For most of the past three years, Western Canadian producers have had to deal with crude oil pipeline constraints — takeaway-capacity shortfalls serious enough to spur huge price discounts for the region’s benchmark Western Canadian Select (WCS) that are sufficient to support the higher cost of crude-by-rail alternatives. But things are changing, and fast. WCS prices are at or near historic lows — low enough to convince a number of producers to rein in their capital spending and production. Crude-by-rail use is down, and there’s even space available on the usually maxed-out Enbridge Mainline system, the region’s primary pipeline egress. And wouldn’t you know it, just as production is slipping and constraints are easing, real progress is being made on three big pipeline projects that had long been in limbo: the Line 3 Expansion, the Trans Mountain Expansion (TMX) and Keystone XL. Today, we provide an update on Western Canadian crude takeaway capacity and examine whether the region may — irony of ironies — end up with too much.
(Canadian) Pipedream – Is Western Canada Suddenly Headed for a Crude Pipeline Overbuild?
