Title: Canada ISA -- Pipeline Sector

Report Type: Planned Market Research

ITA Industry Code: OGM

Contacts: Sharon Atkins, Sr. Commercial Specialist, CS Calgary

Revision Date: N/A

##### CANADA'S Pipeline Sector

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S.
DEPARTMENT OF STATE 2005. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED
STATES.

# 

![](media/image1.jpeg){width="1.5416666666666667in"
height="1.2083333333333333in"}

Opportunities are many in Canada's pipeline sector, from engineering and
construction to hard product; this sector is in for a long and
profitable 10 years. Currently, there are six major pipelines (three
gas, three oil) carrying product to the North American market, and
expansion or new pipelines will be necessary to meet demand through
2012.

# 

# **Canada's Oil and Gas Sector Summary** 

Canada is the world\'s third largest producer of natural gas and the
seventh largest producer of crude oil. Its oil production comes 36
percent from oil sands, seven percent East Coast offshore operations,
and the balance in traditional drill and gush operations. Undeveloped
energy resources include major crude oil and natural gas deposits in
offshore areas in the north, gas reserves in the Yukon and Northwest
Territories, and massive reserves of oil sands in Alberta. The upstream
petroleum industry is active in 11 of the 13 provinces and territories.
The building of the \$4 billion Mackenzie gas project promises massive
gas production from Canada\'s north by 2010.

Confident Canadian producers are drilling at record levels, 23,920 wells
in 2004 and an anticipated 25,000 in 2005. Sustained high oil and gas
prices, together with the hunt for natural gas supplies are driving the
growth.

In 2004, producers are expected to invest over US\$20 billion on
exploration, development and field equipment. In excess of 80 percent of
the spending will be in the Province of Alberta on conventional and oil
sands development. Significant amounts will also be spent in British
Columbia (BC) due to the discovery of a world-class natural gas field in
north eastern BC, and on offshore activity in Canada\'s maritime
provinces, primarily Newfoundland and Labrador.\
\
2004 Industry Statistics:

(source CAPP -- Canadian Association of Petroleum Producers)

Capital Spending: Conventional \$20.5 billion

Oil Sands \$ 4.8 billion

Wells Drilled: Oil 4,700

Natural Gas 16,000

Total 23,920 (including dry and service)

Production: Conventional Oil 1,409,000 barrels per day

Surface Mining 465,000 barrels per day

In-situ bitumen 532,000 barrels per day

Pentanes plus/

Condensate 163,000 barrels per day

Crude Oil 2,569,000 barrels per day

Natural Gas 17.4 billion cubic feet per day

Industry Revenues: \$68 billion

Exports: Crude Oil 1,611,000 barrels per day

Natural Gas 7.4 billion cubic feet per day

Refineries: Number: 20

Capacity: 1,960,000 barrels per day

##### 

##### 

##### Pipeline Sector Overview 

In 2003, Canadian pipeline operators transported 5.9 trillion cubic feet
of gas and 860 million barrels of oil, 60 per cent of which was destined
for the United States. Over 62,000 miles of pipeline operate in the
provinces of British Columbia, Northwest Territories, Yukon, Alberta,
Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia.
The industry has assets totaling \$17 billion.

Canada's top pipeline companies are:

TransCanada Pipelines Limited
[www.transcanada.com](http://www.transcanada.com/) Gas

Enbridge Pipelines Inc. [www.enbridge.com](http://www.enbridge.com/) Oil

Duke Energy Gas Transmission
[www.duke-energy.com](http://www.duke-energy.com/) Gas

Alliance Pipeline Ltd.
[www.alliance-pipeline.com](http://www.alliance-pipeline.com/) Gas

Terasen Pipelines Inc. [www.terasen.com](http://www.terasen.com/) Oil

TransGas Limited [www.transgas.com](http://www.transgas.com/) Gas

ATCO Pipelines [www.atcopipelines.com](http://www.atcopipelines.com/)
Gas

Trans-Northern Pipelines Inc. [www.tnpi.ca](http://www.tnpi.ca/) Refined

Maritimes & Northeast Pipeline [www.mnpp.com](http://www.mnpp.com/) Gas

BP Canada Energy Company [www.bp.com](http://www.bp.com/) Gas

Foothills Pipe Lines Ltd.
[www.foothillspipe.com](http://www.foothillspipe.com/) Gas

Trans Quebec & Maritimes
[www.gazoductqm.com](http://www.gazoductqm.com/) Gas

According the Canadian Energy Pipeline Association the infrastructure
investment required by the pipeline industry is:

-\$17.5 trillion globally

-\$189 billion in the U.S.

