Canada to face oil pipeline shortage: regulator

Canada to face oil pipeline shortage: regulator

Fri Jul 27, 5:35 PM ET

CALGARY, Alberta (Reuters) - Canada's crude-oil pipelines may have to

ration space as early as this autumn because of a surge of new oil

production from the Alberta oil sands, the country's energy regulator

said on Friday.

The National Energy Board said the pipeline industry may face a

capacity crunch as oil output this year rises to 2.9 million barrels a

day, 9 percent more than in 2006.

Almost all new Canadian oil supply comes from the oil sands region of

northern Alberta, where more than C$100 billion worth of projects to

exploit reserves second only to Saudi Arabia are planned or under way.

Most of the that production is destined for the huge U.S. market and a

number of new pipelines are on the drawing boards to handle the

expected flood of oil.

However none of those new lines, which include projects planned by

Enbridge Inc. and TransCanada Corp., is expected be completed before

2009.

Without that new capacity, pipeline firms may have to periodically

resort to apportionment -- rationing available space -- as soon as the

fourth quarter, with restrictions remaining in place for 18 months

until new lines are built, the regulator said.

The NEB's assessment contrasts with a study released by the Canadian

Association of Petroleum Producers last month.

CAPP, the oil industry's main lobby group, said it believes there is

enough oil transport capacity in place or being built to handle rising

output through 2012.

But CAPP said developers must now concentrate on a new round of

expansion beyond that period, given how long regulatory and

construction phases take.

It predicted Canadian crude oil output could hit 5.3 million barrels a

day by 2020, double the current amount.

In the 1990s, pipeline apportionment was a big issue as capacity

lagged demand for crude movement on Enbridge's major artery to the

U.S. Midwest.

Shippers over-nominated for space in efforts to reserve as much

capacity as possible, creating what the industry termed as "air

barrels."

Since then, Enbridge and other operators have added capacity as

production, especially from the Alberta oil sands, has climbed.

Numerous expansions to U.S. and West Coast markets are on the drawing

board or under way.

--

There may come a time when the CO2 police will wander the earth telling

the poor and the dispossed how many dung chips they can put on their

cook fires. -- Captain Compassion.

Wherever I go it will be well with me, for it was well with me here, not

on account of the place, but of my judgments which I shall carry away

with me, for no one can deprive me of these; on the contrary, they alone

are my property, and cannot be taken away, and to possess them suffices

me wherever I am or whatever I do. -- EPICTETUS

Joseph R. Darancette

daranc@NOSPAMcharter.net