Canadian crude oil exports from the US Gulf Coast has the potential to
grow to some 450,000 b/d over the next five years, as Asian refineries
intensify their search for a “diet” of medium-to-heavy crude feedstock,
industry participants said Monday.

New Asian refining capacity is being built to take in medium-to-heavy
grades and that’s “good” for Canada, Sarah Emerson, president of Energy
Security Analysis, said at the CERI 2017 Oil & Gas Symposium in Calgary.

During a five-year period starting 2016, new investments in coking and
desulfurization facilities in Asian refineries will result in incremental
demand of a total of 1.2 million b/d of heavy and medium grades, she said.

For Canadian producers to get a larger share of the new market
demand, “pricing will matter,” Emerson said without giving any figures.

Dinara Millington, vice president of research with the Canadian Energy
Research Institute, said the first step for Canadian heavy producers will be
to find a footing in the Asian market.

“Our current estimates show that about 30,000 b/d of WCS [Western
Canadian Select} grade gets re-exported out of the USGC to foreign markets,”
Millington said on the sidelines of the event. “The advantage for Alberta’s
bitumen producers is there is a growing demand for the heavy barrels and the
success will be in first finding a footing in that market rather be purely
driven by pricing. Subsequently those numbers can grow, as WCS will not be in
direct competition with the US light grades or the volumes being offered now
by OPEC.”

MEETING US REFINERY DEMAND FIRST

Besides pricing, new pipeline takeaway capacity from Western Canada will
also be another determining factor for exports to markets beyond the US,
Emerson said.

Asian exports will likely to be impacted if no new export pipelines get
built by 2023, she said.

For Western Canadian producers, their first target will still continue
to meet growing WCS demand in the USGC which could potentially grow by another
300,000 b/d to 400,000 b/d over the next five years, Emerson said.

Total throughput from Alberta to USGC — through a combination of
pipelines, rail and barges — is about 350,000 b/d and Alberta bitumen
supplies are set to grow as supplies from Latin America starts declining and
WCS finds itself in a competitive position, Millington said.

The Kinder Morgan-backed Trans Mountain Expansion pipeline project will
also offer opportunities for exports of 530,000 b/d for Alberta’s producers to
foreign markets from the Canadian Pacific Coast, Emerson said.

Also, the planned Energy East pipeline of TransCanada will provide
590,000 b/d of export opportunities for Alberta and Saskatchewan producers
from the Atlantic Coast, Emerson said.

Lastly, TransCanada’s Keystone XL will carry 830,000 b/d of Canadian
heavy barrels from Hardisty, Alberta to refineries on the USGC.

The most advanced on the planned pipelines is the 890,000 b/d Trans
Mountain Expansion that received Canadian government approval late 2016 and is
due for start up by 2019.

Energy East is till undergoing regulatory review by Canada’s National
Energy Board, while a US presidential permit is due end-March on an
application refiled by TransCanada to build the Keystone XL pipeline system.

“Trans Mountain Expansion is very significant. Also after 2022, you will
need something?either Keystone XL or Energy East,” Emerson said.

There is interest amongst shippers to export to Asia and it is seen as a
major option, Millington said, adding ultimately it will be the market that
will determine where those barrels go.

The Trans Mountain Expansion project is underpinned by firm commitments
and has the backing of about 13 oil sands producers that include Cenovus,
Imperial Oil, Statoil Canada, Suncor, Total, Husky Oil and Devon Energy.

–Ashok Dutta, newsdesk@spglobal.com

–Edited by Richard Rubin, richard.rubin@spglobal.com

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