Canada Ping!
Posted on 01/26/2013 2:34:33 PM PST by thackney
Canadian provincial premier, 10 state governors, seek Keystone pipeline decision
The sense of urgency among Canadian governments and oil producers facing a crude transportation bottleneck and the looming prospect of shut-ins has prompted one provincial premier to join 10 U.S. state governors in urging President Barack Obama to end procrastination and approve TransCanada’s Keystone XL pipeline.
“The energy relationship between the United States and Canada is vital to both our countries. It is an interest we share, transcending political lines and geographic boundaries,” the leaders said in a letter to Obama, hoping to gain the president’s attention as he embarks on his second term.
Noting that U.S. oil imports from Canada could almost double within seven years to 4 million barrels per day, Saskatchewan Premier Brad Wall said the Keystone XL pipeline “could also provide the critical infrastructure required to transport growing U.S. domestic production from the Bakken shale region to market.”
In a major development Jan. 22, Nebraska Gov. Dave Heineman approved the revised route for the pipeline, dropping his earlier opposition to the project.
He said TransCanada would provide evidence that it is carrying $200 million in third-party insurance to cover any cleanup costs from leaks.
The pipeline is designed to carry 830,000 bpd from the Alberta oil sands to U.S. Gulf Coast refineries, picking up Bakken production from Saskatchewan and North Dakota along the way.
Along with Wall, the Republican governors of Arizona, Idaho, Kansas, Nevada, North Dakota, South Dakota, Oklahoma, Texas, Utah and Wyoming were signatories to the letter.
Names not on letter
Montana’s newly elected Gov. Steve Bullock said he intends to write his own letter, while Alberta Premier Alison Redford — whose province would be the major financial beneficiary of the pipeline — bypassed the chance to add her name to the letter. A spokesman for Redford said: “It’s not about any one letter. We welcome this letter as it supports (Redford’s) longstanding efforts to open new markets for Alberta oil.”
However, Heineman, whose state has generated the strongest opposition to the pipeline, was also a notable omission from the signatories, pending a resolution of TransCanada’s rerouting of the pipeline to avoid Nebraska’s environmentally sensitive Ogallala Aquifer.
A new report by the Nebraska Department of Environmental Quality concluded that any pipeline ruptures would be “localized,” cleaned up by TransCanada and pose no threat to the aquifer — a finding that was scorned by a landowners’ group.
A decision by the U.S. State Department on Keystone XL has been expected this quarter, although some observers expect further delays, with former Alberta premier Ed Stelmach doubts Keystone XL will be approved, if at all, this year.
Effectively shelved by the Obama administration for the past year, Keystone XL is the most immediate hope of relief for Canadian oil producers who are anxious to gain access to new markets.
Arguments for pipelines
Rick George, former chief executive officer of oil sands giant Suncor Energy, has taken a high-profile public role in hammering home a constant refrain — that more pipelines are vital to the petroleum industry’s health and Canada’s economic well-being. The price spread between Alberta’s oil sands bitumen and U.S. conventional crude is ”serious” and should remind Canadians about the dangers of relying on basically one export customer, he said.
Martin King, an analyst with FirstEnergy Capital, agreed that the squeeze on pipelines and delays in retooling U.S. refineries to handle heavier crudes are forcing Canadian producers to think about shutting in some production.
The trigger point results from the dramatic plunge in prices for Western Canada Select heavy blend, which is now hovering around $50 per barrel, less than half the price for international benchmark Brent crude — a discount that King warns could stretch over a long period.
He said traditional heavy oil production is likely to be hit first as that sector sits on the fringe of prices in the $45-$50 per barrel range that is needed to generate positive cash flow.
King said higher-volume projects that use enhanced recovery methods and oil sands operations that use steam-assisted gravity drainage can probably hang in until prices fall below $30 per barrel and remain there for several months.
Those projects are not easily shut down because of the need to keep steaming the reservoir to force the viscous heavy crudes to flow to the surface.
Pressure on prices
The shortfall in takeaway capacity from Canada and a delay in adding a 120,000 barrel-per-day unit to boost capacity at BP’s 337,000 bpd refinery at Whiting, Ind., contribute to the accumulating pressure on realized prices for both Canadian heavy and tight oil, said Chris Feltin, an analyst at Macquarie Research. And it makes little difference that Canada is the largest source of U.S. oil imports at 2.5 million bpd.
The challenges saw the Toronto Stock Exchange’s energy index drop 5.3 percent in the final quarter of 2012, with Penn West Petroleum posting a 22 percent decline in its share value, MEG Energy down 19 percent and Canadian natural Resources off 7.5 percent.
A continuation of the trend points to a “really ugly” first quarter said Andrew Potter, an analyst with CIBC World Markets.
The fist glimmer of hope is the 50,000 bpd of new space Enbridge is scheduled to add to its Line 5 from Superior, Wisconsin, to Sarnia, Ontario, in March.
Marcel Coutu, chief executive officer of Canadian Oil Sands, the largest partner in the Syncrude Canada oil sands consortium, told an investment conference earlier in January that he anticipates a “couple of tough years” ahead.
George said he is counting on the northern segment of TransCanada’s Keystone XL pipeline getting U.S. administration approval and the reversal of Enbridge’s Line 9 to open the Montreal refining market to Western Canada and U.S. light crude also proceeding, and providing some pricing relief. But that won’t be enough.
“We need one new oil line and two natural gas lines to the (British Columbia) coast for Asian customers,” he said.
Taking direct aim at the opponents of new oil sands pipeline capacity across British Columbia, George said that “if we think about what is good for this country and not what is best for each individual in it, that is important.
