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Does Canada Need More Oil Sands Pipelines?

The claim that building more pipelines to carry Canada’s oil sands production to ports for export will unlock significantly higher prices for bitumen is not supported by either past or current market conditions, a new study shows.

According to Jeff Rubin, senior fellow at the Centre for International Governance Innovation, overseas markets pay even lower prices for bitumen than in North America, so there is no economic case for additional pipeline capacity to tidewater or expanded oil sands production.

In his report, Rubin says that global agreements to reduce global carbon emissions over the next three decades will also reduce the size of future oil markets, not to mention the emerging push for electric vehicles.

CIGI argues that there is no economic case for additional pipeline capacity to tidewater or expanded oil sands production.

As expected, the government of the province of Alberta, Canada’s oil sands production central, disagrees.

“It has never been more important for us to get new pipelines built,” Premier Rachel Notley said Thursday at the ribbon-cutting ceremony for a $1.6 billion expansion project led by Japan Canada Oil Sands.

She said she believed that more pipelines are needed to tap deeper into the growing Asian economies. Currently, about half of Canada’s oil exports are destined to the U.S., but the country is working on breaking the land lock condition and so expand its shipments to new markets. Related: Just How Big Is The Oil Market?

Another study released by the International Energy Agency (IEA) stresses the need to find alternative ways to channel oil sands production towards new markets.

In its monthly oil report released Wednesday, the Paris-based agency says Canada’s oil output could edge closer to the 5 million barrel-per-day milestone next year.

The country’s total oil production is predicted to increase by 290,000 bpd this year, and by another 200,000 bpd in 2018 to reach 4.95 million bpd, and could surpass 5 million bpd in the second half of the year.

Canada’s oil sands output has increased in recent year as projects that were commissioned years ago have come online. And if the momentum continues, the IEA says, the nation could displace Iraq as the world’s fourth largest producer after the U.S., Russia and Saudi Arabia.

Alberta’s oil sands hold the world’s third-largest crude reserves, but they are also among the most expensive operations due to their remote location and energy-intensive production methods.

By Mining.com

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Leave a comment
  • Glenn on September 18 2017 said:
    Jeff Rubin! Now there's a contrarian call if I ever saw one. If only you could just put a bet on this. Rubin was never right about the direction of oil prices or any other commodity or equity. I've rarely seen someone so consistently wrong.
  • Refman on September 18 2017 said:
    If you are maxed out on existing pipeline capacity, and your only option is rail then you probably only have 2 other options.
    1) Build more pipeline capacity which should save you around $5/barrel in transportation costs versus rail.
    2) Build a refinery in the oil sands and only have to worry about transporting products.
  • Luis on September 18 2017 said:
    Canada needs pipelines yesterday.
    It is hindered potential here. We don't currently have have the rail capacity and importing in the east.We are too reliant exporting only to the states which now sells our product to Asia.
    Not all oil is used for transportation.
    Look at Norway, highest per capita electric vehicles, and still increased consumption year over year.
  • jarod thompson on September 19 2017 said:
    http://www.cbc.ca/1.4277320 no need for pipelines if they make bitumen pellets.

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