• 6 minutes Will the trade war hurt US project builds? Not if the US does it right.
  • 12 minutes OIl Targets from Experts to $300, vs. imho $52
  • 18 minutes Oil prices going down
  • 19 hours U.S. Challenges 5 WTO Members imposing Illegal Tariffs Against U.S. Products
  • 5 hours Chile Becomes The Latest Country To Commit To 100% Renewables
  • 16 hours Germany: We Can No Longer Fully Rely On U.S. White House
  • 14 hours Well from $74 we hit 67.xx now what?
  • 12 hours Venezuela, the largest oil reserve in the world, faces deep shortages of motor oil
  • 4 hours Does S Arabia Have 2 Mln Barrels in Spare Capacity?
  • 1 hour Chartist predicting a $1 fall, after WTI drops $10
  • 11 hours Where 3 Million Electric Vehicle Batteries Will Go When They Retire?
  • 16 hours Trade War of 1930s, Extended the Great Depression
  • 12 hours Rio Tinto Says $4-Million Goodbye to Coal
  • 20 hours Is Libya the current Iran for oil markets?
  • 19 hours Iran's President Warns Over U.S. Push For Countries To Stop Buying Oil From Iran
  • 19 hours Total Trade War: U.S. Threatens Tariffs On $200 BN of China Goods
  • 19 hours Apple's $300 fund in China
  • 16 hours Kaplan Says Rising Oil Prices Won't Hurt US Economy
Alt Text

The Most Overlooked Renewable Energy Source

Hydrogen energy has been out…

Alt Text

Oil Markets Look Forward To A Quiet Hurricane Season

After a disastrous hurricane season…

Alt Text

The Permian Banks On These Key Pipelines

Analysts believe that the WTI…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

Canada’s Oil Crisis Is Far From Over

Pipeline

Canada has vowed to build the Trans Mountain Expansion project in order to move more oil out of the country, but a lot of hurdles remain.

In May, the Canadian government agreed to pay Kinder Morgan $3.5 billion for the existing Trans Mountain line, plus the proposed expansion project. The decision by Kinder Morgan to sell the project, plus the uncertainty surrounding the takeover by the Canadian government, will almost certainly push back the start date for the pipeline until 2021 at least.

"Pipeline construction is a seasonal activity during summer to the fall [June to August] in Western Canada and failure to start work on the main infrastructure works will also drive up expansion costs," Chris Bloomer, president of the Canadian Energy Pipeline Association, told S&P Global Platts.

The extraordinary intervention from the government demonstrates how desperate Prime Minister Justin Trudeau and Alberta’s oil industry are in their mission to build more pipeline capacity. Canada’s pipelines are at full capacity, which means that even “minor events can prompt significant volatility” in the prices that Canadian oil producers can fetch when selling their oil, Scotiabank said in a note.

Western Canada Select (WCS) has been trading at an enormous discount relative to WTI, which in turn is trading at its own discount to Brent crude. WCS is $18 per barrel below WTI, and nearly $30 per barrel below Brent.

Kinder Morgan’s threat to permanently scrap the project was a “near-death” experience for the federal government, former TransCanada executive Dennis McConaghy said at the Global Petroleum Show last week, according to S&P Global Platts. The cancellation of the Trans Mountain Expansion would have essentially led to permanent discounts for WCS. Related: OPEC Meeting Could End Without Decision

Even with the government rescue, it won’t be smooth sailing for the Trans Mountain Expansion. Kinder Morgan was recently upgraded by Wells Fargo after it sold off the project to the Canadian government, evidence that Wall Street thinks the pipeline was not good for shareholders. The bank said that the sale of the embattled pipeline removed an overhang of uncertainty while also providing a jolt of cash for the company.

It remains to be seen how quickly the Trans Mountain Expansion progresses, but the fortunes of Canada’s oil industry hang in the balance. Pipeline projects like Trans Mountain Expansion and Keystone XL won’t be completed until “early next decade” under the “rosiest outlook,” according to a recent note from Scotiabank. The Canadian government intends to place the project under a crown corporation, which will then build the project for around C$7.4 billion before selling back to the private sector, Scotiabank says.

Meanwhile, the most likely pipeline project to move forward is Enbridge’s Line 3 replacement, which overhauls an existing line that is aging and in need of repair and operates well below capacity. The pipeline runs from Alberta to Minnesota and Wisconsin, servicing Midwest refineries. The replacement would more than double the existing throughput to 915,000 bpd, up from just 390,000 bpd currently.

However, the project still needs approval from Minnesota regulators, which began deliberations on Monday and are expected to wrap up next week. Because of the public outcry over Keystone XL and the Trans Mountain Expansion, which played major roles in adding years of delays in both projects, Enbridge is trying to downplay the significance of what it is trying to do. Related: Permian Discount Could Rise To $20 Per Barrel

“The biggest issue here is we have a critical piece of infrastructure that needs to be replaced,” Al Monaco, CEO of Enbridge, told the Star Tribune. “It’s just like we would replace a road, a bridge, a transmission line, a power plant.” But, just like Keystone XL and Trans Mountain, the communities that lie in the project’s path argue the project poses a threat to water quality, in addition to other environmental damage.

If the project is approved, environmental groups and indigenous communities promise a rerun of the Dakota Access protests that received worldwide attention two years ago. “It will be more than that,” said Winona LaDuke, head of Honor the Earth, a Minnesota-based indigenous environmental activist group, according to the Star Tribune. “I am welcoming water protectors across the world to come to Minnesota this summer.”

The Line 3 won’t begin operations until the end of 2019 at the very earliest, but any delays – whether from permitting, protests or any other reason – would push the start date into 2020 at least.

The Canadian government bailed out the Trans Mountain Expansion project, but Alberta’s pipeline woes are not going away anytime soon.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment
  • John Brown on June 21 2018 said:
    Trudeau is a fanatical Global Warmist. That’s no secret. He always intended to kill as much of the Canadian oil & gas industry as he could. He’s succeeding nicely. The Trans Mountain Project is now 2021. What a surprise! My guess is that date will slip than slip some more. As long a Justin is PM there will always be something holding it up. I’m truly proud of the enormous financial sacrifices the Canadian people are making. Killing high paying jobs & lowering their standards of living to help the planet save .oo1% of a degree is impressive!
  • Mike Kom on June 21 2018 said:
    I'm pro-oil, but I love that the oil sector is suffering in Canada. It means that Brooks, Alberta is suffering. As much as I'm pro-oil, I'm more pro-hate Brooks. The stupidest people and most corrupt local government in the Prov nice. I call it the Armpit Of Alberta.
  • Rick on June 21 2018 said:
    “The extraordinary intervention from the government demonstrates how desperate Prime Minister Justin Trudeau and Alberta’s oil industry are in their mission to build more pipeline capacity.”

    Do the progressive pretty boy’s co-signers from the Paris Accord know this?

    Probably says one thing to his overlords in Europe and another thing to the business interests who actually pay the bills in Western Canada.

    Two faced little twerp.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News