TRANSCANADA CORPORATION 
By CALGARY, Alberta (Reuters) - TransCanada Corp (>> TransCanada Corporation) on Tuesday pushed ahead with plans to take Western Canadian crude to eastern refineries and Canada's busiest oil port as it seeks new markets beyond those it wanted for its stalled Keystone XL pipeline project.
TransCanada said it will give shippers two months to sign contracts to use its proposed 4,400 kilometer (2,700 mile) Energy East Pipeline project, Canada's longest oil pipeline, which could take as much as 850,000 barrels per day to Montreal, Quebec City and Saint John, New Brunswick.
Canada imported more than 700,000 barrels per day from abroad last year, according to the National Energy Board, to supply six refineries east of the Ontario-Quebec border.
Oil sent on the planned line could supplant much of those imports while giving oil sands producers access to high-priced Atlantic markets for the first time.
The line, with a targeted end-2017 opening, would also allow Canada to diversify its oil markets beyond the United States, which currently takes nearly all Canadian oil exports at a discount. As recently as January, U.S. refiners were paying half the world price for Canadian crude.
"Because of a lack of pipeline capacity, Canadian oil is selling at a considerable discount to the international price," Joe Oliver, Canada's natural resources minister, told reporters. "Some C$50 million every day is lost to the Canadian economy."
Canada now produces about 3 million barrels per day of crude. But Canadian, American, European and Asian producers are planning to invest billions to increase output from Alberta's oil sands, the world's third-largest crude reserve.
According to the Canadian Association of Petroleum Producers, production is set to grow to 4.7 million barrels a day by 2020, raising the possibility that an already squeezed pipeline network taking Canadian crude to the U.S. Midwest could be overwhelmed, further cutting into the country's oil price.
"Some of the system is overwhelmed already," said Steven Paget, an analyst with FirstEnergy Capital. "The more heavy (crude) we can get out of Chicago the better."
The search for shippers, called a binding open season, begins April 15 and ends on June 17. If there is sufficient interest, TransCanada will then seek regulatory approvals for the project.
The plan to ship Alberta crude to markets in Eastern Canada took on even more significance as the U.S. government delayed approval of TransCanada's Keystone XL pipeline that would ship crude from Alberta oil sands to Texas.
Enbridge Inc's (>> Enbridge Inc) planned Northern Gateway line, a pipeline that would ship oil to Canada's Pacific coast for export to Asia, also has generated strong opposition, and there is no clue when it might go ahead.
Canada's land-locked Western province of Alberta is home to the tar sands, one of the world's largest crude oil deposits, and conventional oil production is also on the rise.
TransCanada said its project would convert some 3,000 kilometers (1,865 miles) of its under-used mainline pipeline system, which takes natural gas from Western Canada to Ontario, Quebec and the U.S. northeast, to transport oil.
It would build 1,400 kilometers of new line to take the crude from the Hardisty, Alberta, storage terminal to the mainline in southeastern Alberta, and then from the main line's end in Cornwall, Ontario, through Quebec to Saint John, New Brunswick, home to the Irving Oil Ltd refinery, Canada's largest, and a deepwater port that can handle the world's largest oil tankers.
TransCanada shares were up 33 Canadian cents at C$49.62 by midafternoon on the Toronto Stock Exchange.
Rival pipeline operator Enbridge is also planning to get Western Canadian crude to Montreal and beyond by reversing the flow of a pipeline that runs to Sarnia, Ontario.
TransCanada said it is beginning talks with aboriginal groups and with other stakeholders and starting initial design and planning work for the project.
($1=$1.01 Canadian)
(Additional reporting by Euan Rocha in Toronto and Randall Palmer in Ottawa; Editing by David Gregorio, Janet Guttsman and Bob Burgdorfer)
By Scott Haggett
