The proposed Keystone XL pipeline would not have an impact on greenhouse gas emissions, a study indicates.
The study by energy consultancy IHS CERA says it agrees with the conclusions of the US State Department's draft environmental review of Keystone released in March 2013 that says oilsands production is expected to continue at similar levels regardless of whether the project goes ahead.
KXL pipeline: under federal review
Keystone XL, which would move oil from the oilsands of Alberta, Canada, to refineries along the US Gulf Coast, is now under federal review at the State Department. The project needs a cross-border permit to complete the project's northern leg.
The department said in its draft review Keystone XL wouldn't substantially increase greenhouse gas emissions.
President Barack Obama in his 25th June climate address said the project would win approval only if it does not significantly exacerbate the problem of carbon pollution.
Environmentalists maintain Keystone XL would add to greenhouse gas emissions.
IHS report says Venezuelan heavy oil would replace Albertan bitumen
In the absence of the pipeline, IHS CERA's study says, US Gulf Coast refiners would replace expected deliveries of diluted bitumen from Alberta with heavy oil from Venezuela, which has roughly the same emissions intensity as the Canadian crude.
"If Gulf refiners cannot access Canadian heavy oil, the most likely alternative is Venezuelan supply, which is projected to grow based on ongoing investments," the study states. Currently the majority of supply on the US Gulf Coast comes from Venezuela, followed by Mexico, it notes.
"Venezuelan heavy oil, and Venezuela, would be the No. 1 beneficiary of a negative decision on Keystone," the study says.
Canadian oilsands will still find a way to market; rail transport likely
The study says in the absence of the Keystone XL, Canadian oilsands will still find a way to market, either through pipelines travelling exclusively through Canada and not requiring US government approval, or through the increasing use of railcars to ship the heavy oil.
"Given sufficient investment, our view is that the economics for moving heavy oilsands crude by rail could improve further, even approaching pipeline economics," the study states.
"Consequently, even without the Keystone XL pipeline, we believe that oilsands production would grow at a similar rate. Therefore [greenhouse gas] emissions will be unaffected by the fate of Keystone XL."
Long delays and exhausted arguments
"After five years and numerous studies, all pointing to the same conclusion, the White House and opponents of the Keystone XL pipeline project have exhausted all arguments," said Sen. John Hoeven, R-N.D., in a statement last Thursday.
"It's time to stop delaying this critical infrastructure project, which will create jobs, help to grow our economy and help us achieve true North American energy independence," Hoeven said.
The pipeline's potential impact on GHG emissions has been the subject of increased focus.
Details of the new study
The new ‘IHS CERA Canadian Oil Sands Dialogue’ study agrees with the conclusions of the US State Department's Draft Supplemental Environmental Impact Statement for Keystone XL that says oilsands production is expected to continue at similar levels regardless of whether Keystone XL goes forward. IHS currently expects oilsands production to grow from 1.9 million bpd in 2013 to 4.3 million bpd in 2030 and does not expect the Keystone XL decision to have a material impact on the production outlook.
The IHS study points out that 3 million bpd of additional oilsands pipeline capacity (not including Keystone XL), is currently proposed. Some 80% of this proposed alternate capacity travels exclusively through Canada, connecting the oilsands with Canada's west and east coasts, and thus would not require US government approval.
Even if pipeline capacity were to lag behind oilsands growth, the study says that transportation by rail is expected to play an ongoing role and that greater investment could make rail more economic to a level approaching that of pipelines.
The study found that with sufficient scale and investment the additional cost of transporting oilsands by rail to the US Gulf Coast rather than by pipeline could be lowered from today. If heavy oilsands producers were to invest in improved rail efficiencies, the economics could be within US$ 6/bbl compared to pipeline (for each barrel of oilsands produced). This would place rail well within the break-even range for most oilsands production. One source of improved economics could come from shipping oilsands bitumen in its pure state. A lack of pipeline capacity would incentivise such added investment.
The study also found that, were oilsands not to be shipped to the US Gulf Coast, it would result in little to no change in overall GHG emissions. The region, which contains 50% of total US refining, has a large capacity to process heavy crude. This means that crude oils of similar GHG intensity would continue to be refined in the absence of oilsands, the study says.
The complete study is available at the oilsands dialogue website, www.ihs.com/oilsandsdialogue
Edited from various sources by Elizabeth Corner
Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/12082013/keystone_xl_will_not_add_to_greenhouse_emissions_new_study_423/