The missed deadline would mean the deal will be finalized with the Canadian government as the new owner. And according to a Bloomberg report, the pipeline will likely be sold to a Canadian-led consortium rather than a single buyer.
A spokesman for Finance Minister Bill Morneau declined to directly say if there’d be a sale to a third party by July 22 but said the government won’t hold the pipeline forever.
“We have no interest in being a long-term owner of a pipeline, but we will be the temporary caretaker,” spokesman Daniel Lauzon said by phone when asked about a sale. “We won’t rush that.”
With all this riding on the federal government ultimately selling the pipeline with the idea of construction resuming, there is continued opposition from the provincial government of British Columbia which is waiting on a key court ruling.
The provincial government has given no indication it will drop its efforts to impose additional regulations on the pipeline, and this is keeping third-party buyers wary of committing to a purchase.
Kevin McSweeney, a fund manager at CI Investments in Toronto, points out that the fierce opposition to the project was the reason for Kinder Morgan’s threat to abandon the project in the first place, reports the Financial Post. “A buyer would be reluctant to take it on for the same reasons that Kinder decided not to go forward,” said McSweeney, who helps manage $13 billion.
“Perhaps someone would be willing to purchase the project at a big discount, but I doubt the government would want to lock in a loss given the political acrimony this file has generated.”
How much will the completed pipeline help Canada?
A lot of the arguments for a completed pipeline to the west coast center on Kinder Morgan’s original promise that the bigger line would help the nation’s producers ship more crude to fast-growing importers like China and India, according to the Bartlesville Examiner-Enterprise.
But the Enterprise points out some very interesting statistics on just how much oil gets shipped out from the existing pipeline. They note that out of the 48 tankers that entered the Westridge Dock or Parkland Burnaby terminals over the past year, only two tankers departed, headed for Asia.
One of those vessels left for South Korea in April, and the other departed for China earlier this month. Both were carrying an estimated 550,000 barrels of crude.
According to the National Energy Board statistics, essentially all of Canada’s crude oil exports for the first four months of this year have gone to the U.S.
Jeff Rubin, an independent economist who previously served as chief economist of CIBC World Markets says the idea that the Trans Mountain pipeline extension will help oil producers get a better price in Asian markets is “fiction.”
So basically, where the oil goes once it leaves Canada is not a big worry for oil producers, just as long as it gets sold. And right now, the U.S. is its biggest buyer.
