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TransCanada Corp.’s Keystone XL pipeline. A new report from RBC says more than $9-billion of oil sands investment is at risk in the next seven years – and nearly $2.4-billion could disappear altogether – if the Keystone XL pipeline is cancelled or further delayed.Nathan VanderKlippe/The Globe and Mail

More than $9-billion of oil sands investment is at risk in the next seven years – of which $2.4-billion could disappear altogether – if the Keystone XL pipeline is cancelled or further delayed, says a report from RBC Dominion Securities.

The report, released Monday, builds on an earlier RBC analysis that warned that as much as a third of oil sands growth, or 450,000 barrels a day, could be put on hold between 2015 and 2017 if TransCanada Corp.'s Keystone XL pipeline is not approved by U.S. President Barack Obama.

The RBC report addresses the key issue in the debate over Keystone – whether the pipeline is an irreplaceable conduit for the oil sands and necessary if production is to grow, or one of many possible outlets, in which case, in its absence, growth in Alberta's bitumen production would at most be delayed.

According to the RBC report, which focuses on the effects on Canadian oil field companies, a "no" from Mr. Obama on Keystone would reduce expected capital spending in the oil sands by estimated $8-billion to $10-billion – the RBC report does not specify how the $9.4-billion was arrived at – with the majority of this spending reduction likely falling in the 2015-2016 period. The effects will be felt by construction, engineering and project management companies, and those who provide related services, such as module hauling and remote accommodations.

However, most of this $9.4-billion in deferred capital spending, $7-billion, would simply be delayed to the last years of the decade, around 2018-2020. The authors believe "Keystone XL impacts will be short-term in nature as operators find other ways to ship bitumen and synthetic crude to markets, leading to project deferrals but not outright cancellations."

Through a review process that began five years ago, TransCanada is seeking a presidential permit for the Keystone XL pipeline, which would run 1,900 kilometres from Hardisty, Alta., to Steele City, Neb. A decision from the Obama administration is expected later this year.

In March, a U.S. State Department draft report said the proposed pipeline – which if built could allow high volumes of Alberta bitumen to flow to the refineries on the Gulf Coast that offer higher prices – will not have a major impact on development in the oil sands and, therefore, on global emissions of greenhouse gases.

However, both the U.S. Environmental Protection Agency and environmentalists have contested the report, saying alternative means of getting oil sands crude to market are cumbersome. Mike Hudema, a campaigner with Greenpeace Canada, said a weakness of the State Department report is it assumes "oil will magically get to market some other way."

Greg Stringham of the Canadian Association of Petroleum Producers said while it's hard to quantify the total impact of a further Keystone XL delay, it would affect jobs and investment across a number of sectors in both the U.S. and Canada. At the same time, the energy industry is finding new ways to get oil sands production to market, including rail and converting existing natural gas pipelines to crude, he said.

"It's an indicator. And it's an important one to the industry because, as you know, pipeline capacity is tight," Mr. Stringham said of the pipeline. "But it clearly is not in the long term, in our mind, a limit on development of Canada's oil."

Cenovus Energy Inc. spokeswoman Rhona DelFrari said the company's plan is to continue with the expansions of oil sands facilities, with a new phase coming on every 12 to 18 months for several years.

"We're confident we will be able to find ways to get our increased oil production to customers," she said in an e-mail. "If there is a slowdown of activity, we would potentially be able to take advantage of lower prices for supplies and services for our expansions."

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