Kinder Morgan to grow Trans Mountain pipeline expansion

By Mike Lee

Jan. 10 (Bloomberg) — Kinder Morgan Energy Partners LP, the biggest U.S. pipeline operator, will increase the size of its planned Trans Mountain oil-pipeline expansion in Canada to 890,000 barrels a day to satisfy demand from producers.

The expanded project will cost C$5.4 billion ($5.5 billion), up from a most recent estimate of C$4.1 billion, Houston-based Kinder Morgan said in a statement today. The increase came after additional shippers signed long-term contracts in a supplemental open-season round, according to the statement.

Kinder Morgan announced plans in April to more than double the line’s capacity to 850,000 barrels a day from 300,000, and reduced the scope of the expansion in May to 750,000 barrels a day, saying not enough shippers had signed up.

After Kinder Morgan decreased the size of the proposal, shippers told Canada’s National Energy Board they were concerned about their ability to “access the process” to sign up for the pipeline, Kinder Morgan Canada President Ian Anderson said on a conference call. The company held a third sign-up period for the pipeline in December, Anderson said.

Thirteen customers have signed commitments to ship 708,000 barrels a day and about 180,000 barrels a day will remain open for customers who want short-term, or “spot” access, Kinder Morgan said in an e-mail today. The project still must receive federal approval.

Bigger Pipe

The larger project will require 36-inch (91-centimeter) pipe instead of 30 inches, and will lead to more ship traffic at the company’s Westridge dock in Vancouver Harbor, Anderson said.

The pipeline stretches 715 miles (1,150 kilometers) from Alberta to Vancouver and is the only one connecting Canada’s oil-sands region to the West Coast, according to the company. Expanding it would allow more Canadian oil exports to Asia.

Other pipelines that would increase shipments as oil-sands production expands, such as Enbridge Inc.’s Northern Gateway and TransCanada Corp.’s Keystone XL, have faced delays because of environmental opposition.

Trans Mountain may be able to open quicker than competing routes since it involves building a second pipeline and using existing right of way where possible, Anderson said. If approved, the expanded Trans Mountain may be operational in 2017, according to the statement.

Environmentalists and Canadian First Nations groups have said they oppose Kinder’s plan because it may lead to oil spills in Vancouver harbor.

Challenging Opposition

Kinder Morgan expects the most challenging opposition to the pipeline expansion from local groups in Vancouver, one of Canada’s busiest harbors. There are no plans to add additional marine safety procedures, Anderson said.

Kinder Morgan has been watching Enbridge Inc.’s efforts to build support for its Northern Gateway pipeline “with great interest,” Anderson said. Demand from producers to get crude to Asian markets is the most important factor driving demand for such pipelines, he said.

The company has support from communities along the route and is working with groups to address concerns about environmental impacts, Anderson said. The pipeline, operating since 1953, traverses Jasper National Park in the Canadian Rocky Mountains as well as some of Canada’s most productive farmland in the Fraser Valley east of Vancouver.

Canada exported C$68.3 billion worth of oil products in 2011, more than the nation’s other main products that include vehicles, logs and metals, according to Statistics Canada, a federal agency.

Prime Minister Stephen Harper has made increasing Canada’s oil exports a national priority. The federal government passed new rules last year to speed up and simplify environmental reviews on projects like pipeline expansions.

—With assistance from Jeremy van Loon in Calgary. Editors: Jasmina Kelemen, Charles Siler