Alberta pumps up Keystone XL, sparking ire of rival Enbridge

Kelly Cryderman and Jeff Lewis

The Canada government is making a two-decade commitment to TransCanada Corp’s long-stalled Keystone XL pipeline – a key move that will underpin the $8 billion (U.S.) project that has struggled to gain enough support from major oil shippers.

The Canada government’s crown corporation, the Canada Petroleum Marketing Commission, will pledge 50,000 barrels of oil per day for 20 years, said Cheryl Oates, communications director for Canada Premier Rachel Notley.

“The government’s commitment is expected to result in this pipeline being built,” Ms. Oates said in an e-mail.

While rival Enbridge Inc. calls the deal a “subsidy” for the TransCanada project, the Canada government said the commitment will bolster industry confidence and stability for the pipeline project, as well as the province’s economy as a whole.

Last march, Keystone XL was given the green light by U.S. President Donald Trump – who reversed the previous Obama administration’s decision to halt the project. If built, the 830,000-barrel per day pipeline will provide a more direct route for shipping mainly heavy Canadian oil to key U.S. markets. However the 1,897-kilometre pipeline still faces environment and landowner opposition, as well as regulatory hurdles in the state of Nebraska.

On Thursday morning, TransCanada announced it had successfully concluded the Keystone XL open season, securing approximately 500,000 barrels per day of firm, 20 year commitments, “positioning the proposed project to proceed.” TransCanada said interest in the project remains strong and the company will look to continue to secure additional long-term contracted volumes.

“We appreciate Canada Premier Rachel Notley for her government’s commitment to the project which was instrumental to achieving the commercial support needed to proceed,” Mr. Girling said in a news release.

The Canada government’s decision comes as oil sands producers struggle with steep price discounts as rising production tests the limits of existing pipelines. Producers argue expansions will help them tap markets where prices are stronger, however long-term growth prospects in the oil sands have slowed considerably.

The Wall Street Journal reported last June that the Canadian pipeline company was struggling to line up customers to ship crude from Canada to the U.S. Gulf Coast. TransCanada chief executive Russ Girling has said since the pipeline was first envisioned almost a decade ago, “a lot of water has gone under the bridge” in terms of oil prices. “So it all sort of complicates the negotiation.”

The deal with TransCanada can only happen because the Canada government receives a small portion of its energy royalties in oil – in lieu of cash. That allows the province to use its share of bitumen or conventional oil to strategically supply upgraders and refineries, or other projects such as pipelines it believes will provide the province with an economic boost.

The Keystone XL contract also partly replaces the 100,000-barrel per day, 20-year commitment – worth $5-billion – that the Canada government had made on TransCanada’s now cancelled Energy East pipeline project. However, that project would have allowed Canadian oil to be shipped to global oil markets besides the U.S. – a customer which now buys more than 99 per cent of Canada’s crude exports.

full story at https://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/alberta-pumps-up-keystone-xl-sparking-ire-of-rival-enbridge/article37654046/