President Barack Obama’s rejection of TransCanada Corp.’s proposed Keystone XL pipeline could give Venezuela’s ailing economy a lifeline.
With the world’s largest oil reserves, the South American country produces heavy crude that’s similar in consistency to the one coming from Canada’s oil sands, and its economy relies largely on shipping it to the same U.S. Gulf Coast refineries that Keystone XL was meant to supply.
“The number one beneficiary of all this will be Venezuela and other suppliers of heavy oil that ship to the Gulf Coast by tanker,” IHS Energy Inc. Vice President Jim Burkhard said by e- mail.
Venezuela is facing an economic crisis as the price of crude, its main source of revenue, has plummeted by more than half since June last year to trade below $50 a barrel. The slump has caused a rift within the Organization of the Petroleum Exporting Countries, of which Venezuela is a member, as Saudi Arabia continues to pump crude from the ground at an unprecedented pace.
“Venezuela is facing what could end up being the largest external shock of its history,” Bank of America Merrill Lynch Global Research analysts Francisco Rodriguez and Jane Brauer wrote in a Nov. 4 note to clients.
The nation has reacted to the crisis through a combination of import cuts and asset depletion and may further curb imports, they said.
Venezuela is more reliant than ever on petroleum earnings, which account for 95 percent of export income and almost half of government revenues, according to the country’s foreign ministry.
Venezuela’s Oil Minister Eulogio Del Pino last month said the country was exporting around 2.4 million barrels a day. Of that total, 1.3 million are destined for China and India. In August, Venezuela sent an estimated 935,000 barrels a day of oil to the U.S., according to EIA data.
Keystone XL, rejected Friday by Obama, would have spanned 1,179 miles (1,897 kilometers) from Alberta through three states -- Montana, North Dakota, and Nebraska -- before connecting to an existing pipeline network feeding crude to the Gulf refineries.
Obama, siding with an assessment from the State Department, said the Keystone XL project isn’t in the U.S. national interest and that it "would not make a meaningful long-term contribution to our national economy." He said it wouldn’t lower domestic gasoline and wouldn’t bolster U.S. energy security.
“This decision puts to shame Venezuela’s allegations that Obama is waging an economic war on Venezuela," Carlos Rossi, president of Caracas-based consulting firm EnergyNomics, said in a phone interview. "If Obama wanted to wage an economic war on Venezuela, approving this pipeline would have been an excellent way to do it. ”
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