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Sources say that Canada-US pipeline is close to meeting commitment requirements

Four sources with knowledge of the situation said that a proposed 'pipeline' for transporting Canadian crude oil into the United States was close to getting the minimum commitments required from oil companies to move forward. If approved, the 'Alberta to Wyoming pipeline' proposed by Canadian company South Bow Corp, and its U.S. partner?Bridger Pipeline could increase Canada’s crude oil exports to U.S. more than 12%, providing much needed pipeline takeaway capacity for Canada. Donald Trump signed an order last Thursday granting the project a cross border permit. Joe Biden, president of the United States, will formally revoke the permit required to build the Keystone XL pipeline in 2021. This is the last major oil pipeline between Canada and the United States. The new proposal follows a different route in the U.S. compared to the canceled Keystone XL. However, South Bow would restore about 150 km (93 mi) of the Canadian portion that is already built but sitting idle. This pipe would then connect to Bridger’s proposed pipeline in Montana, and extend approximately 645 miles up to Guernsey Wyoming. The four sources reported that oil companies had committed to moving at least 400,000 barrels a day (bpd), which is 72% of the initial capacity of the pipeline of 550,000 bpd. According to a regulatory submission by Bridger, the project could eventually move up to 1,13 million barrels per day. According to Canada's energy regulator, oil production was 5.5 million barrels per day at the end of January. This could rise to 6.1 million bpd in 2030.

Two sources stated that South Bow and Bridger were aiming to secure contracts with long-term durations for 450,000 bpd. This would allow them to surpass the 80% threshold required by pipeline operators before they can proceed with construction. Cenovus Energy, Canadian Natural Resources Ltd. (CNRL) and other top shippers have already committed to moving oil through the pipeline. Other shippers include Tamarack Valley and Whitecap Resources. Strathcona Resources is also included, according to the source.

Sources spoke under anonymity because shipper commitments remain confidential.

South Bow has not commented on the committed capacity of the project, stating that it is still in its early stages, subject to ongoing discussions with stakeholders, rights-holders, and commercial parties, as well as regulatory processes and evaluation.

Bridger declined comment. In a filing with the regulatory authorities in March, Bridger said that the project was developed as a response to market interest. Commercial discussions were also ongoing.

Cenovus CNRL Tamarack Strathcona and CNRL declined to comment about commitments.

Whitecap CEO Grant Fagerheim stated that the oil industry has engaged in the pipeline project constructively and that there appears to be enough momentum to reach the minimum thresholds for the project. He added that the support from the U.S. government was very helpful. The company declined to comment on further commitments.

CANADA'S OIL COMPANY ARE INTERESTED IN THE U.S. PIPELINE These commitments show the eagerness of Canadian oil companies to increase their takeaway capacity. The country's oil production has been stifled for years by a lack pipelines.

Existing pipelines are being expanded by rival pipeline operators.

Enbridge approved the expansion of its Mainline and Flanagan south pipelines last fall. This will allow 150,000 additional barrels per day (bpd) of Canadian heavy crude oil to be transported to the U.S. Midwest.

The company will bring this additional capacity online in 2027. It is also looking for commercial interest to a second stage of its Mainline expansion. This phase, it said, could be operational in 2028, adding another 250,000 bpd in capacity.

The Trans-Mountain Pipeline, which runs from Alberta up to Canada's West Coast for export into the U.S. West Coast, and Asia, also plans a series enhancements that will?increase capacity by 360,000 BPD.

Bridger's proposal currently is to build a pipe from Montana to Guernsey in Wyoming. This would be built at locations along existing pipeline infrastructure.

Analysts say that Guernsey, while a refinery hub, is not a final market for crude oil. Therefore, additional links to other refining centers, such as Cushing, Oklahoma and Patoka in Illinois, or the U.S. Gulf Coast, would be needed. AJ O'Donnell is an analyst with Tudor Pickering Holt & Co. and said that the project would be one of 'the most economical options' for shippers looking to increase oil supply out of Western Canada before the end of this decade.

While uncertainty still remains about the final economics of this project, O'Donnell wrote that it was the most logical way to add incremental oil egress capability through the end decade.

"Our view, is that more egress will be needed, regardless of geopolitical background." (Reporting from Arathy S. Somasekhar, in Houston; Amanda Stephenson, in Calgary; editing by Edmund Klamann.)

(source: Reuters)