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.
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.
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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