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Oilsands could lose $72 billion if B.C.-Alta. pipeline not built: report

Unless a new pipeline is built to boost Canadian oil exports to Asia, Canadian producers will suffer major losses by selling at cheaper prices to U.S. refineries


January 4, 2012
by The Canadian Press

EDMONTON—Oilsands producers could lose up to $72 billion if a pipeline isn’t built to ship heavy crude to the B.C. coast, according to a report by the government of Alberta.

The report by consultants Wood Mackenzie has been submitted by the province to the federal panel reviewing Enbridge’s proposed Northern Gateway project.

It says that without such a pipeline, oilsands companies will not have access to growing Asian markets, especially China.

That means more bitumen would have to be shipped to U.S. refineries at a lower price.

“Given a current lack of access to key demand centres and the lengthy lead time required to execute a pipeline project and the projected growth in supply, the timing of a West Coast export capacity option is critical,” reads the report.

The report suggests Canadian producers will lose about $8 billion a year between 2017 to 2025 without better access to Asian markets.

Public hearings into the $5.5-billion Northern Gateway project are to begin in Kitimat, B.C. next week.

Enbridge wants to build two 1,170-kilometre-long pipelines from Bruderheim, Alta., to an oil tanker port to be built near Kitimat.

One of the pipelines would be used to ship up to 525,000 barrels of oilsands bitumen a day to the coast for export.

The other would be used to ship up to 193,000 barrels of light oily material daily to Alberta. The substance is used to thin heavy oil so it can easily pass through pipelines.

The report also suggests the industry could face a shortage of this toxic material, known as condensate, as oilsands production ramps up.

More than 4,000 people have signed up to speak at the review panel hearings in two dozen communities in B.C. and Alberta.

Alberta’s Energy Department says provincial officials will appear before the panel later this year to formally present the report and make other submissions.

But environmentalists are hoping to make Northern Gateway the next battleground against so-called “dirty” crude from the oilsands. Last fall, a coalition of environmental groups led a campaign in the U.S. that put TransCanada’s Keystone XL pipeline to U.S. Gulf Coast refineries on hold.

In December, opponents of Northern Gateway released their own commissioned report that questions the project’s economics. The ForestEthics report suggests there is enough existing pipeline capacity to handle up to twice the existing volume of bitumen exports by 2025.