Canada’s Imports of Light Sweet Crude Could Change

By The Bakken Magazine Staff | October 22, 2014

In December 2010, the U.S. was exporting 32,000 barrels of oil per day to Canada. This June, the U.S. average monthly crude export volumes to Canada reached 350,000 mbpd. The export increase has happened in large part due to production of light sweet crude, according to a report by Turner, Mason & Co., a Dallas-based petroleum consulting firm. “This growth has been an important relief valve for U.S. producers as the ability of domestic refiners to absorb light barrels approaches its limits and exports to other countries are restricted,” the report said.

The report also noted that the U.S. has passed Ecuador, a member of the Organization of Petroleum Exporting Countries, in total crude exports while also becoming the principal feedstock supplier to Canada’s Atlantic Coast refineries.

But, changes to U.S. refinery infrastructure, export policy and the supply of light sweet crude could alter the amount of light sweet crude produced in the U.S. that is exported to Canada. Changes and factors include:

• The reversal of Enbridge’s Line 9, which transports imported crude west from Montreal to Sarnia in southwestern Ontario. This flow is being reversed to give the eastern Canadian refineries access to western Canadian crudes, potentially cutting into U.S. crude exports.

• Increasing Canadian production combined with the U.S. lack of approval for TransCanada’s Keystone XL pipeline and Enbridge’s Alberta Clipper expansion has made producers more desperate to find a market for their crude.

• Price disparities caused by increased U.S. crude production and restricted exports could enable Canada to use Montreal as a hub for the exchange of heavy crude for light. Using cheaper, foreign-flagged transport vessels, Canada could ship heavy oil sand crude to the U.S. Gulf Coast and have them return with light, sweet crudes.