A regional crude price deeply discounted by pipeline congestion might cost energy companies in Canada $15.8 billion (Can.) this year, according to a new report.
A Fraser Institute bulletin by analysts Elmira Aliakbari and Ashley Stedman noted that the average price differential between Western Canadian Select (WCS) and West Texas Intermediate (WTI) crudes in the first quarter this year was $26.30/bbl (US).
The analysts estimated the “natural spread,” based on quality differences and transportation costs, at $11.80/bbl.
The WCS-WTI differential is widening as production of bitumen and heavy oil in Alberta and Saskatchewan increases while growth in pipeline takeaway capacity faces political opposition.
“As no major pipelines will be entering service till at least the latter half of 2019, we expect the WTI-WCS differential to remain elevated in 2018,” the analysts said.
They applied the expected WCS-WTI differential less the natural spread to projected heavy crude exports to calculate their estimate for lost revenue this year. Their figure was near that of a similar study by Scotiabank in February (OGJ Online, Feb. 21, 2018).
Aliakbari and Stedman made similar calculations for each year’s revenue loss during 2013-17 and estimated total revenue loss for all 5 years at $20.7 billion (Can.).
The annual loss was highest in 2013 at $9.88 billion (Can.) and lowest last year at $1.09 billion.
