Page 9 - NorthAmOil Week 25

NorthAmOil COMMENTARY NorthAmOil

Canadian takeaway capacity

constrains ease up

Having previously struggled with an oil takeaway capacity crunch,

Canada is seeing shipments via both pipeline and rail reduced as a

result of the downturn

NORTH AMERICA HAVING long struggled with a shortage of oil the Line 3 replacement and the Keystone XL
takeaway capacity, Western Canada’s producers pipeline – have been much vaunted as infra-
WHAT: are finally seeing the bottlenecks alleviated – but structure that would eventually come to the res-
Canadian takeaway not for the reasons they wanted. As a result of cue. However, regulatory and legal hurdles amid
capacity bottlenecks are the downturn that started in March, over 1mn local and environmental opposition to such pro-
easing. barrels per day (bpd) of Canadian production jects have slowed their development.
has been curtailed. This has freed up space on Earlier this year, the pipelines appeared to
WHY: oil pipelines, as well as hitting crude-by-rail be making sufficient progress to revive hopes
Low oil prices have shipments. of new takeaway capacity coming online soon.
forced production cuts, And with demand likely slow to recover as Then coronavirus (COVID-19) hit, and in some
freeing up space on the coronavirus (COVID-19) pandemic con- ways spare takeaway capacity now looks like
congested pipelines, as tinues to play out, it could be some time before more of a curse than a blessing. On the other
well as reducing demand pipelines fill again. Indeed, it is possible that one hand, though, it may have provided Canada’s oil
for rail shipments. of the major new pipelines currently under con- industry with some breathing space while the
struction could come online before then. new pipelines are being built – with these pro-
WHAT NEXT: Natural gas has not been hit as hard as oil, jects still vulnerable to further delays.
Curtailed volumes are but there are also trends at play that are leading The current situation diminishes the urgency
not expected to return to reduced exports of Canadian gas to the US. with which new pipelines are being developed –
rapidly, so more pipeline Western Canadian gas prices have risen above though given the money already sunk into them,
capacity could be online Henry Hub benchmark prices in the US in the projects’ operators are expected to proceed as
by the time output is recent months, causing shipments to the West- previously planned. However, as these new pipe-
restored. ern US to fall. lines start coming online, a combined 1.79mn
bpd of oil takeaway capacity will be added to the
Shipments down oil sands.
For crude in particular, reduced shipments mark The start dates for the new pipelines are still
a significant turnaround given that growth in uncertain, given the remaining regulatory hur-
Canada’s oil sands has been constrained by a lack dles that need to be overcome, as well as ongoing
of takeaway capacity in recent years. Major pipe- opposition. However, analysts currently expect
line projects – the Trans Mountain expansion, all three to be online by the end of 2023.

Week 25 25•June•2020 www. NEWSBASE .com P9