TransCanada expects to make a sanctioning decision in early 2013 on converting part of its natural gas Mainline to deliver Western Canadian and Bakken crude to refineries in Eastern Canada and the United States, the company's president of energy and oil pipelines said Tuesday.

TransCanada is confident the project has met its technical and economic tests, said the official, Alex Pourbaix, in an earnings conference call.

Demand for the conversion could range from 500,000 b/d to 1 million b/d and cost in the range of C$5 billion ($5 billion) to reach Montreal and another C$200 million to extend the line to Quebec City, Pourbaix said.

TransCanada is confident it could "very competitively go forward" without needing the upper end of the projected volumes after spending the past six months seeking the response of stakeholders and prospective shippers.

But TransCanada executives were reluctant to deal with speculation that the conversion project could continue to Saint John, New Brunswick, opening a route to Europe and Asia at a time when pipelines by Enbridge and Kinder Morgan to the British Columbia coast are threatened by protests and government feuding.

CEO Russ Girling said exports to Europe and Asia would depend on whether prospective customers were interested in buying Canadian crude. While discussions are underway with shippers it is "too early to share details," he said.

Pourbaix said the first goal of a Mainline conversion is to access Eastern Canadian refineries which process about 700,000 b/d and US Eastern Seaboard refineries that have capacity of 1 million b/d.

All of those refineries are configured to handle light sweet crude, which would consist of synthetic crude from Alberta and light sweet crude from the Bakken in Saskatchewan and North Dakota, although heavier Alberta crudes could find a market if eastern refineries were modified, he said.

THIRD QUARTER EARNINGS

The currently underutilized Mainline, which delivers Western Canadian gas to Ontario and Quebec, has built-in advantages if the conversion decision is made, including the fact that "80% of the pipe is already in the ground," Pourbaix said.

TransCanada is currently concentrating on proceeding with delivery systems within Alberta, including its newly-announced Northern Courier and Grand Rapids projects, to establish connections from the oil sands to the Heartland region near Edmonton and the Hardisty hub in central Alberta, he said.

Laurie Smith, an attorney with Bennett Jones who works with energy companies, said in an interview that TransCanada believes it can deliver crude to China from the North American Atlantic seaboard at a competitive cost compared to shipments from the Pacific Coast. That option is being very actively explored "right now," he said.

TransCanada has estimated it would cost about C$8.50/b to send crude from the Canadian East Coast to China, compared with the C$5.20-C$8.20/b cost of shipping to Shanghai from Enbridge's proposed Northern Gateway system.

Girling said early indications from feasibility studies point to benefits for current gas shippers, but "we are still analyzing the impact on them."

TransCanada reported a net income for the third quarter of C$269 million, or C$0.52/share, compared with C$286 million, or C$0.55/share, a year earlier. Cash flow dropped to C$866 million from C$928 million, while capital spending was C$694 million, up C$189 million.