Canadian producers can meet U.S. oil demand even without Keystone, executive says – by Yadullah Hussain (National Post – September 11, 2013)

The National Post is Canada’s second largest national paper.

TORONTO – Calling Canadian heavy oil logistical challenges “overblown,” a senior oil sands industry executive says other pipelines and rail projects are available to meet rising demand from Alberta producers who until recently have been counting largely on the controversial Keystone XL pipeline to move their product to the United States.

“Misconceptions are common,” Doug Proll, executive vice-president with Canadian Natural Resources Ltd. said Tuesday. “There is ability to meet the supply even without Keystone XL. For the next little while, market access should not be constrained as result of other options.”

Enbridge Inc.’s debottlenecking of the Mainline pipeline will facilitate 400,000 barrels per day to the United States, while TransCanada Corp.’s west-to-east pipeline and the southern leg of the Keystone XL, along with a number of other proposals, expansions and added rail capacity mean Canadian producers have a number of outlets to get to market.

CNRL is planning to spend $2-billon to $2.5-billion annually over the next three years to take production from its Horizon Oil Sands development to 250,000 bpd from its current level of about 100,000 bpd.

The Calgary-based company’s Kirby Phase 1 project is also expected to begin this month with a capacity of 40,000 bpd.

Mr. Proll’s comments, made during a presentation at an industry conference in Toronto, echo a report from investment bank Canaccord Genuity on Monday that said new pipeline and rail terminal proposals mean Keystone XL is “no longer a necessity.”

“The start-up of Keystone Southern Leg (aka, the Gulf Coast project) in late 2013 or Q1/14 and Flanagan South line in mid-2014 means we should see ample excess capacity to end markets through at least the end of 2018 even without Keystone XL approval,” Canaccord analysts Phil Skolnick and Steve Toth said in a note to clients.

Many Canadian producers are resigned to the fact there is considerable uncertainty whether U.S. President Barack Obama will approve the Alberta-to-Gulf Coast project, and are seeking different ways to get output to market.

The new market access channels are also lifting potential asset valuations in the oil patch. “Keystone XL is not the 500-pound gorilla in the room that it once was,” said a Calgary-based lawyer who asked not to be named. “It is still of material consideration, but it’s probably less of an impediment than it was 12 months ago.”

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