Tighter supply and quickly falling…
Both fundamentals and technical indicators…
Obama’s decision on the Keystone XL pipeline will have a far greater effect on Canada’s oilsands than TransCanada believes, according to the Canadian Association of Petroleum Producers.
Due to the constant delays in the build up to receiving a decision on the approval of the Keystone XL pipeline that will carry bitumen from Alberta to refineries on the Gulf Coast, TransCanada invested in other projects in order to spread its risk and reduce the importance of the pipeline from accounting for 32% of all its future projects to just 14%.
By spreading its risk over more projects, TransCanada has protected itself from the possibility that Obama will decline a permit for the Keystone XL, however there are many other Canadian oil companies that are still heavily relying on the project. Canadian Natural Resources Ltd., has already booked to transport 120,000 barrels a day of its crude along the pipeline, and in order to supply this volume it intends to increase production by 14% by next year. Suncor Energy Inc. also plans to increase production by 10% as it looks to send oil along the pipe, and Imperial Oil Ltd. is another expecting to expand production because of the increased export capacity offered by Keystone XL.
Related article: Is a final Decision on Keystone XL Close at Hand?
John Stephenson, from First Asset Investment Management Inc., explained that Keystone XL has actually become far more important to many other companies than it is to TransCanada. Basically Keystone XL is integral to the general expansion of Canada’s oilsands, as it will offer a direct route to the world market, creating far more demand.
Initially the US State Department suggested that Canada’s oilsands will make it to market regardless of the decision, thanks to the increasing transport capacity offered by rail, but Reuters completed a study that shows rail will unlikely be able to replace the 830,000 barrel a day capacity that the pipeline offers.
The Canadian Association of Petroleum Producers even went as far as to claim that if the Keystone XL pipeline is not built then production from Canada’s oilsands could fall by as much as half, compared to the predicted growth.
By. James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…