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Approved oilsands projects remain on hold amid low pipeline capacity

An oil worker holds raw sand bitumen near Fort McMurray, on July 9, 2008. THE CANADIAN PRESS/Jeff McIntosh

Dozens of approved oilsands projects could be built in the wake of the Frontier oilsands mine being shelved last week, but analysts say they’re unlikely to proceed until more pipeline capacity is available.

Oilsands analyst Phil Skolnick of Eight Capital says the Frontier application withdrawal by developer Teck Resources means existing producers with approved projects have a decided advantage over new entrants.

He says developers of smaller “in situ” projects have a leg up over open-pit mining projects because they can make money with lower oil prices and usually need just provincial approvals.

In a recent letter to the Alberta government, Federal Environment Minister Jonathan Wilkinson estimated 2.7 million barrels per day of oilsands growth is planned or under construction, an amount that could lead to emissions higher than regulation limits.

But Skolnick says transportation constraints cap the increase in output at about half that level, and then only if both the Trans Mountain and Line 3 pipelines are built, crude-by-rail capacity grows by about a third and Alberta cancels its oil production curtailment program.

Benjamin Israel, fossil fuels analyst for the environmental Pembina Institute, says oilsands mining megaprojects are things of the past, with smaller, more nimble projects now favoured for their lower cost and environmental footprint.