Pipelines to Tomorrow
Pipeline companies are like Punxsutawney Phil on groundhog day. If there’s a shadow of doubt, the pipeline goes back inside to the drawing board
While prices have collapsed to nearly one-third of their 2008 summer peak, the pipelines that carry oil to their users continue to move cautiously towards as much construction of new shipping capacity as still growing Alberta production volumes will support. Both TransCanada Corp. and Enbridge have bold plans to carry oil sands output to markets in the United States that need imports.
The National Energy Board has already approved the Keystone, Alberta Clipper and Southern Lights projects to Chicago and Oklahoma. But they have yet to put their stamp on the U.S. Gulf Coast refineries that are their final destination.
The reality is that Alberta doesn’t have enough current pipeline space to carry all the available oil sands bitumen to all the U.S. refineries capable of processing the stuff. That’s one reason Alberta Lloyd blend (heavy oil) has traded at a discount compared to its comparable rival, Mexican Maya crude. Basically, Alberta’s bitumen gets burned on price.
“Why this discount?” asks a FirstEnergy Capital research report. “The refineries that are accessible to Alberta heavy crude and bitumen can only handle so much bitumen and heavy oil supply. When supply exceeds demand, refiners lower their price for Alberta’s heavy and oil sands-based crude well beyond the world heavy price.”
Naturally the discount peeves producers as both they and the Government of Alberta lose revenue. The remedy is more pipeline capacity to export oil sands bitumen.
“There appears to be a significant amount of expansion planned to come on in the next five years,” says Chris Feltin, Tristone Capital vice-president and director of institutional research. “We don’t expect all these pipeline projects to proceed. There is a growing indication from the producers’ side that companies are looking to export bitumen to the U.S. The larger pipe projects will likely proceed.”
TransCanada, with its partner ConocoPhillips, is well ahead with the Keystone project that would carry oil from Alberta to Wood River, Illinois and then on to Cushing, Oklahoma at an initial capacity of 435,000 barrels per day in 2009 and increasing to 590,000 in 2010.
Issue ContentsRelated Posts
Canadian Assoc. of Petroleum Producers helps industry adjust to new International Financial Reporting Standards • October, 2009
Canadian Association of Petroleum Producers signals sea change in communication strategy • August, 2009
Talent Erodes Gender Barriers As Determined Women Rise To The Top Of Energy Sector • April, 2009
Arctic Marathon • February, 2009
Mastering Cycles • December, 2008
Black Clouds on Green Horizon • December, 2008
Entries