Citing pipeline constraints, Statoil postpones tar sands expansion project

The Norwegian oil company Statoil has announced it is postponing the development of its 40,000 barrel per day (bpd) Corner in situ tar sands project for at least three years due to rising costs and a lack of pipeline space. Statoil’s announcement is the third major tar sands expansion project to be cancelled or postponed this year due to rising costs and a lack of pipeline capacity, following the cancellation of Shell’s proposed 200,000 bpd Pierre River tar sands mine and Total’s 160,000 bpd Josyln mine. In addition to the cancellation of three major tar sands expansion projects, the Canadian Association of Petroleum Producers (CAPP) have substantially reduced their forecasted rates of tar sands expansion, and rising costs have caused an investor exodus from the sector. In the face of these announcements, it’s time to abandon the tattered argument that major pipelines like Keystone XL would not enable substantial tar sands expansion and associated carbon emissions. Industry doesn’t believe it – and neither should policy makers. Keystone XL fails the President’s climate test and should be rejected.

Statoil’s announcement demonstrates just how economically marginal tar sands expansion projects are. In fact, in situ projects like Statoil’s Cromer are the lowest cost tar sands projects. According to CERI’s most recent estimates, breakeven prices for new in situ projects are now $85 per barrel. Breakeven prices for stand-alone mines are even higher at $105 per barrel. And these estimates assume the availability of cheap pipeline capacity. Based on these figures, it’s easy to see why Statoil has postponed its Corner tar sands project for at least three years – long enough to see whether or not tar sands pipelines like Keystone XL move forward.

As these facts come in, we simply cannot continue to pretend that decisions our nation makes about major energy infrastructure will have no upstream impact. It’s clear that State’s January 2014 conclusions vastly underestimated the importance of Keystone XL to the tar sands industry’s expansion plan and the carbon emissions associated with it. If we build Keystone XL, we’ll see many of the tar sands projects that are being cancelled and postponed become viable once again. At a time when decisive action on climate change is urgently needed, the Keystone XL tar sands pipeline would make the problem of carbon pollution worse – enabling the production of some of the world’s dirtiest fossil fuels.