Page 10 - NorthAmOil Week 39

NorthAmOil COMMENTARY NorthAmOil

as saying the project would reduce Alaska’s costs after it has been brought into service.
of goods and services.
What next?
Oil transport route Against this backdrop of an increasingly difficult
In terms of oil in particular, Treadwell has esti- operating environment for oil pipelines, it is not
mated that the line could carry up to 2mn bar- surprising that alternatives such as rail routes
rels per day (bpd) from Alberta. From Alaska, are being considered more seriously. However,
the crude could be shipped on to Asia, and A2A Canadian crude-by-rail exports are currently at
estimates that taking the route through Alaska an eight-year low, having fallen to around 39,000
could reduce overall transport times to Asia by bpd in July from a previous eight-year low of
2-4 days. 42,820 bpd in June, while pipeline capacity that
However, taking the Alaska route could also was previously considered limited is accom-
entail higher transportation costs. If oil prices modating oil sands crude volumes more easily.
do not rise significantly by the time the railway The trajectory of takeaway capacity needs in the
line is complete, shippers may not favour a more coming years remains highly uncertain.
costly option, seeking instead to avoid cutting Complicating matters further is the fact
into margins as much as possible. that China has announced a target of net zero
But additional export routes may nonethe- emissions by 2060, suggesting that it will seek
less be necessary after the immense difficulties to transition away from dependence on fossil
Canadian pipeline operators have run into while fuels. If China is serious about this – and espe- Canadian crude-
trying to bring new projects online linking the cially if more Asian countries follow suit – Asian
oil sands to export markets. The Energy East demand for Canadian oil in the coming years will by-rail exports
and Northern Gateway pipeline proposals have be significantly lower than previously expected. are currently at
been scrapped outright, and while construction “At a time when California is banning
is now underway on the Trans Mountain expan- gas-powered cars and China is pledging to tran- an eight-year low,
sion, this is not now anticipated to be completed sition off fossil fuels, it’s hard to imagine a bigger
until the end of 2022. waste of money than building a rail line to move having fallen to
Indeed, given how tenacious pipeline oppo- oil trains over the melting permafrost,” a Green-
nents have been in recent years, further delays peace Canada senior energy strategist, Keith around 39,000
to the Trans Mountain expansion schedule Stewart, was quoted by Reuters as saying. bpd in July.
cannot be ruled out. Meanwhile, two pipelines Alberta is looking at using blue hydrogen –
that would carry Alberta crude to the US – the produced from natural gas in conjunction with
Line 3 replacement and the Keystone XL pro- carbon capture and storage (CCS) – to lower
jects – remain held up by regulatory and legal emissions from its oil sands. If this succeeds,
processes. It is uncertain when the issues hold- it may yet allow production of the resource to
ing these projects back from proceeding will expand, and additional takeaway capacity would
be resolved. And a separate case involving the still be required. For now, however, it seems
Dakota Access pipeline threatens to set a prec- more likely that the railway line – assuming it is
edent of permits for existing pipelines being built – will primarily be used to transport other
overturned, which would mean that no pipeline goods, only carrying oil as a last resort when
project is entirely safe from being blocked even other options are restricted.™

P10 www. NEWSBASE .com Week 39 01•October•2020