The largest crash in petroleum prices since the financial crisis has hammered oil-related stocks in the past six months.

WTI Crude Oil Spot Price Chart
WTI Crude Oil Spot Price data by YCharts.

Crude's collapse also potentially threatens major oil pipeline projects such as TransCanada's (NYSE:TRP) Keystone XL pipeline. So let's take a look at what potential cancellation of this major growth project would mean for the company and for the security and growth prospects of its dividend. 

Keystone XL clears yet another political hurdle, but completion far from certain 
On Jan. 12, the new Republican-controlled U.S. Senate voted 63-32 in favor of a bill authorizing construction of the controversial pipeline. The pipeline would transport 830,000 barrels of Canadian crude per day to U.S. refineries on the Gulf Coast. 

Source: TransCanada.

Source: TransCanada investor presentation.

Thus, completion of this project, which has spent six years mired in regulatory purgatory, is of paramount importance to the company's shareholders and the 7.24% projected dividend growth rate analysts expect over the next decade. 

That's because management estimates Keystone XL would be worth about $1 billion in additional annual EBTIDA once completed in 2018. This single project holds the potential to increase TransCanada's EBITDA by 18%, a vital part of the company's efforts to double earnings between 2013 and 2020.

Will low oil prices kill Keystone XL? 
Pipeline competitor Enterprise Products Partners (NYSE:EPD) has already canceled a 1,200-mile pipeline that would have transported 340,000 to 700,000 barrels per day of Bakken shale oil from North Dakota to Cushing, Okla., where West Texas Intermediate oil -- the U.S. standard -- is priced. Enterprise said low oil prices have decreased demand from oil producers to such a degree that the project's economics no longer made sense. 

So how likely is the cancellation of Keystone XL due to the recent oil crash? The answer is complicated by the long-term average oil price.

For example, according to Mark Oberstoetter, an analyst for research firm Wood Mackenzie, up to $59 billion in Canadian oil projects face delay or cancellation between 2015 and 2017 if Brent oil remains at $60 over the next three years. With Brent oil at $55.4 per barrel as of Feb. 4, the prospects of canceled Canadian oil projects seems rather high. In fact, prior to the price collapse, Total (NYSE:TOT), Statoil (NYSE:EQNR), and Suncor Energy (NYSE:SU), have already announced the indefinite delay of their $11 billion Joslyn oil sands mine, which had been designed to provide 100,000 barrels of oil per day.   

The Canadian Energy Research Institute estimates that the breakeven price for new Canadian oil sands mines is $105.54 per barrel. This puts other major projects at risk, including Suncor and Total's $13.5 billion Fort Hills mine, which was scheduled to come online in 2017 and produce 165,000 barrels per day.

In total, Wood Mackenzie estimates that, should oil prices remain around $60 per barrel through 2017, 650,000 barrels per day of expected new Canadian oil production could be delayed or canceled -- potentially decreasing demand for Keystone XL's transportation services. While much of the Keystone XL pipeline's capacity is already secured under take or pay contracts -- the company is paid whether producers ship oil or not -- it's not fully booked and it's excess capacity (about 20% of total capacity), which is sold at spot rates, might end up going unused if oil prices remain too low for too long. 

What does this mean for TransCanada's dividend? 
TransCanada's dividend growth rate over the last 18 years has been a lackluster 4.4%. Yet long-term investors have still been rewarded with a 10.2% annual total return, far superior to the market's 7.8% performance. 

The prospects of major growth projects such as Keystone XL were expected to accelerate TransCanada's dividend growth and provide a major growth catalyst for future market-beating returns. The current annual dividend of $1.65 per share -- a 3.5% yield -- represents only 36% of the company's operating cash flow, and 30% of its EBTIDA,  indicating that even should Keystone XL be permanently canceled, the payout would not need to be cut. This is because TransCanada's cash flow is mostly protected by long-term contracts, and the company is also diversified into natural gas pipelines and power generation.  

Should low oil prices persist for several years or U.S. regulatory approval continue to hold up the pipeline, I would expect TransCanada's dividend growth to miss present growth projections. However, given the company's enormous backlog of projects, I believe dividend growth, while slower, would persist and make for potentially market beating long-term total returns. 

The takeaway: Current dividend protected by secure long-term contracts, but future growth rate could be threatened
While Keystone XL must still clear a presidential veto, a prolonged period of low-price oil might decrease demand enough to delay or even kill the project no matter what the White House decides. While this would not likely threaten TransCanada's current dividend, it would likely slow the payout's growth rate. Thus, potential and current investors should keep this risk factor in mind when making allocation decisions regarding their diversified income portfolios.