According to the latest data from the US Census Bureau, US exports of crude oil reached 401,000 b/d in July—the highest level in 57 years and the second-highest monthly export volume for the US Energy Information Administration’s records dating back to 1920.
“Recent crude oil exports are also noteworthy for both their origins and destinations,” EIA emphasized in its latest This Wee in Petroleum update.
US crude exports are typically sourced domestically and are sent only to Canada. However, since April, crude exports have included modest amounts of Canadian-produced crude that was moved through US and re-exported to Switzerland, Spain, Italy, and Singapore.
To export crude oil from the US, a license from the Bureau of Industry and Security (BIS) of the US Department of Commerce is required. As set forth in Section 754.2 of the BIS Export Administration Regulations (EAR), which codifies the export licensing requirements, the following kinds of transactions will generally be approved: exports from Alaska's Cook Inlet; exports to Canada for consumption or use therein; exports in connection with the refining or exchange of strategic petroleum reserve oil; exports that are consistent with international energy supply agreements; exports of foreign-origin crude; exports of California Heavy crude up to an average of 25,000 b/d; and temporary exports or exchanges.
Exports of oil not meeting these criteria will be considered on a case-by-case basis, and will generally be approved if BIS determines that the proposed export is consistent with the national security interests and the purpose of the Energy Policy and Conservation Act (EPCA).
Separate legislation passed in 1996 permits the export of Alaska North Slope crude oil. The recent shipments to Switzerland, Spain, Singapore, and Italy were small volumes of permitted re-exports of Canadian crude that were not commingled with US-produced barrels.
“As is the case in the US, some of the growth in Canada’s crude oil production is taking place in areas with limited infrastructure to bring the crude to refineries for processing. With limited pipeline and rail takeaway capacity, some Canadian producers are testing the economic viability of moving crude oil to the Gulf Coast for re-export to other markets,” EIA said.
However, as noted by the agency, “it is unclear if this recent trend of Canadian re-exports from the Gulf Coast will continue, and if so, for how long. Several proposed Canadian pipeline projects may provide producers with alternative routes for delivering crude to markets beyond North America, but the timing of each of them is uncertain.”
Proposed pipeline projects
Enbridge Inc.’s Line 9 reversal project is in its second phase, which is expected to be in service next month. The first phase, which began eastward flows earlier this year, currently enables shipment of crude from Sarnia, Ont., to North Westover, Ont. When completed, the second phase will expand capacity to 300,000 b/d and continue on from North Westover to Montreal, Que., where the crude could access refineries in Montreal or global markets via the St. Lawrence Seaway.
Energy East, a separate project proposed by TransCanada, would move 1.1 million b/d from Alberta and Saskatchewan to refineries in eastern Canada. This plan includes conversion of an existing natural gas line to crude service and construction of new pipe on both the gathering and terminal ends. The company submitted a project description to Canada’s National Energy Board in March but has yet to file an official application, meaning this project is several years away from being operational.
Additionally, both TransCanada and Kinder Morgan are seeking approval for projects that would carry crude from Alberta west to the Pacific Coast in British Columbia. But the outcome of these options remains to be seen, as both of those projects face resistance along the pipeline siting routes.
Other developments
Another development in US crude oil exports is the recent shipment of ANS crude to South Korea, the first export of ANS in more than a decade.
“Although Alaskan crude production has recently been declining, the recent retirement of the remaining 79,000 b/cd of crude distillation unit capacity at the Flint Hills refinery in North Pole, Alas., which had been running ANS crude, means that ANS producers may consider sending additional volumes to export markets,” EIA said.
ANS barrels were loaded for export in late September and delivered earlier this month. ANS shipments abroad must use US coastwise-compliant ships for transport, and market analysts estimate that ANS would need to trade at a discount of $5/bbl to Brent to make such a movement economical.
