Northern neighbor
Regardless of pipelines, Canada’s oil industry still depends on the U.S.
If the Keystone XL gets built, the pipeline will tie Canadian oil producers to the United States.
Here is one thing Keystone XL won’t do for Canada: wean the country’s oil industry off its dependence on the U.S.
While approval of the project in Nebraska was welcomed by Alberta and its producers, it came also as a reminder that Canada hasn’t been able to clear two crucial pipeline projects on its own soil to ship crude to foreign markets from its own ports. Kinder Morgan’s Trans Mountain expansion to British Columbia’s Pacific Coast remains mired in regulatory delays and legal challenges even after gaining federal approval last year. The decision in Nebraska also came after another project of Keystone developer TransCanada, the Energy East project was canceled last month amid fierce opposition from Quebec.
The Energy East project would have linked Western Canadian producers to the Atlantic Coast,
If the Keystone XL gets built, the pipeline will tie Canadian oil producers to the United States, where much of their heavy crude is processed by Gulf Coast refiners. The U.S. has become a “monopoly buyer” of Alberta’s oil, Alberta Premier Rachel Notley said at a recent speech in Toronto.
Canada sent 99 percent of its crude exports to the U.S. last year with the remainder mostly going to the United Kingdom, Italy and Spain from oil platforms off Newfoundland and Labrador, Statistics Canada data show.
While the existing 300,000-barrel-a-day Trans Mountain line is the only export pipeline that connects to a Canadian port, nearly all of the crude it carries supplies refineries in Washington state.
New markets
Another project that’s set to send more Canadian crude to the U.S. is Enbridge’s replacement and expansion of Line 3, which runs from Alberta to Superior, Wis. While construction is still awaiting the go-ahead from Minnesota, Enbridge CEO Al Monaco said in September that the company is confident approval will be granted.
Meanwhile, a plan to expand Trans Mountain to 800,000 barrels a day by December 2019 could be delayed by nine months, Kinder Morgan warned last month.
On Oct. 26, the Houston pipeline company asked the National Energy Board for permission to start work as the company waited permits from the city of Burnaby, British Columbia, the end point of the line in Canada and a center of opposition to the project.
Access to Asia
While Keystone XL would likely increase the price for Canadian crude by allowing more volumes to reach the Gulf Coast, Trans Mountain would have the added benefit of opening access to customers in Asia, said Mike Walls, a Boulder, Colo.-based crude oil analyst at Genscape.
Heavy Western Canadian Select crude, the benchmark for the oil sands, would trade at a discount of less than $10 a barrel to West Texas Intermediate futures from almost $16 a barrel currently after Keystone XL and Trans Mountain start operating, according to Walls.