Sales of Canadian bitumen likely on India visit agenda

Although China gets most attention as an alternative buyer of heavy oil from Alberta, Canada’s top energy official has taken a trip that deserves notice.

The oil-craving Chinese government looks longingly at the vast oil sands resource of Alberta and has financed large investments by state-owned companies in Canadian bitumen producers and projects. CNOOC Ltd.’s July proposal to buy Nexen for $15 billion is a standout example.

Canada has reciprocated the interest since the US, its default market, turned balky about extending the Keystone pipeline system to serve high-conversion refineries on the Gulf Coast.

Canada’s China option, though, is no sure thing.

An increase in westbound exports depends on completion of Enbridge’s Northern Gateway Pipeline. The pipeline would carry 525,000 b/d of Albertan oil to Kitimat, BC, but faces environmental opposition.

Furthermore, the ability of Chinese refineries to process Canadian bitumen remains limited to “a few hundred thousand barrels per day,” according to a China National Petroleum Corp. vice-president who spoke at the Oil Sands & Heavy Oil Technologies Conference last July.

All of that makes a foray by Canadian Minister of Natural Resources Joe Oliver to India especially interesting.

“Canada is well-positioned to fulfill India’s rapidly increasing need for energy, minerals, metals, and wood products,” Oliver said, specifically mentioning his country’s potential as an exporter of LNG.

But India is a market for bitumen, too.

At least seven of India’s 21 refineries have coking capacity, including 305,000 b/d at Reliance Industries Ltd.’s 12.4 million-b/d Jamnagar refining complex and a new 150,000 b/d at Essar Oil Ltd.’s nearby 405,000-b/d Vadinar facility. The refineries are on the Gulf of Kutch in the western Indian state of Gujarat.

Bitumen sales might not be the main subject Oliver takes up with Indian Minister of Petroleum and Natural Gas Shri Jaipal Reddy. But they probably are on the agenda.

Canada knows the value of multiple markets. It learned the lesson from a traditional customer acting like it doesn’t want the oil.

(Online Oct. 12, 2012; author’s e-mail: bobt@ogjonline.com)

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