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Oklahoma producers still optimistic about pipeline project

The Obama administration rejected the proposed Keystone XL pipeline Tuesday, but Oklahoma oil and natural gas producers hope developer TransCanada Corp. will proceed with a segment that would link the oil storage hub at Cushing with refineries along the Gulf of Mexico.
BY JAY F. MARKS jmarks@opubco.com Published: January 19, 2012
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Oklahoma oil and natural gas producers are hoping for the best, despite the Obama administration's rejection on Tuesday of the proposed Keystone XL pipeline.

The transcontinental project is stalled once again, but producers hope developer TransCanada Corp. will proceed with a segment that would link the oil storage hub at Cushing with refineries along the Gulf of Mexico.

“We need the pipeline, whether it brings Canadian oil or not,” said Mike Cantrell, president of Domestic Energy Producers Alliance.

Cantrell said domestic oil production is increasing, but there is not enough pipeline capacity to get it to refiners.

Oklahoma Independent Petroleum Association President Mike Terry said there is a glut of crude oil at Cushing because there is not enough pipeline capacity to move it away from the storage hub.

“The result is Oklahoma Sweet crude oil has become less valuable,” he said. “Today, Oklahoma Sweet trades for $10 less, and has traded for as much as $28 less, than crude oil produced on the Louisiana coast or in the North Sea.”

Terry said that can add up to significant losses for oil producers, royalty owners and state government.

“If Oklahoma oil is selling on average for $10 per barrel less than crude oil from other parts of the globe, the price differential costs Oklahoma oil producers and royalty owners approximately $1.5 million per day,” he said. “In one year, the state would lose $75 million in gross production and income taxes.

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