President Donald Trump announced on March 24 the approval of the controversial Keystone XL pipeline, after years of rejections and delays by the former administration of President Obama.
When announcing the approval of the permits for TransCanada’s pipeline, which will carry around 800,000 barrels per day (bpd) of Canada’s heavy oil to the Gulf of Mexico area, Trump said: “It is a great day for American jobs and energy independence.”
The approval follows years of intense debate over the pipeline amid hefty opposition from environmental groups, who argued that the pipeline supports the extraction of crude oil from oil sands, which pumps about 17 percent more greenhouse gases than standard crude oil extraction. Environmentalists also opposed the pipeline because it would cut across the Ogallala Aquifer, one of the world’s largest underground deposits of fresh water.
So will this pipeline be a threat to members of the Organization of the Petroleum Exporting Countries (OPEC), who send their medium and heavy crude to refineries in Texas and Louisiana, or will it be just another pipeline that will carry crude from one place to another?
The Houston-based oil analyst, Anas Al-Hajji, sees the construction of the pipeline as a direct threat to OPEC countries, mainly Saudi Arabia, Kuwait, Iraq and Venezuela, who send a big chunk of their exports to the Gulf of Mexico.
Refineries in the Gulf area are very complex and it is more economical for them to run heavy crude than light sweet grades that are produced from shale oil regions in the US. Even if the Canadians could not send the heavy crude to the Gulf of Mexico, they were planning to send that crude to Asia via another pipeline that heads west, thus affecting OPEC’s share in Asia, Al-Hajji said.
Yet the impact might not be as big as everyone is thinking, said Sadad Al-Husseini, a Saudi analyst and former Aramco executive. The demand for oil is growing by over 1 million bpd per year and by the time the pipeline is done, OPEC’s crude will find a spot either in the US or elsewhere.
