Will the Keystone XL pipeline ever be built? Most analysts believe that the project will be built eventually, with a significant cost increase, probably an additional $1-billion, bringing the total project cost to TransCanada to close to $8-billion.
Keystone XL Versus Enbridge
Other pipelines in the works, notably several operated by Enbridge, may acquire customers which would go to Keystone if and when it gets built. Enbridge’s proposed Wrangler Pipeline project, in combination with its Flanagan South project, and the existing Alberta Clipper pipeline, could bring oil sands barrels all the way from Canada to Texas, just as Keystone would.
There is a pipeline requirement for more than the oil sands. Energy analysts note that additional pipeline capability is required to handle light crude production from tight oil formations such as the Bakken oil field, which is growing very quickly, creating a significant surplus of light crude in the mid-continent that also needs an outlet to the U.S. Gulf Coast. Growth in Canadian oil sands and tight oil production will need both Keystone XL and the Enbridge projects in order to create enough takeaway capacity to prevent bottlenecks. (National Post, "Keystone gateway will sway oil trade," Yadullah Hussain, Nov. 9, 2011).
Canada Negotiates in Hawaii
While the U.S. has forced a delay in the Keystone pipeline, which would provide a steady flow of Alberta crude, estimated to be 833, 000 barrels per day, Prime Minister Stephen Harper will get plenty of face time with potential energy buyers this weekend in Hawaii, as well as having an opportunity for a one-on-one with President Obama.
As noted from news reports, the two did have a meeting and several constructive and positive agreements came out of the session. The Prime Minister used the Asia-Pacific Economic Co-operation (APEC) summit to offer somenting to the president, in exchange for movement on the Keystone file. During this weekend session, the government of Nebraska came forward to break the impasse and offer a way to speed up construction of the Pipeline, even offering to pay for the required environmental assessment.
Is Obama a Job-killer?
The postponement of a decision on the $7-billion pipeline to Texas from Alberta until after next year's presidential election is being used by pro-oil Republicans to bash Obama as a job killer during tough economic times. Even House Speaker John Boehner stated that "a new route in Nebraska away from an aquifer has stalled more than 20,000 American jobs in the name of political expediency,"
Environmentalists have been sniping at Obama for months to veto the project or he would lose their support. They argue that the oil sands produces unacceptable levels of greenhouse gases and a pipeline rupture would harm sensitive areas, erroneous statements that are contradicted by U.S. environmental assessments that approved the project. There are numerous pipelines traversing the U.S., with good safety records, and Americans have become dependent on them to feed their thirst for energy.
Alternatives to Keystone XL
Some Keystone refinery clients turn to Enbridge, another major oil transporting company, which already has pipelines in the U.S., and more in the planning stage.. Enbridge’s proposed Wrangler Pipeline project, in combination with its Flanagan South project, and the existing Alberta Clipper pipeline, could bring oil sands barrels all the way from Canada to Texas.
“Potentially, all legs of this project could be in service by 2014,” noted Jackie Forrest, IHS CERA Oil Sands Dialogue Senior Director. Ms. Forrest also notes that additional pipelines need to be laid out for more than just oil sands. Light crude production from tight oil formations such as the Bakken is growing very quickly, creating a significant surplus of light crude in the midcontinent that also needs an outlet to the U.S. Gulf Coast.
“Based on our view of growth in Canadian oil sands and tight oil production, over the next five years North America will need both the Keystone XL and the Enbridge projects in order to create enough takeaway capacity to prevent bottlenecks,” said Ms. Forrest.
New Regulatory Approval Required for Pipeline Projects
According to a November 25, 2011 article in the Globe and Mail Report on Business, the U.S. decision earlier this year to delay its Keystone XL decision points to the need to break Canada’s dependency on the U.S. as its sole export market. Oil and gas executives warn that access to Asian oil markets will face many of the same issues as Keystone in obtaining approval, from environmental assessment process to meeting regulatory requirements.
Oil and gas, key components of the energy sector, represent Canada's most important economic industry, and the country stands to lose more than half a trillion dollars in revenue if there is no growth in this industry sector. Existing export pipelines are one important component in the industry's capability to grow and these are expected to be full by 2015 or 2016; therefore, new lines are needed.
To ensure growth in this industry sector, governments, oil producers and pipeline companies must work together in a tightly co-ordinated and focused effort to create solutions. Several processes need to be put in place to accomplish these goals: mandated deadlines for approval decisions, only one level of government to oversee a regulatory review, and new rules surrounding engagement with Canada's First Nations.
The delay of the Keystone XL project has caused Canadian executives and politicians to re-think Canada's future energy policies and focus on expanding the market for Canadian oil and gas.
Lengthy regulatory processes are certainly hampering Canada’s ability to sell into fast-growing new markets, the time to act is limited. “Canada needs to get into the game within this decade, while there is still a strong demand for our products,” noted Ms. Forrest. “Missing the opportunity today may mean missing it forever, because everybody is trying to access Asia."
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 ...
