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The Cost of Building Too Many Pipelines

April 28, 2010

Three small U.S. oil refineries are suing TransCanada to get out of their contracts to ship oil on the Keystone pipeline. They say that cost overruns on the Keystone pipeline have gone over budget by 145% in Canada and 92% in the U.S.

The article about the lawsuits has a doozy of a prediction.

So much extra capacity now exists that analysts believe when TransCanada completes its Keystone XL line – an expansion of Keystone that has yet to be constructed, but is expected to begin accepting oil in early 2013 – oil pipelines to the U.S. will run nearly half-empty.

This follows on the heels of an article last week that explained the rancor this pipeline overbuilding is causing in the oil industry. There has been a pipeline building boom, but the new Alberta oil production that they were built to carry has not happened due to the recession. And the price of oil is going to have to go up a lot before it’s cost effective to start much new production in the tar sands, where this oil comes from.

When there are too many pipelines and not enough oil to go in them, costs to ship oil go up because construction costs for all the new pipelines have to be paid by somebody.

Three guesses who eventually will pay.

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One Comment leave one →
  1. May 1, 2010 2:03 pm

    Perhaps the overbuilding of pipelines apparently in excess of domestic demand for oil is a reason the XL pipeline EIS map for western SD shows that they also intend to build a pipeline from the end of that to the gulf coast at sometime. If this is to export oil or petroleum products from the pipeline, it kind of negates all the hype in their propaganda about building the pipeline to provide a reliable supply of oil to the US.

    Incidentally, the EIS report now in libraries for the western SD pipeline shows the meeting information for Murdo, SD in the Nebraska list instead of the SD meeting list. The meeting for Murdo, SD is scheduled for May 12, 2010.

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