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Pipeline constraints are Canadian oil producers $ 20 billion in lost revenue last year: report


Canadian oil producers could have collected $ 20 billion more in revenue last year, if they were able to sell their products at prices that are closer to reaching the global rate, according to a new study from the Fraser Institute.

Conservative-leaning think tank said that based on his calculations, Canadian heavy crude oil traded at an average discount $ 26.50 US per barrel in the past year compared to West Texas Intermediate, the US gold standard. This price reduction is much greater than it was in the previous five years, when the producers saw a gap of only $ 11.90 US per barrel.

The difference in price is due to the continuation of power limitations with existing pipelines and indefinite delay of the proposed pipeline projects, such as expansion of the Trans Mountain.

Brainstorming is estimated that if the pipeline was more in line with the current level of production, Western Canadian Select, which includes product Oilsands, would trade at an average price of $ 52.90 US last year, instead of $ 38.30 US Canadian producers actually collected.

This difference in price, multiplied by nearly 3 million barrels of oil in Canada went to the US last year (minus the fact that the brain requires discounts on transport costs and the inherent "quality differences" – Canadian crude difficult light American oil and, consequently, more difficult to clarify ), working up to $ 20.62 billion in lost potential revenue for Canadian oil companies like Husky and Cenovus.

And because oil from the & # 39 is one of the most valuable export country, it is estimated that the loss of revenue has approximately one percent of the national gross domestic product of Canada (GDP), according to the institute reported.

With 99 per cent of Canada's crude oil exports destined for refineries in the United States, manufacturers are forced to either store the product and wait out the price dips or unload goods at reduced prices.

Other companies have turned to raw on Rail Transport – a much more expensive and potentially more dangerous option – to send the product to the Gulf Coast, where prices are higher than the Canadian heavy oil than they were in the Midwest US refineries plants.

BP refinery plant sits on the shore of Lake Michigan in Whiting, Indiana. Maintenance closed the factory at the end of last year, probably contributed to the steep Canadian oil prices at a discount as the plant buys about 250,000 barrels per day of heavy oil from Canada. (John Gress / Reuters)

Mandatory production cuts instituted by the then Alberta Premier Rachel Notley, and promise to buy more rail cars to move the product, helped to stabilize the gap price between Canada and the US last year, but institute said the construction of new pipelines from the & # 39 is the most practical long-term solution Alberta oilpatch.

Brain said that the construction of two Enbridge in the project Line 3 – which is facing new delays from regulators Minnesota – and expansion of Keystone XL, which also looks down new legal problems, will help stabilize prices, this indicates expansion Trans Mountain as a clue to great value of vast oil reserves in Alberta.

The expansion project will be 1150 km almost triple the capacity of the existing pipeline to 890,000 barrels per day. This would allow the delivery pipeline to Alberta oilpatch in coastal BC, and then volatile markets in Asia.

"During the construction of pipelines to provide access to the coast of the US Gulf of Mexico is very important because it will reduce the existing price differential, gaining access to new foreign markets more importantly … Given the sharp rise in US oil production in recent years and competition from the US producers looking for new customers for Canadian heavy oil with a & # 39 is critical, "says the Fraser Institute report, the author of Elmira Aliakbari and Ashley Stedman.

A federal appeals court overturned the cabinet approval for the project to expand the Trans Mountain in August last year, citing inadequate consultation with indigenous peoples and incomplete environmental assessment. The federal government has promised to build the project, despite the legal problems, but no construction start date has not been announced.

According to estimates of the Canadian Association of Petroleum Producers, supplies from Western Canada will grow from 4.2 million to 5.6 million barrels of oil per day by 2035. The current pipeline can only carry four million barrels.

Line 3, the largest project in the history of Enbridge in -. 1659-kilometer project that will transport oil from the terminal near Hardisty, Alta, through northern Minnesota to Superior, Wisconsin. – double the capacity of the existing line and move 760,000 barrels per day.

Keystone XL would carry more than 800,000 barrels of oil a day in Alberta to refineries in Texas.

If all the proposed projects actually built – it is far from certain – the lack of pipeline capacity can be largely solved.

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