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Andy Stevenson Guest Blog: Is the Party Over for Tar Sands without Keystone XL?

Danielle Droitsch

Posted March 13, 2013 in Moving Beyond Oil

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Andy Stevenson is a Finance Advisor for NRDC

With prices for tar sands oil breaking below $60/barrel for the first time since 2010, the fate of the tar sands oil industry seems more tied to the approval of the Keystone XL tar sands pipeline than ever. 

International Oil Benchmarks 

Providing nearly 30 percent of all new heavy oil pipeline capacity for Western Canada over the next five years, the 800,000 barrel per day Keystone XL pipeline (75% of which will be used to transport tar sands oil) is seen as critical to narrowing the record spread between Western Canadian Select and Brent Crude and ensuring the profitability of future tar sands projects. 

Pipeline Capacity Expansion Projects

Moreover, not only is the size of the Keystone XL pipeline significant, the timing of its construction is also seen as critical given the growth of new tar sands output over the next several years. Indeed it can be said that without the capacity provided by the Keystone XL pipeline, the supply / demand imbalance that has kept tar sands oil at a steep discount to Brent Crude will likely continue until late 2016.

Pipeline Capacity for Tar Sands Oil

While critics have argued that the Keystone XL doesn't matter and that there are alternatives available for transport, investment banks are reporting that continued pipeline delays could start to impact investor confidence in tar sands production growth expectations beyond 2015. The view that Keystone XL matters is also supported by investors, who have punished tar sands stocks relative to their peers over the past year. 

 

  

In sum, the financial community sees Keystone XL as critical to the growth rate of tar sands oil production and it is time for politicians to do the same. Indeed, when a recent Deutsche Bank report on a major tar sands player is titled "The Guest that Arrives as the Party is Ending", it seems clear that investors view of tar sands growth without Keystone XL is far from certain.

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Comments (Add yours)

Studying TarsandsMar 18 2013 05:36 PM

In the last graph, do all three (non-ETF) stocks heavily or completely involved with the tar sands? Not sure if I'm supposed to be looking at just one of those. Thanks.

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