Rumors abound over the fate of the much-touted and oft-maligned Keystone pipeline project, but Canadian Natural Resources Minister Joe Oliver is confident that the Obama administration's deciison will favor the pipeline project. First announced in 2008, the project promises to create up to 20,000 new jobs, according to TransCanada sources
There is some speculation that there will be no decision on the Keystone pipeline until after the 2012 U.S. election, amid warnings from Calgary-based TransCanada Corp. that an extended delay on a U.S. decision for the $7-billion pipeline could threaten the entire project, one which U.S. refineries need to increase their crude oil product with the looming decrease of crude product from other sources. There is a possibility that the Keystone pipeline could be rerouted, which would cause further delays in implementation.
Other Pipelines in the Planning Stages
The fate of the Keystone XL project hangs in the balance, however, Oliver pointed out that there will be enough oil sands production from Alberta to run both Keystone XL and Northern Gateway pipelines to capacity. Northern Gateway will be built to ship Alberta oilsands crude to British Columbia for export.
Oliver said Wednesday he recognizes there’s mounting opposition to the pipeline and that it’s a politically sensitive issue for the Obama administration. However, he still believes a decision will be made soon and doesn’t expect a final ruling to be delayed until after the November 2012 U.S. election.
The U.S. State Department had previously promised to complete its review of the project by year’s end, but has backed away from that commitment over the last week. These developments came just days after an estimated 10,000 Keystone pipeline opponents protested at the White House, demanding President Obama deny the permit TransCanada needs to proceed with the oil sands pipeline. “There’s always doomsayers," noted Oliver. "I’m continuing to believe that it will be decided well before November 2012.” The Keystone XL pipeline would carry up to 830,000 barrels of oil per day from Hardisty, Alberta, to refineries on the Gulf Coast of Texas.
Another pipeline in the works is Enbridge’s $5.5-billion, 1,172-kilometre Northern Gateway project that would ship oil sands crude from northern Alberta to a marine facility in Kitimat, B.C., where oil would be unloaded onto tankers for export. Canada currently produces approximately 2.9 million barrels of oil per day, with about 1.6 million barrels coming from the oil sands. However, total oil sands production is expected to more than double to 3.7 million barrels a day by 2025.
Review Processes Underway for Both Pipelines
The Northern Gateway project is currently under review by the National Energy Board and the Canadian Environmental Assessment Agency. Oliver expects that a final decision on the Northern Gateway project, which would carry an average of 525,000 barrels of petroleum per day, could come by spring 2013, and the pipeline could be operating by 2017.
Chinese state-owned oil companies have invested billions of dollars in the Alberta oilsands and are increasingly eyeing the resource to feed that country’s insatiable energy appetite. The minister said he’s confident there will be plenty of demand from Asia, particularly China, to fill the pipeline.
TransCanada is still operating under the assumption the U.S. government will make a final decision on the project by the end of the year. Rerouting the pipeline would result in a new environmental review process that could take years to complete and even put the project in jeopardy, if TransCanada is unable to meet its obligations to deliver crude oil to refineries by 2013.
Alberta Premier Heading to Washington to Promote Keystone
One of the province's most affected by the Keystone pipeline decision is Alberta, and the new Alberta premier, Alison Redford, is heading to the U.S., while naming a new trade envoy to the U.S., as concerns grow that the controversial pipeline may falter.
Redford will travel to New York and Washington to defend the province against an increasingly loud opposition. “We have a spotlight on us and we need to embrace that spotlight,” said Redford, "it’s time for Alberta to send the message that we’re prepared to lead on what we’re proud of.” Dave Bronconnier, the former mayor of Calgary has been named the province’s new representative in Washington.
Uncertainty Affecting Both Energy Industry and Investors
At risk consultancy firm Eurasia Group, Robert Johnson, director of energy and natural resources, commented that "extreme pessimism” about Keystone is taking root, and his odds have changed in the past few weeks, from an 80-percent chance of approval to 60-percent.
The prospect of Keystone XL foundering is deeply concerning to industry and investors, because without it, Canada stands to run out of export pipeline room in just a few years.
If there is no pipeline, where can Canadian oil sands crude go? The “big concern is that you’ve got all this production coming online from the oil sands that has nowhere to go,” said Duncan Anderson, managing director and senior portfolio manager with Manulife Asset Management. Canadian producers, have a lot at stake, as have U.S. refineries. If there are no alternatives - oil and/or delivery means, then there will be a lot of land-locked production and a lot of idle refineries.
It's a catch-22 situation - no pipeline for oil and no oil to refine.
Reference:
- Postmedia News, "Minister confident of quick Keystone decision," Jason Fekete, Nov. 9, 2011
- Globe and Mail, "XXXXXXXXXXXX," Nathan Vanderklippe, Nov. 9, 2011
Duane Sharp - I am a retired professional engineer (electronics), with over 40 years of writing experience in technology topics, with a focus on the IT ...
