TransCanada Corp. eyes big gains from proposed Keystone XL Pipeline
New pipeline project promises enriched revenues for all
Alberta oil exporters will reap an annual bonus of up to US$3.4 billion from the proposed Keystone XL Pipeline, predict project sponsor TransCanada Corp. and the international energy economics consulting firm of Purvin & Gertz Inc.
The gain will result from improved prices for all exports of oil sands bitumen and heavy crude, says evidence supporting Keystone XL’s construction application to the National Energy Board. Public hearings are scheduled to start Sept. 15 on the $7-billion plan for a 3,200-kilometer express line from Alberta to refineries on the Texas coast of the Gulf of Mexico.
By giving exporters new sales outlets, the added pipeline is forecast to end supply gluts and deep price discounts in the middle-western United States. TransCanada has informed the NEB that shippers which have booked 75 per cent of Keystone XL’s initial capacity for about 500,000 barrels per day are urging the project to go ahead despite the current lull in oil sands plant construction.
Smaller new pipeline paths that already opened up indirect routes from Alberta to northern Texas and the Gulf Coast are contributing to recent gains in prices fetched by bitumen and heavy crude exports. Discounts off the value of the international benchmark WTI light grade, known as the heavy-oil differential, have shrunk to about 10 per cent from a previous standard range of 30-40 per cent.
The Keystone XL schedule calls for construction to start next year, in time for shipments to begin in 2012. The project is the second stage in a new oil export pipeline system that TransCanada is building for a total of about $12 billion to deliver 1.1 million barrels per day into a wide array of U.S. markets from Chicago to Houston. The oil sands cargos will replace dwindling U.S. imports from Mexico and Venezuela.
Hidden Gem
Next project move uncovers a big bitumen bundle
The oil sands lineup is advancing again. A second project is poised to enter construction, on the heels of Imperial Oil Ltd.’s decision to proceed with its $8 billion Kearl mega-mine north of Fort McMurray.
Canadian Natural Resources Ltd. plans to revive its Kirby development south of Fort McMurray late this year or early in 2010, company president Steve Laut told an annual investment symposium held in Calgary by the Canadian Association of Petroleum Producers.
By oil sands standards, Kirby is modest, with its planned first stage making 45,000 barrels per day for construction and drilling costs of $600 million to $700 million. But for CNRL, going ahead will affirm that a long-range growth program survived the global recession.
Kirby is part of an agenda that calls for multiple similar projects to produce 285,000 barrels per day from 5.6 billion barrels of reserves that can be recovered with current technology from bitumen leases which the company owns between Fort McMurray and Cold Lake. Laut described the vast holdings as his firm’s “hidden gem.”
Unlike CNRL’s year-old open pit mine, the Horizon Oil Sands Project north of Fort McMurray, the next projects are thermal in-situ or underground extraction schemes that use pairs of wells for steam injection and production to tap deeper deposits. Instead of the top-quality synthetic crude oil that comes from mining complexes with upgrader plants, in-situ sites pump out raw bitumen that is thinned with lighter “diluents” to flow in pipelines. CNRL is not yet reviving plans for a mammoth new Cold Lake or Edmonton upgrader. That giant stumbled over high construction costs long before the international economy hit the skids.
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