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Reuters: A Canadian ‘Pipeline Crisis’ Looms

From Reuters:

Analysis: Canada’s "Cushing moment": A northern pipeline crisis looms

By Scott Haggett
March 29, 2012

CALGARY, Alberta (Reuters) – Oil traders still grappling with an unprecedented pipeline bottleneck in the U.S. Midwest that roiled global energy markets last year should beware: Canada may be next.

The pipelines that carry crude from Alberta’s oil sands and the Bakken shale fields of North Dakota to U.S. refiners may run out of capacity as soon as 2015, some analysts now warn.

2015 is years after the November elections. Why should we worry about it now?

Fears that the export of Canadian crude will be constrained have risen recently as a result of pipeline project delays and the unyielding growth of North Dakota output. Any resulting glut could weaken Canadian oil prices, depress profits for producers like Suncor Energy Inc and Cenovus Energy Inc and choke growth in the largest source of U.S. imports.

What gobbledygook. This bottleneck — even the fear of such a bottleneck – must be driving up prices right now. Which you would think would be the most relevant point here.

A crisis could be avoided, though. Major pipeline operators like Enbridge Inc say they’re confident that an estimated 1 million barrels per day (bpd) of idle capacity on existing Canada-to-U.S. lines is more than enough for up to five years, sufficient time to complete new lines or add pumps.

If Mr. Obama is reelected there will be no more Canada to US pipelines approved, since the President has veto power over all international pipelines.

That view is by no means unanimous.

"New capacity is needed by the 2014-2015 period or we’re really going to be squeezed," said Steve Fekete, managing consultant at international oil consultancy Purvin & Gertz, which completed a major pipeline study last autumn

So, in fact, we don’t even have three years.

Call it a "Cushing moment" for Canada, the world’s No. 6 oil producer — a dire scenario in which surplus crude would start to pile up in the storage tanks of Hardisty, Alberta, like the glut that developed in the U.S. oil crossroads of Cushing, Oklahoma, a year ago.

The possibility of a Canadian choke-point has arisen because of two recent, unexpected developments: The U.S. rejection of the Keystone XL project, the biggest trans-national pipeline expansion; and the stunning growth of North Dakota’s Bakken shale

Something tells us it is more the former than the latter.

The government is also taking action. Canada is set to push forward new measures to cut approval times for major pipeline projects in order to speed the completion of proposed routes to the Pacific Ocean and refiners in Asia

Or to put it more directly, Canada is going to ship this oil, and the jobs entailed, to China instead of the US.

Until about a year ago, a squeeze seemed unlikely. After years of environmental reviews, TransCanada’s $7 billion Keystone XL project seemed set to get approval to add as much as 830,000 barrels per day of new capacity by 2013…

"There seems to be increasing support for the project in the U.S.," said Paul Lechem, an analyst at CIBC World Markets. "We’ll see if it gets built on schedule, but it seems that things are starting to line up a little bit better there."

This is a fantasy. Once again, if Mr. Obama is re-elected the Keystone Pipeline will not be built by 2015.

In fact, it probably won’t ever be built, since the boat to China will have long since sailed.

This article was posted by Steve on Thursday, March 29th, 2012. Comments are currently closed.

4 Responses to “Reuters: A Canadian ‘Pipeline Crisis’ Looms”

  1. tranquil.night says:

    SG continues hit the nail square on the head in his commentary.

  2. JohnMG says:

    See. Obama is right. “Drill here! Drill Now” won’t do a thing to lower fuel prices. We don’t have the pipeline capacity to get the crude to market. Really! None of this is his fault, just like he says. (sarc. off)

  3. canary says:

    Reuters did study their source –
    ” Steve Fekete, managing consultant at international oil consultancy Purvin & Gertz”

    Purvin & Gertz was bought out by a green marketing company IHS

  4. canary says:

    Undisputed fact Canada has the second highest source of oil next to Saudi Arabia who ranks 1st.

    It’s great Canada can put in pipes, they say will lead to millions of jobs to their country in exporting to the U.S. Better us U.S., than another foreign country.

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