|
Alberta needs pipeline cure
Gary Park For Petroleum News
Oil-rich Alberta stands on the brink of its own version of a fiscal cliff and will only be pulled back if opposition to crude oil and bitumen pipelines out of the province can be overcome.
Premier Alison Redford, faced with having to withdraw a staggering C$3 billion from a “sustainability fund” to keep her government’s fiscal house in order and halt a ballooning deficit, said that unless new pipelines can be built to new markets Alberta will face more drastic deficits and spending cuts.
She said there has been a “monumental shift” in the economics of Alberta oil as delays in approving and building new pipelines eat into the profits that have long supported both the petroleum industry and the powerful economies of Western Canada.
Alberta Finance Minister Doug Horner weighed in with a blunt warning that North America’s oil glut paired with a decline in commodity prices could result in tax increases.
“Everything is on the table,” he said, but Redford was unequivocal that there will be no new taxes in the immediate future, despite conceding “we’re going to have to do some tough stuff, we’re going to have to make some tough decisions.”
Falling oil prices Horner blamed Alberta’s financial woes on falling oil prices, which have seen the Western Canada Select crude tumble drastically in December to a record US$37 per barrel short of West Texas Intermediate.
“I’m really concerned about where those numbers are headed over the short term and the medium term,” he said. “If we can solve the market access piece, the long-term outlook for Alberta is still very robust.”
Redford said Alberta urgently needs to see new pipeline capacity introduced, spurred on by “a profound change in the way that Canadians look at the world” that includes the importance of getting crude to markets beyond North America.
Russ Girling, chief executive officer of TransCanada, which is anxiously waiting for an early-2013 decision from the Obama administration on the Keystone XL project, said the Western Canadian industry needs to take advantage of the demand for its production from U.S. Gulf Coast refineries and the opportunity to displace 1 million barrels per day of expensive imported crude on the U.S. Eastern Seaboard.
He said TransCanada has been discussing converting part of its underutilized natural gas Mainline to Eastern Canada and the U.S., along with a possible extension of that system.
“We’ve provided interested parties with the economics of doing that,” Girling said. “It’s far more attractive than railing it.”
| 