http://www.technologyreview.com/news/533981/low-oil-prices-mean-keystone-pipeline-makes-no-sense/
If prices stay in the low $50 range, “the necessity for Keystone XL may disappear,” says Pete Howard, the president emeritus of the Canadian Energy Research Institute in Calgary, Alberta. “We’ve got rail [transportation] right now as a safety valve, and if we build up rail capacity to carry three-quarters of a million barrels, that pretty much takes up all the projects that are under construction right now.”
Last summer, rail capacity handled 240,000 barrels daily, and the Canadian Association of Petroleum Producers projects that rail capacity will grow to 700,000 barrels per day by 2016.
Oil prices today stand around $50 a barrel, a plunge of more than 50 percent since last summer due to a glut of production, including from the United States. Saudi Arabia’s recent decision to not scale back production has also softened demand.
Canada holds the world’s largest known reserves of bitumen, a tar-like form of petroleum, in underground sands in the province of Alberta. Recovering this oil is done in two basic ways: washing the sands with hot water and chemicals, or injecting steam through horizontal shafts underground. Both processes are more costly than traditional oil drilling, and emit more greenhouse gases (see “Canada’s Oil Sands on the Verge of a Boom Again”).
Right now there are at least 20 oil sands projects under construction in Alberta that are due to come online between now and the end of 2017. Regardless of oil prices, they will be finished because much of the capital expenditure is already sunk. However, Howard adds, “by this time next year, if the oil price hasn’t moved back upwards, the next stream of projects will start to be delayed.”
Last year, a London-based think tank, Carbon Tracker Initiative, issued a report carrying even more conservative predictions. It said oil prices would need to be at $95 per barrel or higher for 92 percent of Canada’s tar sands production to make economic sense.