Vancouver (Platts)--14Nov2012/123 pm EST/1823 GMT

Moving Western Canadian and Bakken crudes to eastern North American would "significantly benefit" refineries in that region and pose less of an environmental challenge than plans to export crude from British Columbia to Asia, a TransCanada executive said Wednesday.

That advantage would be reinforced if converting a portion of TransCanada's Mainline natural gas system reduced the movement of tankers on the St. Lawrence Seaway, Alex Pourbaix, the company's president of energy and oil pipelines, told a webcast investor conference in Toronto.

Pourbaix said that in testing its conversion plan, TransCanada has heard from stakeholders that "right now the East Coast (of Canada and the United States) has the highest refined product prices on the continent."

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"If we're importing higher-priced crude from Saudi Arabia, Nigeria or Libya, it doesn't take a great leap of logic to appreciate" the economic benefits of shipping 500,000-1 million b/d of heavy crude from the Alberta oil sands and light sweet crude from the Bakken to eastern refineries, he said.

Although TransCanada has yet to decide which of its 10 gas pipelines would be affected by a conversion, it expects regulatory approval and construction would take two years each, for a completion date of 2017, assuming corporate sanctioning in 2013.

The Calgary-based company has put a preliminary pricetag of C$5.2 billion ($5.19 billion) on serving refineries in Montreal and Quebec City.

Asked why that project would encounter less environmental and First Nations resistance than the proposals by Enbridge and Kinder Morgan to build pipelines from the Alberta oil sands across British Columbia to tanker ports on Canada's Pacific Coast, Pourbaix said the main advantage is that 80% of the gas pipeline is already in the ground, while rights-of-way and relationships with landowners have been established for the other 20%.

"Unlike British Columbia, there is a pretty significant and long-term tradition of moving oil (in eastern North America)," he said. "For 50 years, tanker traffic has been moving in and out of the Irving Oil refinery in Saint John, New Brunswick, and every day tankers move up and down the St. Lawrence Seaway."

"If we're able to extend the Mainline towards the East Coast that would actually reduce tanker traffic, which everybody sees as more risky than pipelines," he added.

Pourbaix also said East Coast refiners are geared to run light sweet crudes which suits the Mainline conversion, while Gulf Coast refiners have made "very significant investments" to run heavy crudes and are unlikely to switch to "given that they are notoriously cautious" about making any investments.

CEO Russ Girling said TransCanada derives comfort from market support for the Keystone system, including the XL pipeline which has contracts averaging 18 years for 500,000 b/d of its design capacity of 830,000 b/d.

"We haven't seen any wavering on those contracts as new crude supplies have developed. We've actually seen increasing demand for the (XL) pipeline and a line up of shippers who wants to get on if anybody wants to give up capacity," he said.

"When the market speaks with large balance-sheet commitments to long-term contracts that is evidence the market is saying the best bet is to connect supply to refinery," Girling said.

--Gary Park, newsdesk@platts.com
--Edited by Kevin Saville, kevin_saville@platts.com

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