-\$17 billion in Canada

**Crude Oil**

Oil production in Western Canada has experienced record levels of growth
due to Alberta's oil sand developers. Production from the oil sands
exceed one million barrels per day and continued growth will mean
Canada's pipeline infrastructure will need to expand. Pipeline capacity
has increased by over 550,000 barrels per day since the late 1990's to
2.5 millions barrels per day. Forecasts indicate that over the next ten
years an additional 600,000 barrels per day capacity will be needed to
deliver crude to market.

There are currently three major pipelines, which move crude produced in
Western Canada to market - Enbridge, Terasen Express and Terasen Trans
Mountain.

![](media/image2.png){width="6.375in" height="3.8340277777777776in"}

Enbridge Pipeline is the world's longest system. It runs from western
Canada to refineries in PADD II and Ontario. The capacity of this
pipeline is 1.9 million barrels per day and is capable of moving
gasoline, diesel and quantities of light, medium and heavy crudes.

Terasen (Trans Mountain Pipeline) runs from Edmonton, Alberta through
Vancouver, British Columbia into Washington State. This pipeline is
considerably smaller with capacity of about 260,000 barrels per day of
crude.

Terasen (Express) Pipeline runs from western Canada to markets in PADD
IV. It carries light, medium and heavy crude oil. The capacity is
280,000 barrels per day.

**OPPORTUNITY -- Expansion Plans/New Facilities**:

# Enbridge - *Long Lake Pipeline*

Pending regulatory approvals, construction of the new pipelines and
associated facilities will begin in late 2005 with completion in late
2006. The project proposal includes:

-   Cheecham Terminal tankage and metering facilities

-   one 304-mm (12-inch) and one 254-mm (10-inch) diameter pipeline,
    each approximately 18 miles long

-   pumping facilities at the Long Lake site

# 

# Enbridge - *Surmont Pipeline*

Pending regulatory approvals, construction of the new pipelines and
facilities will begin in 2005 with completion and linefill in mid to
late 2006. The terminal would be built approximately eight miles north
of the Surmont oil sands project facility. It would include tankage and
metering facilities to allow safe and efficient transfer of diluent and
blended bitumen in and out of the Surmont production site. The project
proposal includes:

-   Cheecham Terminal tankage and metering facilities

-   304-mm (12-inch), 10-kilometre pipeline from Cheecham Terminal to
    the Surmont production site

-   405-mm (16-inch), 10-kilometre pipeline from the Surmont production
    site to Cheecham Terminal

-   pump and blending equipment at the Surmont site

Enbridge is also considering the construction of a new pipeline to
transport diluent from the AOSPL pipeline west of the terminal to the
new Cheecham Terminal.

# 

# Enbridge - *Gateway Pipeline*

The Gateway Pipeline is envisioned to be a 30-inch, 400,000-barrel per
day pipeline running from Edmonton to the west coast of British
Columbia, where ships would take crude oil and petroleum products to
refineries in California and the Far East. Pending regulatory approvals,
construction on the 750 mile pipeline could begin by 2008 and it would
be operational by 2009/10.

# Enbridge - *Waupisoo Pipeline*

Enbridge has been working with potential shippers to consider the
development of a new pipeline from the Fort McMurray region to Edmonton
that would allow producers to transport bitumen to their upgraders and
refineries in the Edmonton area. The proposed Waupisoo Pipeline would be
a 30-inch, 600,000-barrel-per-day pipeline some 280 mile long.

# Enbridge - *Spearhead Pipeline* 

The pipeline has historically operated in south-to-north service.
However, subject to acceptance of proposed tolling arrangements by
Canadian producers and regulatory approval, Enbridge intends to reverse
the flow of the pipeline to ship crude oil from Chicago, Illinois, to
the hub at Cushing, Oklahoma, providing Canadian producers and shippers
with access to new markets south of Chicago. Depending upon the timing
of the planned reversal, the line would be renamed the Spearhead
Pipeline.

# Enbridge - *Southern Access Pipeline*

The Southern Access project will be built and owned by Enbridge Energy
Partners. It will involve construction of 133 miles of new 30-inch
diameter pipeline segments within the existing Enbridge pipeline
easement at various intervals between Superior, Wisconsin, and Delavan,
Wisconsin. It will also involve the installation of new pumps at an
existing station in Wisconsin and four new pump stations in Illinois.

