Canada’s Prime Minister Stephen Harper has declared that United States government approval of Keystone XL is “inevitable.”
Meanwhile, oil sands giant Suncor Energy has sent its first shipment of crude bitumen to Europe, pointing to a new outlet for production from the Alberta oil sands and Bakken formation.
On the surface, these two developments might be viewed as a dose of good news for TransCanada, the operator of the Keystone pipeline system and the frontrunner in the race to deliver Western Canadian heavy crude to tanker terminals in Quebec and New Brunswick which are seen as the doorways to Europe.
But as fast as TransCanada regained traction in its drive to liberate landlocked Western Canadian crude more obstacles get tossed in its path, including a court ruling that sidetracked its Quebec plans.
Harper and the US
On the XL front, Harper told business executives in New York on Sept. 23 that the U.S. will ratify XL, then ducked speculation on “timelines.”
What he didn’t get was any hint of encouragement from President Barack Obama when both leaders were in New York at the same time to deliver speeches to the United Nations General Assembly.
Although Canada has joined other countries in the United States-led assault on Islamic State militants in Iraq and Syria, which some observers believe gave Harper a chance to ease chilly relations between the two leaders, the State Department has suspended its review of XL pending the outcome of a court challenge of the pipeline in Nebraska, and Obama has stopped even commenting on the project.
Harper, despite his earlier bellicose comments that approval of XL is a “no-brainer,” has retreated from voicing frustration with the length of time being taken by the U.S. administration to decide whether XL can go ahead or not, preferring instead to take the high road and salute the strong overall economic ties between Canada and the U.S.
In his New York speech he confined himself to suggesting that “eventual approval (of XL) under the right circumstances is inevitable.”
He said the need for the pipeline has not vanished despite rapid growth in U.S. oil and natural gas production which Canada “views as a good thing (although) American self-sufficiency is a long way off.”
With the U.S. debate over XL entering its sixth year, and Enbridge’s Northern Gateway pipeline stalled, oil sands producers are turning their attention to Europe and pinning their hopes on TransCanada’s 1.1 million barrels per day Energy East project.
Canada’s export options
Suncor disclosed it has shipped its first batch of crude to Europe by loading a tanker at a terminal near Montreal on the St. Lawrence River.
The company would not say how much crude was delivered by rail to the terminal, whether it all came from Suncor operations, or where the tanker was heading.
A Bloomberg report estimated the tanker was carrying 600,000 barrels of Western Canada Select crude and was bound for Italy to test refinery compatibility and markets in Europe.
The terminal is owned by Kildair Service Ltd., whose website said the facility has 12 rail-loading racks and can handle tankers with capacity of up to 350,000 barrels. Storage capacity at the site is 3.2 million barrels.
A spokeswoman for Suncor said the shipment is part of the company’s strategy to develop new markets beyond North America.
“It just makes good sense that we would look at opportunities that provide us with flexibility,” she said.
Suncor has previously sent crude from the British Columbia coast to Asia, while Cenovus Energy has sent crude to China, Imperial Oil has sold oil sands production in Malaysia and Husky Energy has shipped 1 million barrels to India.
Phil Skolnick, an oil sands analyst with Canaccord Genuity, said the pursuit of new markets such as India and Indonesia is gaining in popularity as Western Canadian producers look beyond the U.S. to access Pacific and Atlantic ports through new pipelines and, failing that, moving their crude by rail.
In addition to using Energy East to provide Canadian crude as feedstock for refineries in Ontario and Quebec, TransCanada aims to build tanker terminals in Quebec and New Brunswick to provide a route to Europe.
Environmental opposition
But those plans, like XL and pipelines to the British Columbia coast, are facing a pushback from environmentalists, First Nations, local communities and, on Sept. 22, were dealt a blow by the Quebec Superior Court.
Justice Claudine Roy granted a temporary halt to seismic surveys to determine where a tanker terminal could be built at Cacouna on the St. Lawrence River.
Four environmental groups sought the injunction during a period they said was critical to beluga whales and calves, accusing the Canadian and Quebec governments of ignoring expert advice about the sensitivity of the area to the whales.
The judge said the Quebec Environment Minister David Heurtel authorized the drilling without obtaining the answers it was seeking on the beluga population from Fisheries and Oceans Canada.
TransCanada said it obtained the necessary approvals and permits to proceed with the work and is studying the court judgment to decide on its next move.
The company has estimated the Quebec government could collect tax revenues of more than C$2 billion by combining the design and construction phase of a terminal along with the operation of the Energy East pipeline.
However, despite that setback, the hopes of moving crude to Irving Oil’s refinery and tanker terminal in New Brunswick may have received a lift on Sept. 22 when the province’s Conservative government was ousted by the Liberal party led by a 33-year-old lawyer, Brian Gallant, who has endorsed Energy East as vital to Canada’s economy.
