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Does Canada’s Energy Future Lie in the East?

Even though many of us that reside in Ontario and east are more or less ignorant when it comes to the specifics of this country’s oil and gas industry, Canada’s energy future may lie at this end of the country.

TransCanada Corp. (TSX:TRP,NYSE:TRP) announced today that it’s going ahead with its “Energy East” project.  A $12 billion endeavor that is set to bring western Canadian oil to 3 refineries located in the eastern portion of the country.  2 in Quebec and 1 in New Brunswick.

Once complete, the pipeline will carry 1.1 million barrels of oil/day to these refineries.  Thus far, the company has received firm long-term contract commitments for 900,000 barrels of this capacity.  This Canadian oil will push out the 700,000 barrels/day that these refineries currently import from foreign jurisdictions and finally provides Canadian oil producers with access to the global market.

Currently, the only foreign destination for Canadian oil is the U.S.  Accessing the global market is a significant development that is being positively reflected today in the rising stocks of big producers like Suncor (TSX:SU) and Canadian Natural Resources (TSX:CNQ).  These producers have been stung in recent times by the glut of oil currently coursing through the U.S. pipeline system.  To have another option is huge.

Of course, there are other projects in the works to help these Canadian producers.  TransCanada’s own Keystone XL project and its proposed 800,000 barrels/day of takeaway capacity as well as Enbridge’s (TSX:ENB, NYSE:ENB) Northern Gateway and its proposed 525,000 bbls/day would also help get Canadian oil to foreign markets.  Both projects however are mired in a well-documented political/bureaucratic mess.  Seemingly, TRP’s Energy East is the closest to becoming a reality of all 3.

A reality, that is, that won’t be finalized until 2017/2018 when the project is expected to be complete.

Foolish Takeaway

Given the newly available, vast energy reserves that exist in the U.S., if Canada wants to remain an energy powerhouse, we need to have more destinations for our oil than just our neighbors to the south.  TransCanada is trying to help.   This 1.1M bbls/day of added takeaway capacity will help to ensure the dream of Canadian oil producers to ramp up production by close to 2M bbls/day by 2020 comes true.

With the Energy East pipeline in place, it’s not a stretch to think that oil from Canada could one day make its way to China. But what many don’t realize is that Canada is already helping to power China by way of uranium – the key ingredient for
nuclear power. That is why The Motley Fool has prepared a Special FREE Report that will clue you into the two best uranium companies in Canada. It’s called “Fuel Your Portfolio With This Energetic Commodity,” and you can receive a copy at no charge, by simply clicking here!

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Fool contributor Iain Butler does not own shares in any of the companies mentioned.  The Motley Fool does not own shares in any of the companies mentioned. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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