July 10, 2018 / 4:18 PM / 9 days ago

Canadian oil executives downplay transportation bottlenecks

CALGARY (Reuters) - Executives at Canada’s largest integrated oil and gas producers on Tuesday downplayed the severity of transportation bottlenecks to move oil in the near term, citing existing pipeline commitments and refining capabilities.

Canadian producers have faced steep discounts for western Canadian heavy crude this year due to bottlenecks, while new pipeline projects have dealt with delays and protests from environmental groups.

Still, executives at Husky Energy Inc and Suncor Energy Inc said their existing pipeline commitments would help overcome constraints in the short-term.

“Right now, 100 percent of our production, including all of the production from Fort Hills (Alberta), we have pipeline access to get to markets,” said Mark Little, chief operating officer for Suncor.

Husky has excess oil pipeline capacity to the U.S. and has enough capacity locked in to ship crude until about 2021, Chief Executive Rob Peabody said, speaking on the sidelines of the TD Securities Calgary Energy Conference.

The company, which aims to grow production by about 5 percent annually over the next five years, has about 75,000 barrels per day (bpd) committed on the existing Keystone pipeline and also has space on Enbridge Inc’s Mainline crude pipeline system, Peabody said.

Most executives also expressed optimism over the completion of three main projects that are seen as crucial for Canadian producers to transport oil to the U.S. and Canada’s western port: Line 3 replacement, Trans Mountain, and Keystone XL.

A Minnesota regulator late last month approved a certificate of need for Enbridge Inc to rebuild its Line 3 oil pipeline, angering environmentalists.

“We’re definitely seeing progress. The innate logic of replacing a pipeline that needs to be replaced is finally being seen by courts,” Peabody said, referring to Line 3.

The Keystone XL pipeline project has been a lightning rod of controversy for a decade, hotly contested by environmentalists even though Canadian oil producers say it is desperately needed.

On the Trans Mountain pipeline, Peabody was optimistic the line will be built.

“Every time I see the prime minister, he assures me it’s going to be built, so I believe that it will happen,” he said.

To be sure, some companies are more cautious, maximizing the use of every barrel.

Imperial Oil Ltd is boosting its refineries’ capabilities to handle more heavy oil, Chief Executive Richard Kruger said.

“The whole objective is to minimize the amount of barrels that are exposed to Alberta and the price discounts,” Kruger said.

Cenovus Energy Inc is awaiting more clarity on market access before it restarts construction on two deferred projects that will have a combined starting capacity of 75,000 bpd, said Cenovus Executive Vice President Al Reid.

Longer term, the companies stressed the need for more infrastructure to plan and invest in projects.

Reporting by Marcy Nicholson and Devika Krishna Kumar in Calgary, Alberta; Editing by Dan Grebler and Chris Reese

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