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Pipeline project delays costs Canada billions a year

They result in prices 20% to 30% below the world price of West Texas Intermediate.


CALGARY — Delays to pipeline projects that would allow Canadian energy producers to diversify their sales are costing Canada’s economy and governments billions in foregone revenues, says a Fraser Institute study.

The public policy think tank says delays are resulting in prices that are 20% to 30% below the world price of West Texas Intermediate.

“Without adequate pipelines to Canada’s coasts, Canadian oil producers are forced to sell their products in the US at dramatically discounted prices resulting in greatly diminished benefits to Canada’s economy,” said Kenneth Green, senior director of Natural Resource Studies at the Fraser Institute and co-author of The Costs of Pipeline Obstructionism.

The study observes TransCanada’s Energy East pipeline, Kinder Morgan’s Trans Mountain Pipeline Expansion, and the Enbridge Northern Gateway pipeline projects would allow roughly 2 million barrels per day of western Canadian crude to reach overseas markets.

Yet all three projects are in limbo because of opposition from environmental and First Nations groups, and the authors contend pipelines pose less safety and environmental risk than other modes of transport such as rail or truck.

The authors used projections of oil demand and prices, plus estimated access to foreign markets to come up with potential scenarios for revenues and royalties that could be generated by accessing international markets via coastal pipelines and ports.

One scenario shows exporting 1 million barrels of conventional heavy oil and oil sands bitumen per day to world markets at US$60/barrel, the energy industry would earn an additional $4.2 billion annually.

A price boost would add $1 billion in royalties annually to the Alberta and Saskatchewan governments.

Click here for the study.

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