Page 4 - NorthAmOil Week 44

NorthAmOil COMMENTARY NorthAmOil
Keystone spill puts more
pressure on Alberta producers,
new pipelines
An outage on the Keystone pipeline system has put more pressure on Alberta’s producers, as well as on operator TC Energy as it tries to win final approval for its Keystone XL expansion, writes Anna Kachkova
NORTH AMERICA
WHAT:
Alberta’s crude producers and pipeline developers are facing yet more pressure.
WHY:
An outage on the Keystone pipeline has backed up barrels in the province and led to renewed concerns over the impact of oil spills.
WHAT NEXT:
Operators will soon be allowed to produce more crude if they ship it out by rail.
ALBERTA’S producers – already under pres- sure from provincial output curtailments and low crude prices – received a further blow when the Keystone pipeline was taken offline last week following an oil spill. The 590,000 barrel per day (bpd) Keystone is a key pipeline for carrying Alberta crude to the US Midwest, and on to the Gulf Coast via connecting systems.
The outage is thus causing barrels to back up in Alberta – a region that is already struggling with a lack of takeaway capacity that is weighing on regional crude prices. With no restart date yet given for Keystone by operator TC Energy, the differential between Western Canadian Select (WCS) and West Texas Intermediate (WTI) futures widened to $19 per barrel on October 31. By November 4, WCS for December delivery in Hardisty, Alberta, was trading at $22.35 per bar- rel below WTI, according to oil brokerage Net Energy Exchange. This is the widest differential between the two grades.
Problems in the pipeline
An estimated 9,120 barrels of oil were spilled from Keystone near Edinburg, North Dakota. By November 4, the source of the leak had still not been identified. Clean-up and remediation work involving about 200 personnel is continuing at the site. About 4,300 barrels of the oil that was spilled had been recovered as of November 4.
TC Energy expects to expose and extract the damaged section of pipe by the end of this week, with it then being sent to a government-ap- proved laboratory for inspection.
Sources familiar with the matter told Reuters on October 31 that TC Energy was also being forced to operate its Marketlink pipeline – which is connected to the Keystone system at Cushing, Oklahoma – at reduced rates. According to one source, the 750,000 bpd pipeline was operating at about 190,000 bpd that day.
The spill is the third along the pipeline’s route in less than three years and causes further head- aches for pipeline operators trying to ensure new project proposals are approved. Height- ened concerns over the impact of oil spills from pipelines are likely to result in increased local and environmental opposition that could cause additional delays to the approval process for each new project.
Indeed, this is a particular problem for TC Energy itself as the company waits for the final go-ahead for its Keystone XL pipeline – an expansion of the existing Keystone system. The project has experienced extensive delays since it was first proposed in 2008. It was even rejected by former US President Barack Obama before being approved by his successor, Donald Trump, in 2017.
This was not the end of regulatory and legal
hurdles for the project, however. In late 2018, a The outage is
US district judge, Brian Morris, blocked con- struction on Keystone XL until the Department of State (DoS) carried out further study of the project’s environmental impacts.
Trump issued a new presidential permit for
the pipeline in March, thought a legal challenge
has been brought against the move, and Morris is region that is expected to issue a ruling on this latest complaint
this month. And there may be other legal and
regulatory challenges against various aspects of
Keystone XL that will contribute to additional
delays. Indeed, opponents of the project in South
Dakota are using the latest spill in North Dakota
to bolster their case as they contest a number of capacity. state water permits for the pipeline. The meet-
ings involved in the process have been extended
into next month.
What next?
While the spill could have longer-term impli- cations for TC Energy if the challenge against
thus causing barrels to back up in Alberta – a
already struggling with a lack
of takeaway
P4
w w w . N E W S B A S E . c o m Week 44 05•November•2019