Opinion: Why Keystone XL is more important to Canada than the U.S.

Approval of Keystone XL, the controversial pipeline that would move heavy Canadian crude to the U.S. Gulf Coast, has been stalled ever since it was first proposed in 2008. And it appears as though the oil industry may have to wait longer still.

The Republican-controlled Congress will vote on a bill approving the pipeline’s construction Jan. 9, but President Barack Obama has threatened to veto the bill if it passes.

Washington can afford to wait. U.S. oil production has risen by nearly 4 million barrels per day since 2010, and refineries along the Gulf Coast have plenty of access to foreign crude. But Canada is not so fortunate. Transportation bottlenecks have kept local oil prices much lower than international ones. With so many questions surrounding the Keystone project, Ottawa must continue to look for alternate routes to export its crude — something that will likely galvanize voters ahead of Canada’s federal election in October.

Most of Canada’s oil production is found in the landlocked province of Alberta, and nearly half of the United States’ refining capacity is located in the Gulf Coast. Both countries have wanted a better connection between the two for some time. From 2009 to 2013, Canada exported only 125,000 bpd; the rest of its production went to the Great Lakes region. With such poor market access, West Canada Select, the Canadian heavy oil benchmark, has traded far below international prices for several years. (Currently, it trades for $33 per barrel.)

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Canada knows that sharing a border with United States can be economically beneficial, but sharing its geographic position, so far removed from the rest of the world, can be detrimental. Ottawa may have its own goals, sometimes distinct from its southern neighbor’s, but it is often beholden to the political machinations of Washington.


http://www.marketwatch.com/story/why-keystone-xl-is-more-important-to-canada-than-the-us-2015-01-09