Gulf Coast opportunities grow for Canadians

CALGARY • With light oil imports falling to their lowest levels to date and heavy oil imports declining in North America’s largest refining market, analysts say there’s a growing opportunity for Canadian energy companies to ship more of their product to the U.S. Gulf Coast.

The Washington, D.C.-based Energy Information Administration said Tuesday that light, low-sulphur oil imports in the Gulf Coast had been “virtually eliminated” in recent years. The EIA released an analysis that showed imports of these light blends — mostly from Africa — had fallen from historic levels of 1.3 million barrels per day to less than 200,000 barrels per day.

Wood Mackenzie senior refining analyst Afolabi Ogunnaike said in an interview there is an additional opportunity for Canadian heavy oil companies to increase their market share on the Gulf Coast — a grouping of 50 refineries that Canadian producers have been trying to reach for years — because production from Mexico, Venezuela and Colombia are either in decline or producers there are shipping more of their product to China.

“I see Canadian crude being able to replace some of the crude that’s being pulled out toward Asia,” Mr. Ogunnaike said. He also noted that refiners prefer Canadian heavy oil, or Western Canada Select, to blends from Latin America, called Maya, because it generally cheaper.

“The refineries here are some of the most complex in the world. There’s going to be the need for this heavy oil,” Mr. Ogunnaike said.

According to the Canadian Association of Petroleum Producers’ most recent crude oil forecast, only 118,000 barrels of oil from Western Canada reaches the Gulf Coast market. However, that is beginning to change.

In the fourth quarter of 2014, Enbridge Inc. called for linefill on its recently completed Flanagan South and Seaway pipelines, which will boost the number of heavy barrels refined in the region. Mr. Oggunaike noted that oil imports from those two lines are not yet reflected in the EIA’s data or analysis.

A report from Citi Group in January said that “the first of many waves of Canadian crude oil capable of reaching the US Gulf Coast by pipeline in significant quantity for the first time” could bring as much as 350,000 additional barrels of oil into the region in the first half of this year.

Greg Stringham, CAPP’s vicepresident of oilsands and markets, said Canadian oil exports to refining markets throughout the U.S. are now averaging 3 million barrels per day, which is roughly 80% of the total oil produced in Canada.

Mr. Stringham added that exports to the U.S. were still growing, albeit at a slower pace than expected, thanks in large part to TransCanada Corp.’s long-delayed 800,000 barrel per day Keystone XL pipeline, which is still awaiting the approval of U.S. President Barack Obama.