North America's energy transformation has progressed on two important fronts outside the US, where revulsion toward nongaseous hydrocarbons increasingly shapes federal policy. Canada has activated its third-best option for debottlenecking production from the landlocked oil sands of Alberta. And Mexico seems ready to shed 75 years of energy-investment xenophobia.
In Canada, TransCanada Corp. announced on Aug. 1 it will proceed with its Energy East pipeline between a new terminal at Hardisty, Alta., and refineries in Quebec and New Brunswick. The project, combining conversion of an existing natural gas pipeline and new construction, will span 2,700 miles and be able to carry 1.1 million b/d of crude oil. TransCanada estimates the cost at $12 billion.
Keystone XL
The company insists the project doesn't replace the Keystone XL system it proposes for moving synthetic crude oil and blended bitumen from Hardisty to the US Gulf Coast. Keystone XL, it says, remains viable. Still, the costly Energy East project probably wouldn't be advancing if the Keystone XL border crossing had received timely US approval.
Energy East initially won't carry bitumen blends, which its destination refineries aren't designed to process. At its far end, the pipeline will mainly displace imported crude. But it also will make more capacity available in existing southbound systems for oil-sands products. It thus will partly compensate for Keystone XL capacity now apparently destined to remain in decision suspense as long as Barack Obama is the US president. Eventually, Energy East will extend to a new terminal on the Canadian East Coast and give hydrocarbons produced in Alberta access to seaborne trade.
Unless expanded, capacity to carry bitumen products away from Alberta will limit production as early as next year. Albertan oil produced in excess of amounts transportable to the US must find its way into tankers. From Alberta, a route to tidewater much shorter than Energy East's is across the Canadian Rockies to the Pacific. Kinder Morgan wants to expand an existing westbound system, and Enbridge wants to build a new one. But those projects, like Keystone XL, face fierce opposition.
Keystone XL, although longer than the Pacific outlets, remains the most logical solution to western Canada's transportation problem. It would directly link Canadian bitumen with the world's largest concentration of refining capacity configured for heavy feedstock. That the project isn't nearly complete is a triumph of stop-work activism. That an ambitious project is proceeding in its absence is a triumph of economic resiliency—and, perhaps, practical recognition that Obama won't always be president.
In Mexico, two important political parties, including the ruling Institutional Revolutionary Party (PRI), are moving to end longstanding bans on private investment in oil and gas production and electric power. The National Action Party (PAN) on July 31 proposed changes to three articles of the Constitution, one of which reserves upstream oil and gas investment for state-owned Petroleos Mexicanos. The PRI was to have made its proposal last week, but President Enrique Pena Nieto on Aug. 7 announced a delay. He was reported to be worried that the Party of the Democratic Revolution (PRD), which opposes privatization, would instigate public protests against the initiative. The PRI and PAN have enough votes to pass constitutional reform.
Historic opening
An opening of Mexican exploration and production opportunities to private capital would be historic. Lacking access to modern technology and with decisions mired by a cumbersome, politically motivated bureaucracy, Mexico far underperforms its potential as an oil and gas producer. Clinging to an antique view of natural resources as national patrimony, Mexico has excluded itself from supply booms developing to the north from unconventional resources and deep water. Nothing would be better for the Mexican economy and people than the overdue step into the 21st century now under discussion.
Technology gives North America rich new promise for energy supply. The governments of Canada, Mexico, and the US must not let obstructionism, in any form, deny North Americans the benefits.
