Page 5 - NorthAmOil Week 37
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NorthAmOil COMMENTARY NorthAmOil
as the “most secure major source of energy” in the world in the wake of the Saudi outage. Indeed, a Scotiabank commodity economist, Rory Johnston, agreed that the incident could revive US interest in Canadian oil as security of supply becomes a greater priority. And the refin- ing hub on the US Gulf Coast is primarily geared at processing heavier crude grades, adding to Canada’s attractiveness as a source of supply.
“Historically, we’ve seen more of the senti- ment toward the Canadian oil sector as being couched in terms of oil security, which as a con- cept has kind of fallen by the wayside,” Johnston said. “This will likely raise that energy security narrative back to the forefront of public dis- cussion, which all else equal, should benefit the Canadian oil patch as a source of secure supply – politically secure and right next door to the United States.”
If such a shift in the narrative occurs, this could add to the impetus to build the Keystone XL pipeline after long delays. However, while the US may come to see additional pipeline capacity as more of a priority in the wake of the Saudi attack, legal proceedings holding up new pipeline projects are not anticipated to move any faster.
Looking to rail
The Line 3 pipeline replacement from Canada to the US is not expected to enter service until around late 2020 or early 2021. Meanwhile, a revised start-up date for Keystone XL has yet to be provided as operator TC Energy, formerly TransCanada, navigates the remaining hurdles
holding up the project. Progress on sending Alberta crude to Canada’s West Coast for export to Asia is equally slow, with the Trans Mountain expansion project now anticipated to be oper- ational by mid-2022. That project also has the potential to be held up further by local and envi- ronmental opposition. It is thus not surprising that attention is increasingly turning to rail in the short term.
Kenney said this week that under the right circumstances, Alberta’s producers could be shipping over 300,000 bpd of crude by rail, up from around 150,000 bpd currently. The prov- ince’s total crude-by-rail shipping capacity is about 500,000 bpd.
In October, Alberta’s oil production will be allowed to rise slightly to 3.79mn bpd, from 3.76mn bpd currently. The move to allow exemptions for crude-by-rail shipments is one that some of the province’s largest producers, including Canadian Natural Resources Ltd (CNRL) and Suncor Energy, have been pushing for.
Despite the difficult economic environment that Alberta’s producers have been operating in throughout recent years, they will now benefit if the rise in oil prices prompted by the Saudi out- age is prolonged. And if the Alberta government does allow extra barrels to be produced if they are shipped out by rail, it would not be surprising if producers seek to make the most of this. The full impact of the Saudi outage is still unclear as the situation plays out, but in Alberta, a push for more crude-by-rail shipments could be coming as Canadian oil gains favour once again.
Kenney said this week that under the right circumstances, Alberta’s producers could be shipping over 300,000 bpd of crude by rail.
Week 37 17•September•2019 w w w . N E W S B A S E . c o m
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