US pipeline delay may spur moves to ship Canadian crude to Asia

11 November 2011 19:28  [Source: ICIS news]

TORONTO (ICIS)--The US government’s move this week to delay a final decision on TransCanada's proposed Keystone XL pipeline project to 2013 could spur efforts to ship Canadian oil to markets in Asia and elsewhere, officials said on Friday.

“Canada should be looking at alternatives, and maybe this [US delay] will put a fire under some of the alternatives, such as shipping oil west [to Asia] rather than just shipping it south [to the US],” John Stephenson, portfolio manager at Toronto-based First Asset Investment Management, said in a media briefing.

Stephenson said Canada was on the way to become an “oil superpower” and as such should promote oil export projects.

Meanwhile, Canadian finance minister Jim Flaherty told media he was not sure that Keystone XL will survive a delay until 2013.

Rather, the US move may mean that Canada will have to move quickly on ways to export its oil to Asia through its western British Columbia province, Flaherty said.

The proposed 2,800-mile Keystone XL pipeline project to ship oil from Canada’s Alberta province to refiners on the US Gulf coast has been under study by US officials since 2008.

However, the US Department of State said on Thursday it “determined that it needs to undertake an in-depth assessment of potential alternative routes” that the pipeline would take across US territory, thus making a final decision before 2013 unlikely.

Canada’s federal government and the Alberta provincial government were heavily involved in lobbying efforts for Keystone’s approval in the US.

First Asset’s Stephenson said the US decision to delay the pipeline will have a “huge impact” on Canadian oil sands producers and their investment projects in Alberta.

However, oil sands major Suncor may benefit as it has refining assets in Alberta and as such can process oil sands locally. Suncor acquired the assets when it took over Petro-Canada in 2009.

Brenda Kenny, CEO of industry group Canadian Energy Pipeline Association (CEPA), said the US move seemed to be “based on emotion”, rather than evidence.

“The rational approach would say this is a good project, Canadian trade with the US is something that’s good for both countries, and [the project] should proceed,” Kenny said.

“This is a project with very limited [environmental] impact, and the route that has been selected is the best route,” she added.

Political observers said a decision by the White House to approve or deny final authorisation for the Keystone XL pipeline would have alienated either the environmentalists or the unions at a time when President Barack Obama is facing a tough re-election bid in 2012.

Meanwhile, in Canada, pipeline firm Enbridge has proposed a project, called Northern Gateway, to ship oil from Alberta to an export terminal at Kitimat in British Columbia.

By: Stefan Baumgarten
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