* Canada's oil could back up without new pipeline
* Natural resources minister promoting Keystone approval
By Kristen Hays
HOUSTON, March 6 Canada's growing heavy crude
output could turn into a glut, making the crude even cheaper
than it is now, in the absence of new major pipeline capacity to
move it to markets, the country's minister of natural resources
said on Thursday.
"I'm definitely concerned about that," Joe Oliver told
Reuters in an interview at the annual CERAWeek energy conference
"We're looking at a potential bottleneck, certainly sometime
this decade," he said. "It's looming."
Canada's support of such infrastructure fueled Oliver's
appearance at the conference, which was part of a multi-day
visit to the United States to press for U.S. government approval
of the northern leg of TransCanada's Keystone XL
pipeline after years of delays.
The pipeline needs approval from the U.S. State Department
because it would cross an international border from Canada to
the U.S. crude futures benchmark hub in Cushing, Oklahoma.
Opponents contend it should be scrapped to ease spill concerns
and possibly provide less incentive to continue the
A glut of inland U.S. crude at Cushing has kept U.S. crude
prices cheaper than those for global crudes, though pipeline
reversals and new projects are beginning to alleviate that.
Oliver said Keystone and other proposed pipeline projects
can ensure refiners configured to run heavy crude can get it and
keep it flowing from Canada to those markets.
"We don't want our resources to be stranded," he said.
Oliver said earlier he doesn't expect the Obama
administration to reject Keystone's $5.3 billion north leg.
The State Department said in a draft report last week that
the pipeline would not affect the pace of Canadian oil
production. It also would not demonstrably increase greenhouse
gas emissions, Oliver said.
He said 20 percent of the crude moved through Keystone would
come from North Dakota's Bakken shale oil play, while the rest
would come from Canada.
He noted that rejection of Keystone won't stop Canadian oil
production, as some pipeline opponents hope. Demand for Canadian
oil exists in India and other places in Asia, and projects are
in the works to export from Eastern or Western Canada to those
Those plans would go forward with or without Keystone, he
said, because Canada's growing output means plenty of crude to
Those projects include Canadian pipeline company's Enbridge
Inc's proposed Gateway Pipeline, which would move
550,000 barrels per day of Canadian heavy oil to British
Columbia for export to Asian markets. The project is under
review by regulators with a decision expected by year-end.
Last month Enbridge said it was teaming up with Energy
Transfer Partners to convert a natural gas pipeline to
carry up to 660,000 bpd of Canadian and North Dakota Bakken
crude to Louisiana from Enbridge's pipeline network in Illinois.
Enbridge Chief Executive Al Monaco told Reuters in an
interview at the conference that Enbridge, like many others in
the oil and gas industry, assumes the Keystone project will
eventually be approved.
"There's so much product, and we need pipeline capacity,"
Earlier Wednesday Oliver toured LyondellBasell Industries
NV's 268,000 barrels-per-day refinery, which is boosting its
capacity to process heavy Canadian crude oil by 115,000 bpd. The
plant now runs 60,000 bpd of Canadian crude.
Many refineries along the U.S. Gulf Coast, home to 40
percent of U.S. refining capacity, support the Keystone project
because they are configured to run heavy crude.
Keystone's southern leg from the U.S. crude futures
benchmark hub in Cushing, Oklahoma, to the Gulf Coast is under