Pipeline Delays To Temper Growth
BMI View: Enbridge has reported delays in receiving permission for the expansion of the Alberta Clipper pipeline, intended to carry crude from Canada's oil sands to US markets. While we believe that the project will likely ultimately be approved, combined with other midstream project delays, the potential for further setbacks to the project only underpins our view that infrastructure bottlenecks are likely to weigh on Canadian liquids growth.
Enbridge has reported that the US State Department is taking longer than expected in reviewing an expansion to the Alberta Clipper pipeline. The pipeline runs from Hardisty, Alberta to Superior, Wisconsin and currently carries 450,000b/d of Canadian heavy crude to the US market, though planned expansions would nearly double its capacity. Specifically, the first stage of Enbridge's expansion plans include increasing capacity on the line by 120,000b/d (to 570,000b/d), while a second phase would see the pipeline carry up to 800,000b/d by 2015.
While the project will likely still win approval eventually, we note that delays to the US-bound pipeline, combined with significant impediments to bringing online other takeaway capacity from the Canada's heavy oil sands have driven down the price of Western Canadian Select (WCS). With less attractive project economics for the country's crude development, this underpins our admittedly more conservative average 1.7% y-o-y liquids growth forecast over the next decade. Indeed, even despite the country's huge resource potential, we believe that industry interest could wane if not enough is done to ensure that there is a route to market for Canadian oil.
|Takeaway Capacity Planned…Execution Uncertain|
|Pipelines Planned For Western Canada, '000b/d|