Oil sands-derived crude to overseas markets
This year, as other major pipeline proposals such as Keystone XL and Northern Gateway remain in limbo, Canadian oil has travelled though the United States to ports in the south, such as Houston/Galveston and New Orleans. From there it is loaded onto tankers and shipped abroad.
Among the destinations: Spain, Italy, Singapore, and in increasing volumes, Switzerland, according to the U.S. Energy Information Administration. Such exports hit a peak of 874,260 barrels in total in July, before falling back to 346,921 in August. That is up from zero in March.
Canadian producers contend that shipping oil sands-derived crude to overseas markets will boost its value by exposing it to higher international prices. Their traditional export market is the United States, which has recently been amply supplied as U.S. domestic output of light crude has surged.
But Option 1 – major new pipelines to Canada’s West Coast and through to the Gulf of Mexico – has been hampered by regulatory and political delay. The re-exports have become a relief valve for both countries by reducing some congestion of supplies within the United States.
“We’ve got so much rail capacity now and pipe capacity is really starting to come on line, especially heading down to the U.S. Gulf,” said Martin King, analyst at FirstEnergy Capital Corp. “One way or another, the market’s figured out a way to get Canadian crude to a country other than the United States. It’s market diversification – a chance to maybe capture some world prices.”