WASHINGTON, April 29, 2013 /PRNewswire/ -- The increasingly contentious debate over the environmental impact of TransCanada Corp's (TRP) Keystone XL Pipeline obscures the oil and gas industry's pursuit of alternative means to deliver rising production from Canada's oil sands to the U.S. and other markets.
Facing lower price realizations in oil-glutted Western Canada, enterprising oil-sands producers have already turned to railways to deliver their output to the US market. In fact, weekly car loadings of petroleum products originating from Canada hit an all-time high in mid-February.
Roger Conrad expects this trend to continue to gain momentum while the Keystone XL project hangs in limbo. "The big money is committed to oil-sands development and the market is already there," says Conrad. "Even if the Obama administration doesn't approve the pipeline, the oil will reach end-users by any means necessary, including rail."
And these end-users aren't necessarily in the U.S. The oil industry has also targeted emerging-market Asia as another destination for heavy-oil exports--a move that would make sense given the USD40.25 billion that China's three national oil companies have invested in Canadian energy assets over the past five years.
Enbridge's (ENB) Northern Gateway Project includes an oil pipeline with nameplate capacity of 525,000 barrels per day that would transport diluted bitumen from Edmonton, Alberta, to Kitimat, British Columbia, for export to Asia. Fierce local opposition to this project has prompted industry participants to push back the expected start date to 2019.
Meanwhile, Kinder Morgan Energy Partners LP (KMP) in early 2012 announced a $4.1 billion plan to expand the capacity of its Trans Mountain pipeline to 750,000 barrels of oil per day from 300,000 barrels of oil per day. This system transports output from Alberta's oil sands to the Port of Vancouver on Canada's Pacific Coast. Management expects the project to be completed in 2018.
But with the inordinate focus on the fate of Keystone XL, the market has discounted oil-sands producers' long-term growth prospects. Conrad regards this skepticism as an opportunity. "Investors need to take advantage of the uncertainty surrounding the pipeline and the recent dip we've seen in oil prices," says Conrad. "I favor high-quality names such as Cenovus Energy (CVE) and Pembina Pipeline Corp (PBA), a well-positioned midstream operator."
Roger Conrad and Elliott Gue to Host Free Live Chat
Roger S. Conrad needs no introduction to individual and professional investors, many of whom have profited from his decades of experience uncovering the best dividend-paying stocks for accumulating sustainable wealth. The founder and former editor of Canadian Edge, MLP Profits and Utility Forecaster, Conrad built a reputation for providing high-quality investment research and analysis.
On April 27, Conrad joined his long-time friend and colleague, Elliott Gue, as co-editor Energy & Income Advisor (www.EnergyandIncomeAdvisor.com), a semimonthly online newsletter that's dedicated to uncovering the most profitable opportunities in the energy sector. Conrad and Gue will host a free Live Chat (https://www.energyandincomeadvisor.com/043013-april-live-chat/) on April 30, 2013, at 2:00 p.m. EDT to answer questions about Keystone XL and other critical topics for energy investors.
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SOURCE Energy & Income Advisor