CALGARY — A University of Calgary report warns that the Canadian economy will lose out if oilsands crude remains landlocked because new pipeline capacity isn’t built to coastal waters.
Improved access to international markets could add as much as $131 billion to Canada’s gross domestic product between 2016 and 2030, the researchers estimate. That could mean $27 billion more in federal, provincial and municipal tax receipts.
But environmental groups have been fighting pipeline projects as part of a wider battle against “dirty” crude from the oilsands and regulatory delays have put some proposed projects — like the Keystone XL pipeline to U.S. Gulf Coast refineries and the Northern Gateway pipeline to the Pacific coast — in limbo.
“The rewards of additional pipelines for all of Canada are too great to ignore,” said report co-author Michal Moore. “Pipelines must be a national priority.”
Heavy crude from the oilsands takes a lot of work to process and has a long way to travel to U.S. refineries that can handle it, said Moore. It’s that characteristic that already makes it trade at a discount to the U.S. benchmark West Texas Intermediate.
WTI, in turn, has been lagging international crude benchmarks like North Sea Brent because there is a big supply glut at Cushing, Okla., a massive storage hub that has become a major choke point.
“In a sense, you can say that we are doubly discounted from what is available on the world market,” Moore told reporters.
“In essence, you might imagine that what we’ve done is to ask Canadian producers to play tennis with one foot in a bucket.”
TransCanada Corp. (TSX:TRP) and Enbridge Inc. (TSX:ENB) are looking to relieve the bottleneck at Cucking through initiatives like Keystone XL and the Seaway pipeline reversal, respectively.
Enbridge also wants to connect oilsands crude to Asian markets through its $5.5-billion Northern Gateway proposal, which would run from Alberta to the West Coast port of Kitimat, B.C.
The oil would then be loaded on tankers and shipped overseas, where the University of Calgary researchers estimate a barrel of Canadian crude will be able to fetch up to $14 more in 2030.
But Northern Gateway’s fate is far from certain. Some 130 First Nations groups have expressed opposition to the project and B.C. residents are generally wary of tanker traffic in coastal waters. The regulatory process will take a year longer than expected because of the sheer volume of people scheduled to speak at hearings that begin in the new year.
A report from the environmental group Greenpeace released earlier this week said uncertainty around pipeline projects should make investors think twice about putting their money in oilsands companies.
“Currently accessible markets for tar sands crude oil are becoming saturated and pipeline projects that would enable penetration of new markets are facing unprecedented delay and possible failure,” the report said.
“It is the timely development of midstream infrastructure that could be the undoing of the industry’s lofty ambitions.”