XL Pipeline construction to get underway

Oyen will be in the midst of oil industry activity within the foreseeable future. 

Premier Jason Kenney was in Oyen July 3 to launch construction on Alberta’s portion of the 1,947 km Keystone XL pipeline.

According to the government release, Keystone XL will deliver up to 830,000 barrels per day of western Canadian crude oil from Hardisty to Steele City, Nebraska. In turn it will go to U.S. Gulf Coast refiners. The government of Alberta has a $1.5 billion stake in the project. 

In an interview July 2 while in Brooks, Kenney said in an interview with Prairie Post he was excited about the prospects for recovery in the oil industry, once oil inventories go down. 

“We are optimistic because we have the third largest oil reserves in the world and we are very capital efficient. Tens of billion of dollars have been taken out of upstream exploration and production of oil around the world because of the price crash due to COVID,” explained Kenney who expected the price to significantly increase in 12 to 18 months. “Two months ago we were selling Alberta oil at negative price territory. Thankfully things have recovered more quickly than we expected and are now more or else at survival price, bumping around $40 WTI (West Texas Intermediate) and $30 WCS (Western Canadian Select), our producers can generally survive at that price, I believe that like many forecasters 12-18 months from now there will be a supply crunch, because of all the money taken out of upstream exploration and production.”

Proposed by TC Energy 12 years ago, the Keystone XL project is supposed to create about 2,000 construction workers hired in Alberta over the next two years. Overall, the project will contribute about $2.4 billion to Canada’s GDP and will generate more than $7 million in property taxes in the first year in service. It’s estimated the project will generate $30 billion in tax and royalty revenues. Plus it will also create other industry-related jobs. 

Investing in Keystone XL is part of the more than $10 billion infrastructure spending announced as part of Alberta’s Recovery Plan. This spending includes: $6.9 billion Budget 2020 capital spending, $980 million accelerated for Capital Maintenance and Renewal, $150 million for Strategic Transportation Infrastructure Program and water infrastructure projects, $600 million in strategic infrastructure projects, $500 million in municipal infrastructure and $1.5 billion for Keystone XL.

Keystone XL is expected to be complete and operational in 2023. Over the next three years, 269 km of pipeline will constructed and commissioned. 

In the meantime, Kenney is positive the pipeline will be worth the wait because is positive oil prices will come back strong. He says Alberta is a world leader in the industry and expects the companies within the province

“Here is why we will come through: because Alberta’s basis is far more capital efficient, although this doesn’t necessarily help the conventional producers around Brooks because particularly around the oilsands because when they are doing a project, it is producing for 30 years. Whereas in the Texas permeate, with the shale they are churning and burning, they have to drill a hole every year just to replace the production as those reservoirs deplete. 

“The prices will be very strong in the mid-term, we just need to survive the next 12-18 months. We are doing what we can to help the industry, particularly these small service companies that are the lifeblood of much of rural Alberta like Brooks. With our billion-dollar surge paying for accelerated well reclamation and completion of abandoned and orphaned wells. We estimate that will get thousands of high-paying blue collar jobs. It is a lifeline to so many of those small contractors…but ultimately we are only going to capital get back in the industry whether it the conventional basin here or the oil sands up north, if the investors know we have market access pipelines. 

Kenney noted the importance of the July 2 Supreme Court of Canada’s decision on rejecting the challenge by B.C. aboriginal bands to halt construction of the Trans Mountain pipeline — effectively approving it. Kenney says this was the “knocking down the last series of objections.” 

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