Home' Trinidad and Tobago Guardian : November 12th 2015 Contents BG8 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt NOVEMBER 12 • 2015
Following the Obama admin-
istration s rejection of the
Keystone XL pipeline, the oil
industry faces the tricky task
of making sure the crude oil
targeted for the pipeline still
gets where it needs to go. The pipeline, first
proposed by TransCanada Corp in 2008,
was projected to carry 800,000 barrels a
day of crude from Canada and North Dakota
down to Nebraska, where existing pipelines
would bring it to refineries on the Gulf
Keystone XL was expected to come online
toward the end of this decade. Until then
a combination of existing pipelines and rail-
roads was expected to be enough to handle
anticipated production. Now the question
becomes whether there will be enough
pipeline capacity to move the oil and keep
costs from getting too expensive.
Skip York, vice president of integrated
energy at consultancy Wood Mackenzie,
said the oil industry "didn t need Keystone
today," but will need the capacity in the
President Barack Obama s decision means
shipping the oil will require "a more expen-
sive form of transportation than it would
have with Keystone XL," he said.
At the moment, the biggest impediment
to the flow of oil is low prices. Oil has aver-
aged about US$50 this year, making many
projects in the Canadian oil sands uneco-
nomical. According to Wood Mackenzie,
projects totaling about 485,000 barrels a
day have been delayed this year. Canadian
oil producers still expect production to rise
to 5.3 million barrels a day in 2030, up from
3.7 million barrels a day in 2014, even after
lowering their forecast to take into effect
the impact of lower prices.
The US imports more crude oil from
Canada than from any other country, about
3.4 million barrels a day as of August,
according to the US Energy Information
Tim McMillian, president and chief exec-
utive officer of the Canadian Association
of Oil Producers, is concerned that the rising
cost of getting oil to market could hurt the
Canadian industry s competitiveness. Last
month, Shell abandoned an oil sands project
in Alberta, and its CEO pointed to concerns
about high costs and insufficient pipeline
capacity for the decision.
McMillan said other proposed pipeline
projects should be able to help make up for
lost shipments via Keystone XL.
About 100,000 barrels a day of the oil
that was supposed to move through Keystone
XL would have come from North Dakota,
where a boom in unconventional drilling
has propelled it to become the No 2 pro-
ducing state in the US behind Texas.
Keystone XL would have reduced some
of the dependence on rail and truck ship-
ments, said Kari Cutting, vice president of
the North Dakota Petroleum Council, which
represents more than 500 companies work-
ing in the state s oil patch.
North Dakota produces about 1.1 million
barrels a day, with about half of it moved
by rail, down from about 70 per cent a year
ago. Recent derailments and fires involving
North Dakota crude---including an explosion
in Quebec two years ago that killed 47 peo-
ple---have drawn criticism from lawmakers
and the public about using trains to move
oil.Keystone XL would have replaced at least
one, mile-long oil train each day, state and
industry officials say.
Now, not having the pipeline built means
railroads will get to keep much of the busi-
ness they re already hauling and compete
for new production as it comes online. Even
with safety concerns, oil producers have
become more comfortable shipping by rail,
although it costs more than shipping by
"Five years ago or eight years ago very
little oil left Canada by train. Today it is
commonplace for us to see unit trains mov-
ing oil to market," McMillan said.
Even if the Keystone XL had been built,
oil would have continued to be shipped by
rail because oil production exceeds pipeline
capacity in North Dakota and oil producers
have come to like the flexibility railroads
offer. Shipping by rail allows oil producers
to send their product to different markets
to obtain the best price.
Keystone was supposed to expand the
market for Canadian crude on the US Gulf
Coast. Refineries there are better equipped
to refine the so-called heavy crude that
comes from Canada s oil sands.
"The Keystone XL decision does not mean
less oil sands overall but it may complicate
oil sands access to the US Gulf Coast, where
there is substantial refining capacity for
heavy types of crude," added Jim Burkhard,
vice president at IHS Energy.
Burkhard sees Venezuela and other coun-
tries that ship heavy oil to the US as ben-
efiting from the Keystone XL rejection.
Venezuela heavy crude "will continue to be
consumed by US refineries in the absence
of access to Canadian crude oil," he said.
For many proponents of Keystone XL,
that aspect was the most perplexing when
considering the rejection.
"The most baffling part of this decision
is that this administration would rather con-
tinue importing oil from countries that fund
terrorism than from our very own resources
and our Canadian allies," Cutting said.
Barbados energy sector will receive a much
needed boost with the injection of BDS$7.72
million (US$3.86 million).
Prime Minister Freundel Stuart made this disclosure
shortly before signing the National Indicative Pro-
gramme (NIP) 2014-2020 with Head of the European
Union Delegation, Ambassador Mikael Barfod, earlier
He said the sector had been identified for funding
under the 11th European Development Fund (EDF).
"The overall objective is to support the Govern-
ment s energy sector goals, as defined in the draft
2013 Government of Barbados Energy Policy," he said.
The main elements of that policy include: increasing
the share of economically viable renewable energy
in Barbados energy mix; achieving savings in trans-
portation and other non-electric energy uses; and
increasing the sustainability and efficiency of fossil
fuel exploration, production, transportation, storage,
and use across all sectors.
"The specific objective is to support the recently
commenced Government pilot programme for renew-
able energy and energy efficiency measures in primary
and secondary schools, thereby raising awareness,
reducing energy costs, and securing a reliable energy
supply for schools designated as hurricane or natural
disaster shelters. Complementary to this will be a
capacity building programme for educators on Renew-
able Energy and Energy Efficiency," Stuart added.
The Barbadian leader said it was anticipated that
the financing agreement relating to the 11th EDF
would be ready for signature by early 2016.
Ambassador Barfod explained that the NIP rep-
resents the agreement between the Government of
Barbados and the European Commission for use of
resources under the 11th European Development
Fund. He said BDS$12.81 million (US$6.4 million)
had been previously committed to the sector through
the Smart Renewable Energy Programme.
"Our support under the 11th EDF will be for €3.5
million (US$3.86 million). In the face of calls for
graduation of countries based solely on GDP per
capita, we recognised the inherent vulnerabilities of
Small Island Developing States such as Barbados.
This reality justified continued bilateral support," he
"At the same time, our Agenda for Change approach
calls for resources to be targeted where they are most
needed and can be the most effective. In response,
we have shifted to a more focused regional programme
and in so doing created the largest regional envelope
for the Caribbean, with a total commitment to the
region of €1 billion (US $1.1 billion)."
Barfod said Barbados was in an excellent position
to benefit from their new programming thrust, includ-
ing capitalising on multi-country programmes and
new opportunities for blended financing options
through the Caribbean Investment Facility.
industry must find
new paths for oil
sector to get
boost from EU
A sign is posted in front of TransCanada's Keystone
pipeline facilities in Hardisty, Alberta, Canada. AP
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