Despite this year's crash in crude prices, TC Energy Corp on Tuesday said it would start construction on the controversial $8bn Keystone XL pipeline after it secured financial backing for the project from the government of Alberta, Canada, pushing the long-delayed pipeline closer to fruition.
The company behind the controversial Keystone XL oil pipeline has finally chose to greenlight the project after years of delays.
This is good news for our oil and gas industry.
North America's most infamous oil pipeline project just got a surprise $5.3 billion financial aid package from Alberta as the Canadian province fights to rescue its battered oil-sands industry. TC Energy shares jumped 6.85 per cent to $62.26 on a rare positive day for the market this month.
Alberta, home of the world's third-largest oil reserves, has struggled for years as congested pipelines weakened prices and forced the provincial government to curtail production. The Calgary-based pipeline giant said it will invest the remaining $2.7 billion. Many companies in the province have cut capital spending as well due to the twin shocks of falling demand from the fast-spreading coronavirus outbreak, and an oil price war initiated by Saudi Arabia after its market alliance with Russian Federation collapsed in acrimony earlier this month.
"We can not wait for the end of the pandemic and the global recession to act", said Premier Jason Kenney in a statement on Tuesday. The credit rating firm said the project's construction could be disrupted by "demonstrations and civil unrest" as well as ongoing legal and regulatory challenges.
Richard Masson, executive fellow at the University of Calgary's School of Public Policy, said the Alberta investment was likely needed to mitigate a looming political risk from the US presidential election in November.
Moody's rates TC's debt Baa2, the second-lowest investment grade.
The decision disappointed US environmental groups that have fought against the pipeline in regulatory hearings and the courts for years.
At 1,210-miles (1,947-kilometres) in length, the Project will be capable of safely delivering 830,000 barrels per day (Bbl/day) of crude oil from Hardisty, Alberta to Steele City, Nebraska where it will connect with TC Energy's existing facilities to reach U.S. Gulf Coast refiners to meet critical needs for transportation fuel and useful manufactured products.
TC Energy's decision comes about two months after the U.S. Interior Department authorized construction across a swath of federal land in Montana, a sign that momentum was growing for a project that had been stalled by federal opposition in 2015. Contracts for 115,000 bpd on the existing Keystone line will then shift to the new facilities under renewed 20-year contracts for a total of 690,000 bpd or 83 per cent of capacity.
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