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President Biden’s decision to ax the controversial Keystone XL pipeline, which had been approved by his predecessor, is a tremendous blow for Canada’s energy sector and particularly its oil sands industry. For years, the U.S.’s oil-rich northern neighbor, which has the world’s third-largest proven oil reserves of 168 billion barrels, has for some time lacked sufficient takeaway capacity for the crude oil produced. That lack of transportation capacity is weighing heavily on prices for Canadian crude oil grades which sees the crucial heavy oil benchmark blend Western Canadian Select (WCS) trading at an almost $14 discount to West Texas Intermediate. Such a substantial discount is weighing on the profitability of Canadian heavy oil producers in a difficult operating environment where crude oil prices are caught in a prolonged slump. Even after the latest rally, sparked by Saudi Arabia’s surprise one million barrel per day production cut, WTI is selling at around $53 per barrel. The Keystone XL pipeline was an essential piece of industry infrastructure that would boost Canada’s pipeline transportation capacity and connect Canada’s economically vital oil sands to crucial U.S. energy markets. Lack of adequate access to U.S. refining markets, notably in the mid-west where many refineries […]
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