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TransCanada Turns Up the Heat on President Obama

Motley Fool Staff | May 31, 2013| More on:

The United States Congress is no stranger to lobbyists, but targeting the President and his staff directly isn’t exactly the norm for most corporations. Judging by the most recent actions of TransCanada (TSX:TRP,NYSE:TRP), the Keystone XL pipeline decision might just be a make-or-break decision for the company’s future. Even the province of Alberta has boarded the lobbying express with a direct ticket to Washington, DC.

Shift focus

While we all wait to find out if this northern leg of the Keystone XL pipeline will pass the final sniff test, there are a few other pipelines that could help alleviate the current oil glut that is causing Canadian crude to trade at a steep discount.

Mentioning this discount is important because refineries both in North America and abroad would love to get their crackers on it due to its relatively cheap asking price.

When identifying these potential buyers, it’s hard to overlook the 1.3 billion person market that is China. Toss in the 128 million strong Japanese market, and companies like Suncor (TSX:SU) – the world’s largest producer of bitumen – are suddenly licking their chops at the prospects of a market opening up that is nearly five times the size of their current south-of-the-border target market.

So how can they go about feeding these far-flung, yet voracious appetites? Well, pipeline expansions and proposals could be just the solution.

Kinder Morgan Energy Partners (NYSE:KMP) and Enbridge (TSX:ENB, NYSE:ENB) have applied to either expand an existing pipeline – in KMP’s case – or to build a brand new line out to the West coast.

Because this is a decision that rests solely with Canadian officials as no borders are being crossed, I believe that this is the area most of Canada should be focusing on. These pipelines would provide access to the Asian market via exports and the U.S. market by way of ships sending crude to refineries along the coast.

In the meantime, oil sands producers must remain on the edge of their oil derricks since a significant portion of their fates rest on these decisions. Takeaway capacity is badly needed in these producing regions, and without it, the disparity between the price of oil that can be charged and the overall benchmarks will undoubtedly remain wide.

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This post was authored by Fool.com contributor Taylor Muckerman. 

Fool contributor Taylor Muckerman has no position in any stocks mentioned at this time.  The Motley Fool has no position in any stocks mentioned at this time.      

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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