TransCanada Shifts Focus from KXL to Energy East, from Gulf Coast to East Coast

Researched by Industrial Info Resources (Sugar Land, Texas)--TransCanada Incorporated's (NYSE:TRP) (Calgary, Alberta) Keystone XL project (KXL) is one of the most famous--and infamous--pipeline projects today. It has faced stiff opposition from its beginning and been mired in the regulatory process for years due to its crossing of an international border, which has inflated its cost greatly. The KXL is not expected to receive regulatory approvals until later this year.

On March 4, TransCanada filed its first project description to the National Energy Board (NEB) of Canada for its proposed Energy East project. The $12 billion Energy East project also has faced stiff opposition, but not to the level of KXL, and the project has brought on key personnel from the KXL project.

The KXL pipeline is supposed to transport 500,000 barrels per day (BBL/d) of crude oil from the Alberta oil sands to Cushing, Oklahoma. It would then be moved through other pipelines, including TransCanada's own Gulf Coast pipeline, to the refining hub along the Gulf Coast. The KXL faces competition, however, from Enbridge Incorporated (NYSE:ENB) (Calgary) and its network of crude oil pipelines, which can transport a greater amount of Canadian crude to Chicago, as well as Cushing, while bypassing the regulatory struggles faced by KXL. For related information, see December 2, 2013, article - Stopping Keystone XL May Not Keep Canadian Oil Sands from Reaching Gulf Coast.

In contrast, TransCanada's Energy East project would have more than twice KXL's planned capacity; it is expected to transport 1.1 million BBL/d of crude oil to refiners in Quebec. Those refiners have access to Canadian crude oil through Enbridge's Line 9 system, but also must rely heavily on imports. Line 9, even after expansion, is expected to transport roughly 300,000 BBL/d and is the only competitor bringing domestic crude to Quebecois refineries. TransCanada may be hoping to edge out its competitor by sheer volume, and keep public relations positive by keeping the Alberta crude oil in-country.

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