Keystone report seen lifting TransCanada, producer shares

Sun Mar 3, 2013 4:30pm EST
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - TransCanada Corp (TRP.TO: Quote) shares are expected to get a boost on Monday from a positive U.S. report on the company's contentious Keystone XL pipeline, as are those of Canadian energy producers under pressure from deeply discounted heavy oil prices.

The U.S. State Department, in its long-awaited draft supplemental environmental impact statement, said on Friday that the proposed $5.3 billion oil pipeline to Texas refineries from Alberta would not likely accelerate Canadian oil sands production, and by extension, fuel a spike in greenhouse gas emissions.

The report, widely criticized by environmental groups opposed to the project, is far from the final step in the Keystone XL approval process, which has now dragged on for 4-1/2 years. The Obama administration rejected the proposal and invited TransCanada to reapply last year.

A final decision is not expected until July or August, but analysts and investors welcomed the development on the heels of increasingly forceful comments by President Barack Obama and new Secretary of State John Kerry about the need to fight climate change.

"I think it's a step in the right direction in regards to removing a material risk overhanging the Canadian oil sector that has been sold to near financial-crisis lows while the rest of the stock market is reaching new all-time highs," Martin Pelletier, managing director and portfolio manager of TriVest Wealth Counsel, said on Sunday.

"While certain oil stocks may rally tomorrow, I believe that the sector will continue to trade near current levels until the Keystone is actually approved by the Obama administration."

Weak heavy oil prices, largely due to limited pipeline capacity to ship the surging supplies from the Alberta oil sands to export markets, and long-depressed natural gas markets have combined to hamper energy-producer stocks in Canada.

The Toronto Stock Exchange's energy group is down 13 percent in the past year, compared with a 0.39 percent gain in the broad TSX composite index.   Continued...