A New Problem for Keystone XL: Oil Companies Dont Want It
Keystone XL is facing a new challenge: The oil producers and refiners the pipeline was originally meant to serve aren’t interested in it anymore.
Delayed for nearly a decade by protests and regulatory roadblocks, Keystone XL got the green light from President Donald Trump in March. But the pipeline’s operator, TransCanada Corp. is struggling to line up customers to ship crude from Canada to the U.S. Gulf Coast, say people familiar with the matter.
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TransCanada has spent $3 billion to date on Keystone XL, much of it on steel pipe, land rights and lobbying. Completed, the pipeline would travel 1,700 miles from Alberta to Steele City, Neb., where it would link up with existing pipelines that run to the Gulf Coast.
The lack of interest has put the pipeline’s fate in jeopardy. The company, based in Calgary, Alberta, has said it wants enough customers to fill 90% of Keystone’s capacity before it proceeds. It started to aggressively court potential customers earlier this year as it seeks to meet that target, according to people familiar with the situation.
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The uncertain outlook for Keystone XL stands in contrast to Mr. Trump’s upbeat rhetoric in March. The president invited Mr. Girling to the Oval Office and announced he was reversing an Obama administration move to block construction, declaring, “It’s going to be an incredible pipeline, greatest technology known to man.”
But much has changed in the oil markets since TransCanada first filed an application with the State Department in 2008 for a cross-border permit.
Back then, the price of oil had surpassed $130 a barrel, producers were rushing to pump as much as possible and refiners were itching to secure steady supplies. Today, oil is trading around $45 amid a global supply glut caused in part by the emergence of American shale drillers.
Refiners want the flexibility of being able to buy oil from wherever it is cheapest. In a world awash in low-price oil, Canadian crude doesn’t look as attractive as it once did. Many refiners thus far are unwilling to commit to long-term deals for Canadian crude, say people familiar with the matter.
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Keystone XL still requires final approval from Nebraska and faces the prospect of additional protests from a reinvigorated antipipeline movement in the U.S. following the fight over the Dakota Access Pipeline. The other pipeline projects face similar obstacles.
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https://www.wsj.com/articles/after-3-billion-spent-keystone-xl-cant-get-oil-companies-to-sign-on-1498734002
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