According to the new IHS study, the proposed Keystone XL pipeline would have no material impact on US GHG emissions. In the absence of the pipeline, alternate transportation routes would result in oil sands production growth being more or less unchanged, the study says.
The study also found that any absence of oil sands on the US Gulf Coast (the destination for Keystone XL) would most likely be replaced by imports of heavy crude oil from Venezuela, which has the same carbon footprint as oil sands.
The pipeline's potential impact on GHG emissions has been the subject of increased focus. President Barack Obama's June 25 climate address indicated that the relative emissions related to increase Canadian oil sands processing in US markets resulting from the pipeline are key criteria for the United States' decision whether to approve the project.
The new IHS CERA Canadian Oil Sands Dialogue study agrees with the conclusions of the US State Department's Draft Supplemental Environmental Impact Statement for Keystone XL that says oil sands production is expected to continue at similar levels regardless of whether Keystone XL goes forward. IHS currently expects oil sands production to grow from 1.9 million barrels per day (MMbpd) in 2013 to 4.3 MMbpd in 2030 and does not expect the Keystone XL decision to have a material impact on the production outlook.
The IHS study points out that 3 MMbpd of additional oil sands pipeline capacity (not including Keystone XL) is currently proposed. Eighty percent of this proposed alternate capacity travels exclusively through Canadaconnecting the oil sands with Canada's west and east coastsand thus would not require U.S. government approval.
Even if pipeline capacity were to lag behind oil sands growth, the study says that transportation by rail is expected to play an ongoing role and that greater investment could make rail more economic to a level approaching that of pipelines.
The study found that with sufficient scale and investment the additional cost of transporting oil sands by rail to the US Gulf Coast rather than by pipeline could be lowered from today. If heavy oil sands producers were to invest in improved rail efficiencies, the economics could be within $6/bbl compared to pipeline (for each barrel of oil sands produced). This would place rail well within the break even range for most oil sands production. One source of improved economics could come from shipping oil sands bitumen in its pure state. A lack of pipeline capacity would incentivize such added investment.
The study also found that, were oil sands not to be shipped to the US Gulf Coast, it would result in little to no change in overall GHG emissions. The regionwhich contains 50% of total US refininghas a large capacity to process heavy crude. This means that crude oils of similar GHG intensity would continue to be refined in the absence of oil sands, the study says.
Venezuela is currently the largest single supplier of heavy crude to the US Gulf Coast and would be the most likely alternative source of heavy crude supply absent oil sands. IHS research has found Venezuelan heavy crude to have a similar range of life-cycle GHG emissions as oil sands imported into the United States.
Venezuelan heavy oiland Venezuelawould be the number one beneficiary of a negative decision on Keystone, the study says.
The complete study is available at the oil sands dialogue website,