Wall Street Journal: Buffett’s Lesson for Keystone and Canada

“Canadian oil producers face an even harder battle. Western Canadian Select, or WCS, is a relatively heavy grade of oil, so it should be cheaper than a lighter benchmark than Brent. But the discount, now $38 per barrel, owes much to transportation bottlenecks. . . . TransCanada’s Keystone, along with a couple of other planned expansions of existing pipelines, should boost capacity to about 4.8 million barrels per day in 2015—if Keystone gets built on time. Even then, though, more capacity will be required beyond 2017. The most obvious route is westward to Canada’s Pacific coast, from where oil could be exported to Asia’s growing market. TD Economics estimates piping oil to the coast would cost about $3 a barrel. Both Enbridge and Kinder Morgan have proposals on the table adding up to a combined 1.2 million barrels per day of capacity. But they also face significant opposition from environmentalist and First Nation groups. Another option is to pipe the oil eastwards to Quebec and possibly all the way to the Atlantic coast at St. John, New Brunswick. TD estimates this would cost $8 a barrel. And Poten & Partners, a shipbroker and consultancy, points out that St. John can handle the largest types of tankers that could then ship oil onto East Asia for about another $5 a barrel.”