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U.S. refiners turning to Canada for supplies
Gary Park For Petroleum News
Western Canada’s oil producing sector is facing a pipeline capacity crunch by 2015, with United States demand expected to almost double to 3.1 million barrels per day and domestic demand headed for a 44 percent increase to 1.1 million barrels per day.
In its annual long-term forecast of Canadian production and supply, the Canadian Association of Petroleum Producers established a “planning case” that points to a rise in output from the western provinces to 5.3 million bpd in 2020 from last year’s 2.4 million bpd, while a “moderate case,” based on slower expansion of the oil sands, projects supply of 4.6 million bpd.
However, total oil sands production is expected to reach about 3.37 million bpd by 2015, lagging slightly behind last year’s forecast of 3.5 million bpd.
But the “planning case” means there will not be sufficient pipeline capacity by 2012.
“It is very important that pipeline capacity is available on a timely basis and that refineries are able to process both the higher volumes and the changing (crude) mix,” said CAPP Vice President Greg Stringham.
In its first review of U.S. refineries, CAPP discovered that many more — after their long-term reliance on Saudi Arabia and Venezuela — are looking to Canada for supplies and more are exploring refinery configurations to a greater variety of crudes, including upgraded light synthetic crudes and heavy oil blends.
Canadian exports to U.S. rising The rise in exports to the U.S. — from 1.6 million bpd in 2006 to 2.4 million bpd in 2011 and 3.1 million bpd in 2015 — “reflects various drivers, such as: Canada’s proximity to the United States, geopolitical stability and security of supply for Canada and the United States,” the report said.
Stringham told reporters that U.S. interest in Canadian crude is building as refiners accept that oil sands production will increase.
As those volumes start to build and new markets open up, shrinking the price differential between heavy and conventional oil in the process, the lack of pipeline capacity will become a greater concern, said David MacInnis, president of the Canadian Energy Pipeline Association.
He said the squeeze could come on in 2009 unless the process of moving pipeline projects through the regulatory phase is accelerated from its current two years.
In addition to growing demand in the U.S. Northeast and Midwest, there is the potential for new markets to open up in Quebec, California and Asia, CAPP said.
The report said market demand for Western Canadian light crude will exceed supply in the 2006-11 period, but the opposite will occur for heavy crude, reflecting refiners’ views that they expect to add upgraders at their refineries to processing the rising volumes of heavy crude.
In total, the CAPP crude supply forecast is almost in step with the results of CAPP’s refinery survey, although that survey did not cover all North American refineries. As a result, the report said, refinery demand for specific crude types could exceed supply in some instances.
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