Canada Builds Pipelines To Export Oil To Asia (At Higher Prices) As US Stalls on Keystone XL

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By Robert M. Cutler of Oilprice.com:

Canada continues to push ahead with a strategic plan for its own energy pipeline infrastructure as the United States has yet again delayed a decision on the controversial Keystone XL Pipeline designed to take the hydrocarbon product of Alberta’s oil sands to the American Gulf Coast. The Office of the Inspector General (OIG) of the U.S. State Department has opened an investigation to look at whether contracts were wrongfully awarded in the review process for the Keystone XL and to examine whether the regulatory safeguards that were adopted are proper.

According to environmental groups, the private contractor Environmental Resources Management failed to disclose its ties with TransCanada, which would own the proposed pipeline. A spokesman for the OIG said that he hoped the report of the investigation would be issued soon after the New Year.

The announcement by the State Department unit comes weeks after the new Energy Secretary Ernest Moniz told the U.S. Congress that he would do everything possible to speed up and streamline his department’s approval procedures. Still, the State Department can still issue its decision on the Keystone XL without waiting for the report, and President Obama is on record promising a definite word sometime this year.

Meanwhile, Canada is not standing idly around. This Tuesday the federal Minister of Natural Resources Joe Oliver met in Yellowknife with energy and mining ministers from most the provinces, who agreed with him on the need to diversify the country’s export markets and, for this purpose, build new infrastructure with a special view towards the Asia-Pacific region. As Oliver put it, the construction of such new infrastructure in Canada “is a strategic imperative since Canada currently exports virtually all its oil and gas to the United States.”

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Coincidentally this week the Norwegian firm Statoil made its third discovery of crude oil in a basin in the Newfoundland offshore, a little over 300 miles northeast of St. John’s, which is already the planned terminus of a new pipeline project to bring product from Alberta eastwards for refining, domestic consumption, and export. Energy exports to the U.S. from Canada are likely to grow but at a slower rate, as Canada begins to compete with the U.S. on global markets.

At present, the only pipelines out of Canada end in the United States, which is the sole foreign buyer and which pays prices well below world market value. Thus the argument in Canada for pipelines to the coasts for export not just to Asia but also, from Eastern Canada, to Europe. The political momentum in Canada in favor of the Keystone XL is in the process of being transferred to other projects. By Robert M. Cutler of Oilprice.com.

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