The much-discussed Keystone XL oil pipeline recently hit a setback when the Senate voted to not approve its Canada-to-Gulf construction. Though the House voted to pass it a few weeks earlier, it missed the Senate vote by only one. Many with an interest in the Keystone XL pipeline construction project recognize the Senate vote as a setback but believe the project will be built one way or another. Besides political issues, a wide number of regulatory and financing issues also need to be addressed before the pipeline can be built.
TransCanada, the company behind the oil pipeline project, has a plan B already set should the Keystone XL pipeline stall out. The Energy East Pipeline, which would make use of already existing east-to-west pipeline, is being marked as the possible backup. Because this Canadian pipeline would be built off an existing natural gas pipeline, less oil and gas financing would be needed. Building off existing pipelines is easier that laying down a brand new pipeline from regulation to cost to political reasons. TransCanada, for instance, has expanded several pipelines in Canada in recent years with little to none of the commotion that surrounds new pipeline construction.
Yet expanding or transforming existing pipelines rather than building and using new ones causes its own set of problems. Some oil and gas companies say lack of new construction has caused too many of their existing pipes to get backed up. New pipeline construction, whether for the Keystone XL pipeline or others, requires large capital that often comes from oil and gas loans. Re-using existing pipes – as well as delays due to politics, insufficient capital and regulatory issues — are causing delays in production, according to some oil company spokespersons.
Invoice Factoring Companies Can Support Demand for Capital
Other financing options such as oil and gas factoring (or factoring receivables), can help such contractors get the cash they need build a new pipeline or expand an existing one. Funding for such projects has been stalled itself with industry representatives stating that alternative financing companies, such as invoice factoring companies and others, need to step up to help fill the need for project financing.
So whether it makes national news as an oil pipeline construction project or not, oil and gas factoring can help contractors, producers, transporters, drillers and others get the capital they need to complete the next phase of the project.