Shifting Oil Sands Economics Work To Houston's Benefit

2011 NASA Earth Observatory image created by Robert Simmon using Landsat data provided by the United States Geological Survey. Caption by Holli Riebeek.
A study by energy research firm IHS CERA provides a fresh economic argument for building the Keystone XL pipeline.

Crude oil extracted from the Alberta oil sands is the consistency of peanut butter. There are three options to render it usable. It can be refined on the spot. It can be upgraded to a light, sweet crude. Or it can be blended with fluids and shipped to refineries elsewhere.

The report from IHS CERA finds that Alberta is unlikely to build new refineries or upgrade facilities any time soon. The price difference between the heavy crude they would take in and the products they would turn out to make a profit is too narrow to justify the multibillion dollar investment needed.

The report notes refineries on the U.S. Gulf Coast already process nearly 2.5 million barrels of heavy crude a day. It concludes such refineries could absorb the Alberta oil sands’ product with little or no new investment.

The Obama Administration is weighing a revised permit application by TransCanada to build the Keystone XL pipeline, which would transport crude from Alberta directly to Port Arthur and Houston. The White House is expected to issue a ruling by summer.

Bio photo of Andrew Schneider

Andrew Schneider

Business Reporter

Andrew Schneider joined KUHF in January 2011, after more than a decade as a print reporter for The Kiplinger Letter...