A shipment of Alberta oil sands crude shipped by rail to terminal in Portland Oregon sailed to China last January. Northwest Engineering photo.
Nearly all Alberta oil sands crude exports go to the US
According to a report by Bloomberg, a shipment of Alberta oil sands crude left the Port of Portland, Oregon, in January bound for China.
This means that Canadian crude producers have found a way to ship oil via tidewater to customers in the growing Asian market, bypassing the controversial Trans Mountain pipeline and shipping crude to customers outside the United States.
US Census data shows the export that left Portland was 243,879 barrels of foreign crude. The crude had an API of under 25, which indicates it was heavy oil, similar to the crude produced in the Alberta oil sands.
Kinder Morgan’s Trans Mountain pipeline expansion has been granted approval by the National Energy Board, but is mired in opposition from First Nations, environmentalists and local governments. The BC government recently proposed limiting any increase in shipments of diluted bitumen because of concerns over possible spills.
Once the pipeline is completed, it will nearly triple the capacity of the current pipeline.
At a time when opposition to Kinder Morgan’s pipeline expansion is throwing up roadblocks to construction of the line, Canadian oil producers are looking to ship their crude via tidewater to other markets, including Asia.
Crude production in Canada is rising. According to the Canadian Association of Petroleum Producers, Canadian crude production in 2016 amounted to 3.85 million barrels per day (b/d), and is expected to rise to 5.1 million b/d by 2030.
Shipping Canadian crude via tidewater will open producers’ markets up beyond the United States. The United States was once Canada’s biggest customer, and with production in the US growing and expected to top 11 million b/d later this year, it now is Canada’s biggest competition as well.
According to Statistics Canada and US Census Bureau data for 2017, 98.5 per cent of all Canadian crude exported was transported to the United States.
In November, a leak was detected on TransCanada’s Keystone pipeline in South Dakota. Since then, pressure on the pipeline has been reduced, along with the amount of Alberta crude allowed to be transferred on the pipeline. As a result, heavy Canadian crude is now trading near their biggest discount to West Texas Intermediate futures in nearly four years.
Other pipelines carrying Alberta crude are filled to capacity and producers trying to ship oil via rail are facing bottlenecks as Canadian rail companies work to clear up a backlog of grain shipments.
Oil sands benchmark, Western Canadian Select, is trading at a discount of $25.75/barrel to WTI futures and a $29.68/barrel discount to Brent.
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