Nov 14, 2014

Cheap Oil,Economics no longer makes Keystone pipeline viable

MSN: The 28 percent decline in oil prices puts any oil project not under construction at risk of being canceled or delayed. What's next for Keystone?

"Anything not under construction [is] at risk of being delayed or canceled altogether," said Dinara Millington, vice president for research at Calgary-based CERI. Her cost estimates include the price of drilling new wells, meaning that existing wells that have already been paid for can continue to pump oil profitably, she said.

CERI' s analysis squares with the views of other experts, who have pointed to low prices as a sign that economic facts, at least for now, don't match political rhetoric coming from Washington, where Keystone has been a goal for both Republicans and for Senate Democrats from oil-producing states.

One of the latter, Louisiana Sen. Mary Landrieu, is in a tough reelection fight, which went to a runoff set for Dec. 6 after no candidate won a majority of the initial vote last week. Senate Majority Leader Harry Reid yesterday set a vote on Keystone for next week after Landrieu called for a vote in the Senate, which has refused to take up House of Representatives-approved legislation authorizing the pipeline.

Oil sands are among the most expensive sources of oil, costing an average of $75 to $80 a barrel to produce, Norwegian energy-consulting firm Rystad Energy said in June.

"I would think that in order for new drilling projects to be capitalized and economical, the price of oil would need to be around $85 to $90," Moody's Analytics energy economist Chris Lafakis said.


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