TransCanada sees need for rail shipping #kxl
20 Nov 2014
THE CANADIAN PRESS
TransCanada sees need for rail shipping
Chances are good TransCanada will get into the rail business regardless of whether its long- delayed Keystone XL pipeline is built, CEO Russ Girling said Wednesday.
But how big a rail player TransCanada becomes will depend on the fate of its proposed pipeline expansion and others, he said.
For several months, Calgary- based TransCanada has floated the idea of a “rail bridge” while its $ 8- billion US cross- border pipeline remains in regulatory limbo.
The company is in “active negotiations” with shippers about moving their crude by train, but there’s no timeline for when the plan will be a go, Girling told reporters following TransCanada’s annual investor conference in Toronto.
“I would say there’s a better than 50- 50 chance that we will be in that business in some form or fashion in the future and it will take us some time here to actually nail down the agreements to underpin those investments,” he said.
Though TransCanada touts pipelines as the safest and most efficient mode of transport, it sees a longterm role for rail for the energy industry.
“I think the marketplace has learned that it is flexible, it can be put in place relatively quickly, it doesn’t have the same regulatory hurdles as building pipe does,” Girling said.
“I think it plays a larger role in the future than it has in the past, and therefore it’s likely a business that we’re in long term, irrespective of Keystone.”
Girling’s remarks came a day after efforts to speed along Keystone XL’s approval were narrowly defeated in the U. S. Senate.
The U. S. regulatory process for Keystone XL has been dragging on for more than six years, amid court challenges, political wrangling and sustained opposition by environmental and landowner groups.
Supplies of Canadian crude are still crucial to U. S. energy security and will provide a boost to the North American economy, as shown by the loyalty of its customers, Girling said Wednesday.
“The marketplace need for Keystone has probably grown,” he said, pointing to more than four million barrels a day of crude that’s still being imported into the Gulf Coast. “Our 20- year shipper contracts remain in place. Not one of those shippers has given up their capacity.”
As TransCanada awaits a U. S. decision on the project, it’s keeping a giant pile of 36- inch diameter pipe stacked in a rail yard in Little Rock, Ark., and storing pumps and other equipment in warehouses along the route. TransCanada this month raised it cost estimate for Keystone XL to $ 8 billion from $ 5.4 billion.
The existing Keystone network has been shipping 591,000 barrels per day crude to the Midwest since 2010 and in January of this year began deliveries to the U. S. Gulf Coast.
Keystone XL would add a new segment of pipe cutting across Montana, South Dakota and Nebraska with a capacity of 830,000 barrels per day.
Though most of Keystone XL’s volumes would come from the oilsands, TransCanada is planning an “on ramp” in Montana that would carry up to 100,000 barrels per day of crude from the Bakken formation.
Meanwhile, TransCanada is plotting new pipelines that would tap into burgeoning U. S. shale oil deposits, said Paul Miller, the executive in charge of oil pipelines.
North American crude production is expected to grow 40 per cent to 14 million barrels per day by 2020 — between the oilsands, the U. S. Bakken formation centred in North Dakota and shale in Texas and Colorado.
“In the United States, there’s numerous shale plays that do require transportation solutions,” said Miller, adding TransCanada is eyeing expansions in Alberta’s oilsands region, too.
“Some of those have the opportunity to connect to our existing Keystone system and some of those would be independent of our existing Keystone system.”
Earlier Wednesday, TransCanada said it’s aiming to accelerate the growth of its dividend over the coming few years.
Girling told the investor conference the dividend is expected to grow by an average of at least eight per cent a year through 2017.
The company’s dividend has been growing at an annual rate of around 4.5 per cent in recent years.
Girling said the dividend growth could reach 10 per cent, depending on whether major projects — Keystone XL and major natural gas pipelines to West Coast LNG projects, for example — go ahead.
Earlier this week, an activist investor urged TransCanada to make changes to boost its share price.
Sandell Asset Management Corp. wants TransCanada to transfer more assets to its master limited partnership, TC Pipelines LP, and to spin off its power business. TransCanada has called Sandell’s analysis “fl awed” and said it’s sticking to its current strategy.