Canada to lose billions more from pipeline woes, CIBC says as it backs Keystone

Canada to lose billions more from pipeline woes, CIBC says as it backs Keystone
Michael Babad
The Globe and Mail
Published Wednesday, Apr. 03 2013, 7:53 AM EDT
Last updated Wednesday, Apr. 03 2013, 1:14 PM EDT
The pipeline cost
Canada stands to lose out on more than $50-billion over a three-year period because of oil pipeline constraints, one of the country’s major banks projected today as it urged President Barack Obama to approve the controversial Keystone XL project.
That figure from CIBC World Markets represents lost opportunities, in terms of producer revenues and government royalties.
Economist Peter Buchanan forecasts that this “money left on the table” will be about $20-billion this year, $15.2-billion in 2014 and $16.5-billion a year later.
That assumes a certain spread between the price of Western Canadian oil to that of the U.S. benchmark, West Texas Intermediate, which has narrowed of late, and the spread of WTI to Brent crude.
Pipeline constraints are well documented, particularly as U.S. production ramps up, and they’re costing Canadian oil companies and governments dearly.
“As opposed to earlier hopes for a ‘quick fix’ to bottlenecks, pipeline capacity will likely struggle for years to match aggressive supply growth on both sides of the Canada-U.S. border,” Mr. Buchanan said.
The costs to Canada aren’t “quite so crippling as last winter, but still equal to nearly 5 per cent of the GDP of Canada’s two largest oil-producing provinces.”
In a separate report, Mr. Buchanan’s colleague, chief economist Avery Shenfeld, called for approval of the Keystone XL pipeline, which would transport bitumen to the Gulf Coast of Texas, and which is hugely controversial in the United States and has already been rejected once, forcing TransCanada Corp. to propose rerouting it.
“There will be a sigh of relief if President Obama is able to put aside mere symbolism and approve a project that will have no material bearing on global climate, particularly relative to what America could do if it took its own coal appetite seriously,” Mr. Shenfeld said.
Mr. Shenfeld cited several issues for Canada’s oil patch, including the dramatic increase in shale oil production in the United States and the “growing list” of oil-producing nations that remain open to foreigners.
Remember, Canada has slapped new restrictions on foreigners in the oil sands.
“The policy implication for Canada is that while Ottawa has imposed some new restraints on oil sands activity by foreign state-owned enterprise, other measures on the policy dial may have to move the other way,” Mr. Shenfeld said.
“With more competition for investor dollars, deficit-fighting federal and provincial governments may have less room to manoeuvre in setting taxes and royalties than was earlier the case. Both pipelines and reasonable royalties will be critical to avoid killing the black-gold goose.”

Canada to lose billions more from pipeline woes, CIBC says as it backs Keystone Oil & Gas  Oil Pipelines   via Prosperity Saskatchewan

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