Canada Needs New Oil Outlets After Keystone Rejection, IEA Says

Canada will need to find new outlets for its crude output after the Obama administration rejected TransCanada Corp.’s application to build the Keystone XL pipeline, the International Energy Agency said.

The Keystone decision has longer-term implications for Canadian oil producers and will result in the country having to find a West Coast export point by the middle of this decade, the IEA said today in its monthly oil market report.

Without either Keystone XL or a pipeline to Canada’s West Coast, producers will have to export extra volumes to refiners in the Midwest and the Rockies, instead of to the Gulf Coast or to China, incurring an $8 a barrel value loss in revenue, according to a Wood Mackenzie Consultants Ltd. assessment for the Alberta Department of Energy, the Paris-based agency said.

In the U.S., the short-term impact of the absence of the 1,661 mile (2,673 kilometer) oil pipeline on production will be limited because of rapid increases in rail and alternative pipeline capacity in North Dakota, the IEA said. Railways may account for more than half of total delivery capacity by 2015, according to the North Dakota Pipeline Authority.

The proposal to construct the 700,000 barrel-a-day pipeline from Alberta, Canada to the U.S. Gulf Coast was turned down by President Barack Obama in January after it wasn’t deemed to be in the national interest.

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