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Mike Priaro

Mike Priaro

"Mike Priaro, B.Eng.Sc.  (Chem. Eng.), U.W.O. '76, P.Eng., Lifetime Member Association of Professional Engineers and Geoscientists of Alberta (APEGA), worked in facilities, production, operations and…

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Should President Obama Veto Keystone XL?

Should President Obama Veto Keystone XL?

President Obama is correct when he says there are few US jobs created by Keystone XL and that it provides little energy security or economic benefit for the US which shoulders much of the environmental risk.

Gasoline in the US is currently averaging around U$2.30/gal and in some areas is going for less than U$2/gal. That removes much of the need and justification for Americans to approve the Keystone XL pipeline as it is hard to imagine Keystone XL driving fuel prices much lower.

As a result, Democrats can now hold up Keystone XL indefinitely, probably without paying much of a political price, because the Republicans do not have enough votes in the Senate to remove the veto option from President Obama.

Keystone XL is designed to ship 730,000 bbl/d of Canadian dilbit and heavy/medium crudes plus 100,000 bbl/d of US Bakken light crude to the Gulf Coast.

Related: Is Keystone Still Viable Amid Low Oil Prices?

Most of the Canadian volumes will be dilbit which typically contains 30 percent diluent. That means Keystone XL will ship up to 510,000 bbl/d of raw bitumen, extra heavy crude and/or heavy crude –along with up to 220,000 bbl/d of diluent to render the thick crudes pumpable.

Very little Canadian dilbit reached refineries on the Gulf Coast until the completion of debottlenecking projects in 2014 (Enbridge’s Flanagan South and Seaway Twin and TransCanada's Keystone Southern Leg pipelines) between the pipeline hub at Cushing OK and the Gulf Coast. Most Canadian production has been refined in the US mid-west.

Existing heavy/medium sour crude refining capacity on the Gulf Coast is mainly used by off-shore imports of Saudi Arab heavy, Mexican Maya, and Venezuelan medium/heavy crudes at about 22-27 oAPI and some eavy crudes at 16-17 oAPI. Much heavier Canadian bitumen and extra heavy crude (6-10 oAPI) dilbits and Cold Lake heavy crude (11 oAPI) dilbit are an order of magnitude more difficult to upgrade and refine economically and efficiently, especially at current oil prices.

One mechanism to achieve heavy/medium crude refining capacity for many refineries on the US Gulf Coast is blending heavy/medium crudes with light crudes. However, this is inefficient and impractical for blending large volumes of bitumen or extra heavy crude or heavy crudes from the Canadian deposits. Gulf Coast refineries equipped with cokers to handle imported heavy/medium sour crudes, and even the very small number of Gulf Coast refineries recently upgraded to process heavy sour crudes, are not properly equipped to efficiently process significant volumes of much heavier Canadian bitumen dilbit, or extra heavy crude and Cold Lake heavy crude dilbit without expensive and extensive process re-vamps.

For Americans the pressing need and priority on the Gulf Coast is not to increase dilbit or heavy/medium sour crude refining capacity but must be to re-vamp Gulf Coast refineries to handle record and still increasing production of US light shale crude. Shale crudes have exactly the opposite problem: high light ends content which also cannot satisfactorily be handled by existing refineries. Under current US law, most of that domestic light crude cannot be exported anywhere except to Canada –but there are no restrictions on exports of refined products.

Related: Keystone XL Saga Continues, Obama Threatens Veto

The bottom line is that most Canadian dilbit arriving at the Gulf Coast will be exported unrefined, and heavy/medium crudes refined and exported as products for years to come. Dilbit, especially bitumen-dilbit, extra heavy crude dilbit, and Cold Lake heavy crude dilbit, will not displace Saudi, Mexican, or Venezuelan heavy/medium crudes any time soon.

Keystone XL would provide about 2,000 temporary construction jobs over two years of construction and then approximately 50 permanent jobs running it –many of them in Canada. The oft-quoted figure of 42,000 additional indirect and induced jobs touted by proponents of Keystone XL is vastly overstated. Refineries on the Gulf Coast will either process heavy/medium sour crude from Mexico, Venezuela, and Saudi Arabia, or from Canada via Keystone XL –whichever is cheaper. Thus, Keystone XL provides no new refining jobs on the Gulf Coast.

So what are we left with? A few thousand extraction jobs for low-value raw bitumen and heavy crudes in Canada, very few permanent jobs in the US, little or no energy security for either the US or Canada, and a whole lot of pipeline and marine tanker risk conveying bitumen-dilbit and extra heavy crude-dilbit –neither of which are comparable to normal heavy/medium crude in any respect if spilled into water (just search for "A Dilbit and Bitumen Primer" on-line).

By Mike Priaro for Oilprice.com

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  • bob on January 16 2015 said:
    Why would anyone believe anything the presentiment of the US has to say. He is responsible for increasing the debt in the US to over 17 Trillion dollars. He is trying to crash the US economy. Why can't anyone see that. There will be no US dollar left if you follow him as your leader. Read up on him, type in New World Order into you-tube. You'll see him for who he really is.
  • Dano on January 16 2015 said:
    Trying to crash the US economy? What US are you talking about? Economy doing the best it has since...Clinton times? Have you looked at the Dow Jones lately? Unemployment levels? So no even better. Low oil prices, debt way below what it was when bush was around and NO MILITARY PERSSONEL ARE DYING IN COUNTRIES CONSISTING OF MOSTLY SAND! I havn't had to put the flag at half mast for some time. You are totally delusional bobby.
    As for the pipeline? BUILD IT. In the winter they can ship hot air to Canada and in the summer they can pump cold air south to Texas. LET THE ECONOMICS PLAY OUT. Right now it isn't worth it but never let economics get in the way of good old republican posturing...they are as the barking of mute dogs...keep it up.
  • Gordon Steingart on January 16 2015 said:
    I thought North Americans wanted Energy independence ?

    Refineries on the Gulf Coast can process heavy Canadian crude or heavy crude from Saudia Arabia and Venezuela so by arguing the pipeline is not economical or barely worthwhile .... is very short sighted....,considering that the true costs of oil from Canada comparably than from OPEC ,to the American Taxpayer ,...has never been revealed.

    Canada is our friendly neighbor to the North whose international interests are similar to our own. The real price tag for OPEC oil is never calculated , because the massive cost of the ongoing Military Industrial Complex ,which most certainly includes CRUDE, only makes that heavy crude from the Middle East and South America a slightly cheaper short term venture. Considering the new reality of both Canada and the U.S. working together to make themselves net exporters of Petroleum products is now at hand ,it startles me that the author is so vague in his description of ALL IN COSTS .

    The Keystone is an important ingredient for the energy independence and the military downsizing that is necessary to keep the USD reasonably sound. Our solvency , our freedoms and our intrinsic value as a nation, run by its people are in jeopardy of being permanently dictated to, by the segments of Corporate America and O.P.E.C. ,whose indifference to the plight of the common American are obvious, to anone who wants to take a closer look.

    The hapless Repulicans don't ever use good reason why the Keystone is so important ,which is why the author of this piece ,is able to tear down any hope for construction of the pipeline.
  • Bill Bondi on January 19 2015 said:
    The US should buy from Canada, what do we continue sending money to countries that don't even like us, Canada and the US have shared believes and stand together most of the time. Saudi and Venezuelan will use there money against us, and well Mexico sure why not. I trust the Canadian more than I trust the Saudis. Continue to put pressure on them.

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