A yard in Gascoyne, ND., which has hundreds of kilometres of pipes stacked inside it that are supposed to go into the Keystone XL pipeline.Alex Panetta/The Canadian Press
TransCanada Corp. launched an effort Thursday to sign up new customers for its long-delayed Keystone XL pipeline amid an uncertain outlook for Canadian oil production growth and tougher competition in American markets.
The Calgary-based company initiated an "open season" to solicit firm commitments from shippers to transport crude from Hardisty, Alta., to Cushing, Okla., and the U.S. Gulf Coast, a process that will close at the end of September.
Keystone XL – which received a green light from U.S. President Donald Trump in March – would have a capacity of 830,000 barrels a day. TransCanada spokeswoman Jacquelynn Benson said the company is looking for an additional 225,000 barrels a day of firm commitments from shippers.
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"We believe the capacity we're offering in the open season will be fully subscribed," Ms. Benson said. "We have core support for this project and are confident that we will have the support we need to move forward."
However, the market looks dramatically different from the one that TransCanada faced when it was seeking approval for Keystone XL from former U.S. president Barack Obama several years ago. The company still lacks approval of a route in Nebraska, where regulators are reviewing the project amid vocal opposition from landowners and environmental groups.
Canadian production continues to grow as the projects initiated prior to the slump are being completed, but the outlook for growth after 2020 has dimmed significantly as crude prices have remained lower for much longer than many in the industry had anticipated.
At the same time, multinational oil companies are retreating from the oil sands, selling their assets to the large Canadian producers.
There are currently three pipeline expansions that have Canadian and/or U.S. government approvals, though each faces challenges from local opponents and state and provincial governments. In addition to Keystone, Kinder Morgan Inc. proposes to add 590,000 barrels a day of pipeline capacity in its Trans Mountain line to Vancouver, while Enbridge Inc. is planning to boost its Line 3 route to the U.S. Midwest by 370,000 barrels a day.
All told, those three projects would add nearly 1.8 million b/d of export capacity within a few years, while the Canadian Association of Petroleum Producers forecasts Western Canadian crude output will grow by 1.5 million b/d by 2030. And that projection is likely optimistic if prices remain in a prolonged slump as some fear.
"It is difficult," said Jackie Forrest, analyst with Arc Energy Research Institute in Calgary.
"For these projects to go forward, they need that shipper commitment – but it is highly probable they don't all go forward. So I think the challenge [for TransCanada] is there are a lot of barrels already committed and the outlook for growth in production is a lot different than it was a few years ago."
Still, Ms. Forrest said the producers see value in "optionality and having access to different markets" and so may support more pipeline capacity than would be strictly required by actual production. As well, new pipelines could cut into the industry's reliance on rail.
Two major Canadian producers – Suncor Energy Inc. and Cenovus Energy Inc. – signalled their support for the Keystone XL project Thursday, though neither company would quantify that commitment.
"We generally support all of the projects which are currently seeking access to markets. We support Keystone. We support Trans Mountain. We support the Enbridge Line 3 project," Suncor chief executive officer Steve Williams said on a conference call. "I think the projects are still needed and the industry and Suncor are supporting them."
Cenovus CEO Brian Ferguson also voiced his support for the TransCanada project, saying Keystone XL would add important export infrastructure for the industry.
The U.S. market is evolving dramatically as booming American production changes the competitive landscape.
Following a brief decline as a result of slumping crude prices, U.S. supply is growing again, and the U.S. Energy Information Agency forecast this week that crude production will climb by more than 900,000 barrels a day between now and the end of 2018.
Most of that increased supply is light crude that producers can export. Refiners like Valero Energy Corp. – which supports Keystone XL – are retooling their operations to handle more light crude that is produced from tight oil wells.
Still, many refiners on the U.S. Gulf Coast are configured to process heavy oil and they are still eager to receive additional volumes of diluted bitumen from the oil sands, particularly as production of Venezuelan and Mexican heavy oil declines.
With files from Jeff Lewis and Jeffrey Jones in Calgary