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Study plots new course for Canadian light oil

26 Jan 2018 19:10 GMT
Study plots new course for Canadian light oil

Houston, 26 January (Argus) — The big story of Canadian crude in 2018 is the growing struggle of western producers to get their oil to market as output outstrips pipeline takeaway capacity, leaving reticent railroads to pick up the slack.

But in eastern Canada, the opposite is true. Despite offshore production and pipeline connections to Alberta, refineries in the region rely on overseas imports. And with the death of TransCanada's 1.1mn b/d Energy East pipeline proposal last year, that promises to continue.

It is a question the Canadian Energy Research Institute (CERI) took up this month in a study using four scenarios, including two that would have been valid if a new pipeline were built. In the "current reality" model that calls for maximizing Canadian crude usage in the east on existing pathways, CERI found a potential for both cost and emissions savings.

The scenario called for an increase of 120,000 b/d of western light crude movements to be maximized to eastern Canada until they either ran out or became too expensive, then added in 161,000 b/d of offshore Atlantic Canada crude using the same formula. CERI figures that if Canadian production were prioritized economically, it would drop eastern Canadian refinery crude imports from around 57pc of the slate to 47pc.

To ramp up domestic crude usage in eastern Canada, Enbridge's 300,000 b/d Line 9 would need to run full, as would Valero Energy's shuttle tanker fleet serving its 265,000 b/d St Romuald refinery near Quebec City. Emissions cuts would come from production involved in the new slate itself as well as the reduced transportation costs.

A market-based focus on Canadian crude would render the already little-used 600,000 b/d Portland-Montreal import pipeline virtually unnecessary, CERI said, although crude by rail would play a key role. But the emergence of Bakken crude caps the economic justification for much of western Canadian production going east, CERI said.

"Changing the trade balance to create an increased trade surplus may be of net benefit to the country, but it is a complicated question that is best answered through additional analysis," CERI concluded.