U.S. Oil Giants Poised to Gain on Keystone Pipeline

08-05-2011 // Amy Harder

The following is an excerpt from the National Journal.

After Kensington

Three major American oil companies are poised to gain big if the Obama administration green-lights a controversial pipeline that would send 700,000 barrels of oil a day from the oil sands of Alberta, Canada, to refineries in Texas.

Shell, Valero, and ConocoPhillips are expected to ship oil via the Keystone XL pipeline if it’s approved, according to the companies and TransCanada, the Canadian company seeking to build the pipeline. Two Canadian companies, Canadian Natural Resources Limited and Cenovus Energy, also have signaled interest in using the pipeline.

The U.S. State Department has said it will decide by the end of the year whether to approve the pipeline. Its approval is needed because the pipeline would cross international borders.

Debate over the project has focused largely on its environmental and economic impacts. It would more than double the oil capacity—from 591,000 barrels to 1.3 million barrels a day—being shipped through the TransCanada pipeline system, a branch of which is already operating from Alberta to Illinois and Oklahoma. TransCanada hopes to start operating Keystone XL by 2013, which would run 1,700 miles in total from Alberta to Texas.

Some congressional Democrats and environmental groups oppose the Keystone XL project because of concerns about the extraction and production of oil sands, with processes that are more detrimental to the environment than conventional oil drilling. The method emits more greenhouse gases and damages the land around the extraction area. Supporters of the project say it is critical to weaning the U.S. off oil from unstable areas like the Middle East.

Little attention has been paid to what specific companies are positioned to benefit the most should the project be approved, and what that could mean for the oil shipped through the pipeline.

Shell is more than doubling its refining capacity—from 275,000 to 600,000 barrels of oil a day—at a refinery in Port Arthur, Texas. Port Arthur is one of two destinations for oil that would be shipped via Keystone XL. That refinery is half-owned by Saudi Aramco, the state-owned oil company of Saudi Arabia. The final destination for the additional oil refined at Port Arthur remains to be seen. But the connection between Shell and Saudi Aramco is galvanizing environmentalists.

“Oil companies say this will reduce our dependence on Middle Eastern oil, but in reality the pipeline will shift tar sands oil coming into America’s Midwest and send it instead to port refineries controlled by Saudi Arabia, who can then charge higher prices or ship it anywhere in the world,” said Jeremy Symons, senior vice president for conservation and education at the National Wildlife Federation. “America is becoming the middleman in the global oil business.”

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