More pipeline outlets seen crucial to Canadian oil producers

By OGJ editors

Although a price squeeze on Canadian producers of bitumen and heavy oil has eased recently, pipeline access to waterborne trade remains essential, according to an analyst at Scotiabank, Toronto.

The price of Western Canadian Select (WCS) heavy crude oil rose from $58.38/bbl (US) in February to $66.73/bbl in March and about $68/bbl in April, reported the analyst, Patricia Mohr, in a commodity price report. The WCS discount against West Texas Intermediate crude fell from a record high $36.94/bbl in February to $26.23/bbl in March, $23.07/bbl in April, and, based on futures values, $13.90/bbl in May. The WCS discount is growing again in June.

Mohr attributed the recent narrowing of the WCS-WTI discount to:

● A seasonal increase in demand for Western Canadian crude oil as refineries in the US Midwest increased runs after unusually high maintenance downtime early in 2013.

● Operational enhancements allowing increased throughput in the pipeline system.

● Increased use of rail transportation, allowing crude from Alberta to reach the Gulf Coast, where heavy crude has higher value than it does at the WTI pricing hub at Cushing, Okla.

Constraints remain

Mohr noted that capacity of the Seaway Pipeline between Cushing and the Gulf Coast expanded to 400,000 b/d in February but said actual throughput has remained at 300,000 b/d, dominated by light crude.

The analyst said: “The overall pipeline system from Canada to the United States still constrains flows of Western Canada’s oil to Texas, where heavy Mayan crude from Mexico (only marginally higher in quality than WCS Heavy) is currently priced at $96/bbl—above WTI oil at $91—and $25 above the $68 garnered by heavy oil producers in Western Canada (subtracting a $2-3/bbl quality discount but not adjusting for transportation costs.”

Approval of the US-Canadian border crossing of the Keystone XL pipeline, she said, would boost flows of Canadian crude to the Gulf Coast refineries needing heavy feedstock, “significantly boosting prices for Alberta and Saskatchewan heavy crude.”

Citing the delay in approval of the border crossing, TransCanada Corp. last week changed its in-service date for the project to late 2015 from late 2014 or early 2015 (OGJ Online, Apr. 26, 2012).

If Canadian oil producers are to be assured of world prices, Mohr said, pipeline access to the West and East Coasts must increase.

The average price of Saudi Arabian heavy crude delivered to China in the first quarter this year was $106/bbl, she pointed out.

“Given the low cost of tanker shipping and pipeline transportation, the netback for Alberta sales of heavy crude in China would have been quite high in the first quarter, probably more than $95/bbl, had transportation infrastructure been available,” she said, adding that tanker shipping from British Columbia to China costs only $3-4/bbl.

 

Related Articles

Woodside delays Browse FLNG development schedule

12/17/2014 Woodside Petroleum Ltd. has reported it expects to enter front-end engineering and design phase for the proposed Browse floating LNG (FLNG) develop...

EPP kills plans for Bakken-to-Cushing crude oil pipeline

12/15/2014 Enterprise Products Partners LP (EPP) has elected not to proceed with development of its proposed crude oil pipeline that would have extended 1,200...

Woodside to buy Apache’s interests in Wheatstone, Kitimat LNG for $2.75 billion

12/15/2014 Woodside Petroleum Ltd. has agreed to acquire interest in the Wheatstone LNG and Kitimat LNG projects, respectively in Western Australia and Britis...

Gas agreement seen firming China-Russia energy ties

12/15/2014 A Nov. 9 framework agreement for another large gas-supply deal between OAO Gazprom and China National Petroleum Corp. remains far from concluded bu...

Falling prices may pose new test for China oil policies, speakers say

12/15/2014 China, which successfully revised its oil strategy in response to new technologies since 2008, could face fresh tests if prices stay low for a prol...

Watching Government: Russia: On the ropes?

12/15/2014 Russia's Dec. 1 cancellation of its South Stream natural gas pipeline was not surprising. European nations have signaled for years that they intend...

ExxonMobil forecasts 35% higher world energy demand by 2040

12/15/2014 A significantly bigger global middle class, expanded emerging economies, and 2 billion more people will contribute to 35% higher world energy deman...

API: Producers reducing methane emissions already

12/15/2014 US oil and gas producers are reducing wellhead methane emissions already and don't need ill-conceived, overly prescriptive federal regulations, Ame...

West Cornwall Township hears from Sunoco Logistics

12/12/2014

Sunoco Logistics Partners outlined its safety systems during a West Cornwall Township meeting in Pennsylvania on Nov. 10.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected