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
“This is definitely a positive signal with TCPL and Enbridge,” says Feltin. “Investors believe in the long-term viability of those projects.”
Savvy investors recognize that the two pipeline companies aren’t going to be as crunched by commodity crashes as the actual producers. The S&P energy index dropped 42 per cent by the end of November, while the storage and transportation index dipped only 18 per cent. Short-term oil prices are harrowing for producers. But in the long run, producers are confident that prices will rise as supply softens and demand grows. While the current economy creates havoc for producers, the best ones find ways to reap benefits such as securing lower costs.
Pipeline companies continue their competitive race to develop capacity. “Producers are hurting, but pipelines have generally moved commodity price sensitivity out of their systems,” notes Paget.
Solid leadership, strict balance sheets and feasible future projects played into the pipeline giants’ ability to raise funds. Yet it’s difficult to dance when the orchestra stops playing. The pipeline business isn’t fundamentally any different than it was a year ago. Lenders want a greater return for taking any sort of risk, but the reality is that the pipelines currently under construction are very likely going to get paid for.
Regardless of the economic roller-coaster, Alberta pipelines are poised to move crude to the U.S. Midwest and beyond. The new projects are being built right now; but after that, there may not be any new pipeline construction for another decade. At that point, Paget predicts, more shipments to the industry’s Edmonton shipping hub from the oil sands production regions could pave the way to further expansion. Chicago is always a draw, and companies are hearing the warm siren song of the Gulf Coast.
Send letters to letters@albertaoilmagazine.com
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