Being able to transport oil and gas produced in North America is a crucial issue that needs to be addressed if the promise of an energy independent future is to be realized, according to discussions at the Woodrow Wilson International Center for Scholars, as reported by the Oil and Gas Journal.
Oil and gas production in the Western Hemisphere has grown exponentially over the past few years while the demand for it has continued to grow in the Eastern Hemisphere, according to Woodrow Wilson Center public policy scholar Jan H. Kalicki, an expert in regional and global energy issues. He commented, “We need to better define North American prospects all the way from the Arctic to the Caribbean.”
The issues concerning the transportation of North American produced oil and gas ranges from the bottlenecks between unconventional producers, a refinery’s ability to handle different types of crude, and the funding for new pipelines that could move America’s natural gas surplus to, for instance, Mexico. The speakers from the Woodrow Wilson Center warned that these are obstacles that could hinder domestically produced oil and gas from reaching the global market and could also create limits for the industry’s continued growth.
Senior advisor for the U.S. Energy Information Administration Shirley Neff stated that, “Price differentials may slow drilling down in some U.S. areas … some prospects were drilled to hold leases. That’s slowing down.” Other analysts are arguing that updated policies are needed to encourage the development of infrastructure such as pipelines, which often require two or more years to build.
Robert Johnston, chief executive of Eurasia Group, said that, “If prices stayed at $80-90/bbl for the next few years, U.S. and Canadian growth will continue.” Some Canadian tar sand projects have been cancelled, however, due to the lack of access to pipeline infrastructure. For growth to advance, he continued, at least one of four major proposed pipelines (the Keystone XL, Energy East, Trans Mountain, and Gateway pipelines) will need to be approved.
In the U.S. the lack of pipeline infrastructure is a growing issue as well, due to how quickly domestic production has grown. For example, the production surge in the Marcellus Shale formation has prompted construction of multiple new pipelines. The lack of midstream infrastructure, though, has also led to an influx of oil-by-rail traffic, sometimes with disastrous consequences, such as the derailment in Lac Megantic, Canada, which resulted in the deaths of 47 people.
Neff also stated that there is “…somewhat of a mismatch between crude quality and refining preferences. Refiners have some flexibility, but there’s a fair expectation that large amounts of heavy crude will come from deep-water sources.”
North American countries could soon be in a unique position for integration, though, according to David L. Goldwyn, president of Goldwyn Global Strategies LLC. He went on to say, “We can do it more easily with Mexico and should consider how to invest there. The Caribbean is more challenging, but deserves a closer look. It all comes down to pipelines and exports. We need to determine whether we’ll be willing to make those choices.”
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