“The infrastructure we need is not risky and not terribly complex and we should be putting it in to protect the Canadian standard of living.”
He welcomed “civil conversations” with people who do not hold entrenched views, urging them to “get out of the trench.”
Pricing outlook bleak
Alberta Energy Minister Ken Hughes took an even bleaker view of the pricing outlook than George, saying “it’s entirely possible that this will take a much longer cycle to work its way through. So I’m not thinking we’re facing just a couple of years of pressure on differentials.” “It’s going to take time to build pipelines. Do not assume that we will be bailed out by another boom. That is a very dangerous assumption,” he said.
Alberta Finance Minister Doug Horner added to the dismal outlook by noting that provincial auctions of exploration rights and royalties from conventional oil will add to Alberta’s painful budget troubles, hinting at a deficit-burdened budget on March 7, while noting that his province’s returns from natural gas royalties have slumped to C$1 billion in the current fiscal year from C$8 billion five years ago.
He told a business luncheon Jan. 21 that the widening price gap will put Alberta more than C$3 billion below its revenue projections in the fiscal year that ends March 31, shattering the government’s hopes of collecting C$11 billion from its resources, and jeopardize projections of C$10 billion in bitumen revenue in fiscal 2014-2015.
“It’s not pretty,” Horner said. “The price differential has widened out during a period when seasonality would normally indicate we would get a better result. We did not.”
Why is this commercial decision up to Obama alone?
Because he’s The Messiah, a god, the lord and savior. At least according to Jamie Fox. Obama is a dictator and everything goes through him and him alone. He won after all, dontchaknow.
Romney said he would okay Keystone on his first day in office. Obviously, your countrymen don't want the oil or the jobs. Go figure.
Does Obama want this oil to go to China instead of the US? I believe he does. Isn't he doing everything possible to delay the Keystone?
In passing, isn't it interesting that the Keystone will also transport oil from the Bakken fields? It seems that Obama is not crazy about bringing domestic production to market either.
There are 3 trillion barrels of oil in the Alberta oil sands. There are 250 billion barrels of oil in Saudi Arabia. I used to wonder why the Bank of Canada didn't hold more gold. When you have 12 times the oil reserves of Saudi Arabia, I guess you don't need gold.
When will Canada reach the point that it will build the necessary infrastructure to transport the oil to its West coast to be shipped to China and the rest of Asia? Would this really be the outcome that Obama prefers?
Nope...not really possible
NAFTA requires Canada to sell 2/3 of all its oil/gas to the US....so they just cannot willy-nilly ship its oil to Communist China or other countries or they will be in violation of NAFTA
Surprised that this “sell to Communist China” canard line in regard to Keystone is always used by some of the more liberal Free Traders...did they not read NAFTA?
The only way Canada can force the US hand is by going to NAFTA Court and get a ruling. NAFTA Court usually rules against environmentalists vs Free Traders...so Canada has a good chance. Probably Harper and the Canucks do not want Eco-extremists rioting over a NAFTA ruling that is pro-Keystone...
Canada Ping!
Oh,and "Beyonce" too.
As a Canadian (a formerly proud one,it would seem) it's understandable that you don't know this but no more than a third of our voters have the first clue what Keystone is and the overwhelming majority of those who do voted for Romney.Osama Obama won because Romney hasn't paid taxes for years and he allowed that steelworker's wife to die.Yes,that's how shallow this country's typical voter has become.
I bet less than 10% know what Keystone is. Low information voter?
There are 3 trillion barrels of oil in the Alberta oil sands. There are 250 billion barrels of oil in Saudi Arabia. I used to wonder why the Bank of Canada didn’t hold more gold. When you have 12 times the oil reserves of Saudi Arabia, I guess you don’t need gold. >>>>>>>>>>>>>>
Thats exactly it. Canada also has massive natural resources of precious metals as well.The problem is that we have too long relied on the US market to valuate Canada’s oil reserves, essentially a single source evaluation. Asia stands ready to establish a market for Canada’s oil. All we have to do is get it to both the West and Easts coasts. The smart money says screw the environmentalists who are the wild card in US politics, they are here to stay.These environmentalists seek to control energy production far beyond their own borders based on proposed carbon foot priont parameters.( Mine is less dirty than yours.)
So Eff the environmentalists. Canada should build its West coast pipeline without delay. Obama will never approve of Keystone.If he does, it will only be for the purpose of sabotaging it to create a massive oil spill, as was done with the BP rig in the Gulf of Mexico.
It is not him alone, lots of other approvals are required. The executive branch is involved because an oil pipeline crossing the border requires approval from the State Department. It has been that way for decades.
Thanks. That answers my question.
Wow, let me put it this way, you are absolutely wrong. In fact, you couldn't be more wrong.
NAFTA requires no government intervention in the normal function of the energy market. It also requires all consumers of energy in North America to be treated equally. Nowhere does it set or require quotas. See reference here: http://www.parl.gc.ca/content/LOP/ResearchPublications/prb0633-e.htm
Furthermore, in this particular case, the US obviously does not want Canadian oil. When the Northern Gateway is completed, feel free to buy as much as you want. I'm sure the producers will be glad to sell to anybody that can get a tanker up to Kitimat.
Canada is not really interested in "force(ing) the US hand". Canada just wants to sell the oil. You see, there are 3 trillion barrels of the stuff up there. Besides, how difficult do you think it would be to abrogate NAFTA? It's a trade treaty. A piece of paper. The US and Canada have signed and abrogated trade treaties in the past and we are still friends.
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