The expansion, which will cost an estimated US\$240 million, is planned
to be in service in 2008 and will add 124,000 barrels per day of
capacity to the Lakehead System.

As demand and growing supply from Western Canada warrant further
enhancements, additional expansion could take place that would result in
a pipeline spanning more than 600 miles from Superior, Wisconsin, to
Wood River, Illinois.

The new pipeline is intended to provide increased capacity on the
Lakehead system to accommodate growing production from the Alberta oil
sands and to provide greater access to new U.S. markets for Canadian
crude oil supplies.

Teresen -- *Heartland Terminal Project*

The Heartland Terminal is being developed to support the transportation,
blending and storage of crude oil products as a result of the major oil
sands growth. The proposed terminal is intended to provide long-term
crude oil handling services for oil sands producers who will be shipping
crude oil and for upgrading facilities in the area. The project is a
terminal hub that will offer:

-Cavern and above ground storage for crude oil.

-Off-loading of product from trucks and rail cars.

-Blending of crudes.

The project, while developed over several phases, is expected to begin
in 2005 with in-service date commencing the last quarter of 2006.

Teresen -- *Anchor Loop Project*

This project will increase the Trans Mountain system's capacity from
260,000 barrels per day to 300,000 barrels per day by the end of 2008.
The Anchor Loop involves winning (or looping) a 110 mile section of the
existing Trans Mountain pipeline system between Hinton, Alberta and
Jackman, British Columbia and the addition of three new pump stations.
The current system is already looped with 30 inch pipe between Darfield
and Kamloops, British Columbia and a 30 inch pipe between Edson and
Hinton, Alberta.

Teresen -- *Trans Mountain Pump Station Expansion Project*

A Teresen pipeline is planning to expand its Trans Mountain pipeline
system to transport increasing volumes of crude oil from Western Canada.
The expansion involves constructing new pump stations to help move
product through the pipeline at a faster rate.

TransCanada Pipelines -- *Keystone Pipeline Project*

Proposed pipeline from Hardisty, Alberta to Wood River/Patoka, Illiniois
will be approximately 1,870 miles long. Nearly 1,000 miles of new pipe
will cross portions of North Dakota, South Dakota, Iowa, Missouri and
Illinois. This project will include 15 new pumping stations in the
United States and the Canadian portion will include construction of 100
miles of pipeline and the conversion of 770 miles of existing gas pipe
to crude.

**NATURAL GAS**

There are three major pipelines transporting gas in Canada, TransCanada,
Alliance and Westcoast Energy (Duke). This subsector of the pipeline
industry is expanding and growing as the American demand for energy
continues to increase and new developments in the western Canadian
sedimentary basin, together with the hunt for arctic and Alaska gas,
continues.

TransCanada has a network of approximately 25,600 miles of pipeline
transporting natural gas to the fastest growing markets in Canada and
the United States.

Alliance Pipeline - From its gathering system in northeastern British
Columbia and northwestern Alberta, Alliance transports 1.325 billion
cubic feet of gas through its 2307 mile pipeline system, traversing
Alberta, Saskatchewan, North Dakota, Minnesota, Iowa and Illinois to the
Chicago hub.

Westcoast (Duke) -- An integrated natural gas gathering, processing and
transmission system in British Columbia, Alberta and the Yukon and
Northwest Territories, Westcoast includes 3500 miles of natural gas
transmission pipelines with four gas processing plants. This product is
transported to other parts of Canada and the Western United States.

**OPPORTUNITY -- Proposals under consideration**:

BP Canada -- *Alaska North Slope Gas Pipeline Project*

BP and it's partners ExxonMobil and ConcoPhillips are considering
building a buried, high-pressure, natural gas pipeline from Alaska's
North Slope to North American markets in response to growing demand for
natural gas. The pipeline would ship 4.5 billion cubic feet per day of
natural gas and could be expanded to ship 5.6 billion cubic feet per
day. This pipeline would provide open access to producers and consumers
along its route and would be one of the largest private energy projects
undertaken anywhere in the world.

Imperial Oil Ltd. -- *Mackenzie Valley Natural Gas Pipeline Project*

This \$6 billion project would be 760 miles long and snake from Inuvik,
above the Arctic Circle, follow the east side of the Mackenzie River to
northern Alberta.

