WhatFinger


Alberta Oil Sands, Keystone XL pipeline expansion, Enbridge Northern Gateway

Get Those Pipeline Deals Moving



Golda Meir’s only gripe with Moses was that “he took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil.” Perhaps Moses should have gone to Canada. Canada’s Gross Domestic Product doubled between 2002 and 2010, and from 2008 to the end of 2011, inflation-adjusted economic output grew 2.8% in Canada vs. 1.7% in the United States.
The main reason is oil. The Alberta Oil Sands are the world’s third largest crude reserves (behind only Venezuela and Saudi Arabia), but the largest open to private investment. In 2006, the Alberta tar-sands accounted 1.25 million barrels of oil per day, around half of all Canadian output. However, a 2011 National Energy Board Report estimated that production from northern Alberta will rise to 5.1 million barrels per day within the next two decades. American refiners are Canada’s only foreign buyers, and the shale-oil boom in North Dakota has forced Canadian producers to agree to steeper and steeper discounts to move oil south. The Bank of Canada estimates that the transportation bottleneck will shave .4% off of Canada’s 3rd and 4th quarter GDP, which will slow the rest of the economy. Calgary real-estate board chief economist Ann-Marie Lurie told the Wall Street Journal recently that “If we don’t get certain oil pipeline expansions, if companies slow projects, this will impact employment.” Most North Dakota oil winds up at America’s largest storage hub in Cushing Oklahoma, which is jammed. As a result, Alberta’s largest producer Suncor has shelved plans to expand production because of the increased traffic at Cushing and other hubs. “We have too much light, effectively sweet, crude,” said Suncor Chief Executive Steve Williams.

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The best solution is Trans-Canada Corporation’s proposed Keystone XL pipeline expansion, which would ultimately link the Alberta sands with the Gulf Coast. Unfortunately, this is unlikely to happen anytime soon. This is why the oil needs to go west. The most promising (and crucial) pipeline being proposed within Canada is the Enbridge Northern Gateway project, which would run from Bruderheim Alberta to Kitimat in British Columbia. The port of Kitimat is a “full day closer to Asia than ports in southern British Columbia,” according to its website. If completed, Enbridge Northern could carry roughly 525,000 barrels of oil per day, or 225,000 barrels more than the busy Kinder-Morgan Trans Mountain route (which stretches from Edmonton to Vancouver). Also, a recent study conducted by Navigant Research shows promising potential for a new refinery in Kitimat, which could process 550,000 barrels of Alberta dilbit. British Columbia Premier Christy Clark called it “the largest single private-sector investment in the history of our great province.” Canada has a long, rich history of getting things done. Booming economies in China, Hong Kong and Singapore are in need of oil. “If Canada builds its pipelines to the west and sells its products to Asian buyers, that is a plus for us,” posted Interop CEO Robert S. Stewart at Mining.com. “But B.C. and Alberta better get those pipeline deals moving, or U.S. producers will start exporting to those markets too. Canada cannot be caught napping again. Global markets are responding fast to major energy shifts and initiatives. If Canada blows this, we may as well pull the covers over our heads and forget we are alive. There is no one else to blame.” The most embarrassing part of this for America is that Canada has bent over backwards to help. Completing the long-delayed Keystone XL project would be best for both countries right now, and everybody knows it. Alberta Premier Alison Redford has been down here six times in the past year to push for approval of Keystone, but the Obama Administration will have none of it. “As a North American energy economy, we need to be accountable to each other,” says Ms. Redford. Sorry, Ms. Redford, America has let you down. This is why the Enbridge Northern Gateway needs to get done.


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Anthony J. Tarquinto -- Bio and Archives

Anthony J. Tarquinto is an independent financial adviser based in Aliso Viejo California. Anthony is the author of “The Real 40 Year-Old Virgin of Orange County.” (Xlibris 2010) which is available at Google Books.


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