The Texas Gulf Coast is not the only destination available to Bakken producers in the United States and Canada.
Companies intent on securing new customers are suddenly paying attention to eastern North America, where refiners are eyeing the Canadian Prairies and U.S. Plains for the first time in decades, attracted by crude that is selling at steep discounts to international crudes they source at Brent prices.
Canadian political and business leaders are paying special attention to the prospects of market diversification, with their sights set on using western crude as feedstock for refineries in Ontario, Quebec and Atlantic Canada.
Refineries in Eastern Canada import 44 percent of their crude, a number Derek Burney, a former ambassador for Canada in the United States, wants to shrink.
“Even though we have a huge reservoir of oil of our own, we’re still importing more than 500,000 bpd of foreign oil, which is coming at a much higher price than what is being extracted in the Alberta oil sands,” said Burney, a member of TransCanada’s board of directors.
Family-owned Irving Oil has already brought crude by rail from Western Canada to its 300,000 bpd refinery in Saint John, New Brunswick, to test its processing ability and sources say Irving executives are now trying to contract firm supply.
Suncor Energy ran its own test by a daunting route, shipping crude from the oil sands to tankers in Vancouver, which reached the company’s Montreal refinery via the Panama Canal.
Little wonder that Suncor endorses Enbridge’s proposal before the National Energy Board to reverse its 240,000 bpd Line 9 from Montreal to Sarnia, Ontario, so its 137,000 bpd Montreal facility can process Western Canadian crude.
TransCanada is not prepared to leave that field wide open to Enbridge.
A company spokesman said that although the U.S. remains a key market for Canadian crude, Canada must “explore other markets,” partly because of the delays imposed on Keystone XL.
“As others have highlighted in recent months, the concept of an East Coast oil pipeline has merit,” he said, affirming word from sources that TransCanada first proposed opening that route six years ago.
Shipping crude to the East Coast might also open the way to tanker deliveries of Canadian crude to Europe, India and China.
“At present, there is limited access to crude oil produced in Western Canada, including the growing supplies of light crude from emerging shale basins,” the spokesman said.
The oil sands aside, pipeline connections to Eastern Canada present some relief to the rapid production growth in the Williston basin.
The National Energy Board already approved Enbridge’s C$180 million Bakken Pipeline Project Canada. The 75-mile pipeline from Steelman, Saskatchewan, to Cromer, Manitoba, will initially transport crude from the Bakken and Three Forks formations in Montana and North Dakota, feeding into Enbridge’s mainline system to North American markets and could easily be expanded to 350,000 bpd.
The NEB determined there is enough commercial interest to support the Bakken pipelines based on firm commitments of 100,000 bpd, representing 68 percent of the national initial capacity of 148,500 bpd. The average shipping term is 9.25 years.
The NEB also found Enbridge successfully demonstrated there would be sufficient oil supply markets for the projected volumes. Enbridge’s Commodity Future Group estimated total reserves of 7.6 billion barrels from the Bakken formation and 3.2 billion barrels from Three Forks, with an estimated recovery factor of 3.5 percent, would underpin the project.
Enbridge said that if a Canadian shipper requested service on the pipeline it would be willing to consider an agreement for adding a receipt point.
The company said it would not differentiate between barrels nominated by a U.S. shipper and those nominated by a Canadian shipper, adding that those barrels would still be subject to a pro rata apportionment under Enbridge Bakken’s rules and regulations.
—Gary Park
