has increasingly called for an
alternative to its dependence on central U.S. markets, and filled
growing numbers of tankers bound for Asian markets in recent years. With
North American demand stagnating, Canada’s oil patch has directed
greater attention toward Asia’s rising energy thirst, amid hopes that
greater access to a vibrant new market will spur more attractive crude
prices.

For Kinder Morgan, a system expansion would kick-start an effort to
beat out growing competition for an Asian connection. Both of Canada’s
railway companies have proposed “pipelines on rail” to take oil to the
West Coast, and Enbridge Inc. is seeking approval for its $5.5-billion
plan to build a new pipeline called Northern Gateway across northern
B.C.

But expansion plans will expose Kinder Morgan to the fierce
opposition that has greeted Northern Gateway – especially since Trans
Mountain feeds tankers that sail past Vancouver, the birthplace of
Canada’s environmental movement. Kinder Morgan has yet to seek
regulatory blessing for its expansion.

The company has been spurred to action, however, by mounting demand
for a system that forms the only existing connection between Canadian
crude and offshore markets.

It plans to hold an “open season” later this year that will allow it
to solicit oil companies for commitments to ship on new capacity it
hopes to add by 2014 or 2015.

“What we’ve got to assess with the market is how big is that
expansion,” Kinder Morgan Canada president Ian Anderson said in an
interview.

“We’ve talked about going from 300,000 to 380,000 as the next step,”
he said. “But if we get interest for anything over 80,000, we could work
the engineering to try and design the expansion to accommodate it.”

Kinder Morgan has long discussed plans to expand the Trans Mountain
system, which it ultimately hopes to bring to 700,000 barrels a day. In
2008, it completed a $750-million project that added 40,000 barrels of
pipe capacity by twinning the system through Jasper National Park.

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