Shares in TransCanada Corp (TSE:TRP, NYSE:TRP) slumped on Friday as President Obama rejected the proposed Keystone XL pipeline, which would’ve connected Canada’s vast but isolated oil sands operations to America’s Gulf Coast hubs.
The American president said the project would not make a meaningful long term contribution to the economy.
Keystone XL, a massive controversial pipeline project, was supposed to carry some 800,000 barrels per day and without it there is doubt over the future of Canadian oil sands.
The project had become something of a focal point for environmental and climate change campaigners. More recently, meanwhile, weak oil prices have further dented the proposals as Canadian oil sands are among the most costly to develop resources in the world at present.
In this context it was particularly notable that Shell last month shelved its activities at Carmon Creek, in Alberta, where some 80,000 barrels of daily production was targeted.
Shell blamed the lack of distribution infrastructure among the reasons for the decision, which triggered US$2bn of write downs and meant more than 400mln barrels of reserves were wiped off the oil major’s inventory.
Obama’s rejection has been seen as increasingly likely, though TransCanada was reportedly hoping to have the can kicked down the road so that the decision would be made by America’s next Whitehouse administration.
In New York, TransCanada shares fell 5.5% to trade at US$32.49 while the price in Toronto was down 4.7% at C$43.11.