# **Sector Import Market**

In 2004, American companies supplied 87% of the import market for the
sector equipment. Third country competitors include Japan, Finland,
Germany and France, each holding less than a 1% share. Australia, Korea,
Italy, the U.K. and the Netherlands also sell here. Domestic firms
supply project components and the services needed to develop, construct
and maintain existing structures and equipment.

A sound relationship between U.S. manufacturers and a local distributor
is the key success factor when selling to end-users. While domestic
enterprises purchase much of their heavy equipment or bulk orders of
product directly from producers, local distributors sell most
components. The primary objective of the distributor is establishing
product reliability with purchasing officials.

End-user procurement analysts and engineers determine the needs of a
project and write specifications for the bid process at each tender
stage. When calling for tenders, procurement executives use an approved
supplier list that each company develops*.*

Best Prospects:

730421 Drill Pipe for Oil and Gas Drilling

843041 Boring & Sinking Machinery

##### Sector Market Access

Sector experts recognize U.S. products for their excellent quality,
technological benefits, and good after-sales-service. U.S. manufacturers
can improve market share by offering state-of-the-art products and
employing reputable agents and distributors located near the market.

Because of the single-market dynamics of this sector, pricing tends to
not be an issue. The U.S. supplies almost all-major equipment and large
product runs, while domestic companies supply components, support and
service.

Canadian tax requirements, shipping and brokerage fees, and provision of
credit terms, should be considered prudently. Products manufactured in
the U.S. meeting NAFTA rules or origins are free of duties and tariffs.
However, all goods are subject to a 7% Goods and Services Tax (GST), a
value-added tax applied to all domestic and imported goods and services.
With the exception of Alberta, each province has a retail sales tax
(PST).

##### Useful Links 

**-- Canadian Petroleum Industry Organizations and Regulatory
entities:**

Canadian Oilwell Drilling Contractors Association --
[www.caodc.ca](http://www.caodc.ca/)

Canadian Association of Petroleum Producers --
[www.capp.ca](http://www.capp.ca/)

Alberta Energy Research Institute --
[www.aeri.ab.ca](http://www.aeri.ab.ca/)

Alberta Energy and Utilities Board --
[www.eub.gov.ab.ca](http://www.eub.gov.ab.ca/)

Alberta Energy -- [www.gov.ab.ca](http://www.gov.ab.ca/)

Petroleum Society -- [www.petsoc.org](http://www.petsoc.org/)

Canadian Energy Pipeline Association --
[www.cepa.com](http://www.cepa.com/)

##### Upcoming Trade Events

The producer of all the major Canadian oil and gas trade shows, dmg
world media, has its website at
[www.petroleumshow.com](http://www.petroleumshow.com/) for registration.
The following is a listing of its events pertaining to the oil and gas
and environment sectors.

September 14-15, 2005 -**Oil Sands Trade Show and Conference**-- Fort
McMurray

Held in conjunction with a major conference program, this annual show
highlights latest technologies and innovations. The event features
keynotes from industry leaders, project updates, and a free series of
leading technology presentations.

June 13-15, 2006 - **Global Petroleum Show 2006** - Calgary

Global Petroleum Show is a pivotal showcase for world-class technology
in the fields of exploration, production and transportation of oil and
natural gas. In 2006, the show is held in conjunction with the Petroleum
Society\'s 55th annual International Petroleum Conference. Together,
these two major events will attract an anticipated 50,000 visitors from
around the globe.

September 26-28, 2006 -- **International Pipeline Exposition &
Conference --** Calgary

This exposition and conference was designed by the pipeline industry to
meet the current and future technical, developmental and business needs
of the industry.

June (TBD) 2007 - **Go-Expo: Gas and Oil Exposition** - Calgary

## Held in conjunction with the Petroleum Society\'s 55th Annual Canadian International Petroleum Conference. GO-EXPO showcases latest innovations. The 2007 event also features keynotes from industry leaders, project updates, and a series of free presentations. This show will run concurrently with the Canadian International Petroleum Conference - The premier organization for professionals, the Petroleum Society presents well over 100 technical presentations and its annual Awards Banquet. Contact 403-237-5112 to register.

**U.S. Commercial Service Goldkey Service**

If you are planning to attend any of the shows listed above, consider
using our Goldkey Service. This very productive and cost effective
resource will make your trip to Canada the most successful it can be.
Commercial Service staff in Calgary will work with you to tailor an
appointment schedule to help you meet your goals in the Canadian oil and
gas sector. Contact Sharon Atkins at <sharon.atkins@mail.doc.gov>.