CALGARY — Western Canada’s oil producers will likely cope better with Joe Biden’s cancelling of the Keystone XL presidential permit than they did with the same move by ex-president Barack Obama in 2015, an industry analyst says.
But Phil Skolnick, a New York-based analyst for Eight Capital, agreed with other observers that the end of the pipeline will stifle investment and production growth for years in the Canadian oilpatch.
Shortly after being inaugurated on Wednesday, President Biden, who was Obama’s vice-president, fulfilled a campaign promise and again took away the pipeline permit that former president Donald Trump gave back to builder TC Energy Corp. in 2019.
The difference between now and five years ago is that producers have two promising alternative pipelines — the Line 3 replacement and the Trans Mountain expansion, together providing nearly one million barrels a day of export capacity — to pin their hopes on, said Skolnick.
And, he added, after more than five years of poor oil prices and a lack of access to capital markets to raise money, their expectations for growing their oil production have been greatly diminished.
“It was worse when it happened in 2015 .. that was bad back then because we didn’t have the big rail buildout and we really didn’t have Line 3, no one really knew about that,” said Skolnick.
“This is bad because (the government of) Alberta spent the money on it but, looking through the lens of the producers, not as big of a deal as some people might think.”
Incremental capacity additions to pipelines, technology that makes oil transport more efficient and crude-by-rail capacity that hit a record of 412,000 bpd last February mean the system will be “pipe neutral” — with capacity matching demand — in the first half of this year, he said.
TC Energy approved spending US$8 billion in the spring of 2020 to complete Keystone XL after the Alberta government agreed to invest about US$1.1 billion (C$1.5 billion) as equity and guaranteed a US$4.2-billion project loan.
Alberta Premier Jason Kenney has said the province has about $1 billion at risk if the project is killed.
The 1,947-kilometre pipeline is designed to carry 830,000 barrels a day of crude oil from Hardisty, Alta., to Steele City, Neb., where it connects with the company’s existing facilities to reach the U.S. Gulf Coast refining centre.