(Adds comment from government)
By Ethan Lou
CALGARY, Alberta, March 13 Shippers have taken
up Transcanada Corp's sweetened offer to move natural
gas on its Mainline pipeline, the company said on Monday,
granting Canada's remote western plays a boost against more
easily accessible American counterparts.
Western Canadian shippers have been increasingly squeezed
out of the Ontario natural gas market by eastern U.S. shale
basins like the Marcellus and Utica. They have comparable
production costs to Canada's remote Montney and Duvernay gas
plays, but lower delivery costs.
The resulting lack of movement on the Mainline in the last
decade caused tolls to rise even more. That further reduces the
competitiveness of Canadian gas, causing more shippers to leave
in what the industry calls a "death spiral," according to an
internal government briefing note seen by Reuters under
In its latest terms, TransCanada offered lower tolls at a
10-year term for 1.5 petajoules of capacity per day on its
Mainline system to southern Ontario.
Such a move could have a "positive effect on the
competitiveness" of Canadian natural gas, federal government
officials told Natural Resources Minister Jim Carr in the
November 2016 note, after TransCanada first offered its lower
In a statement, the Natural Resources Canada federal
department said shippers' backing the new toll "highlights the
ability of Canada’s natural gas industry to adapt to an ever
evolving competitive environment."
TransCanada said it intends to file an application for
approval with the National Energy Board (NEB) regulator in April
and hopes to have an in-service date of Nov. 1, which would be
before rival pipelines from U.S. shale basins come online.
Energy Transfer Partners LP's Rover and Spectra
Energy Partners LP's Nexus lines both have targeted
in-service dates to Ontario's Dawn hub in November.
Energy infrastructure development has faced strong
opposition in Canada among environmental and aboriginal groups,
who may seek intervener status before the NEB to block
For its part, TransCanada will move "fairly quickly," said
Tracy Robinson, the company's senior vice president of Canadian
natural gas pipelines.
"There's no requirement for any build, so our producers can
access the market upon the NEB approval," she said in an
interview. "We believe it puts them in there competitively,
regardless of the various options."
TransCanada's current terms allow shippers to exit after
five years, but they must temporarily pay higher tolls than the
77 Canadian cents per gigajoule offered.
Robinson said the company does not yet know how many will
trigger that option.
(Editing by David Gregorio and Lisa Shumaker)