Canada to play increasing role as US crude oil source

24 March 2009 21:10  [Source: ICIS news]

SAN ANTONIO, Texas (ICIS news)--The US will likely increase its reliance on Canada for crude oil, already the nation's largest foreign supplier, a consultant said on Tuesday.

"With the increasing emphasis in the US on the security of energy supply, the stable political relations with Canada have served to support this trend," said Praveen Gunaseelan, manager for energy consulting firm Exponent.

Gunaseelan was speaking at the 107th annual meeting of the National Petrochemical & Refiners Association (NPRA) in San Antonio, Texas.

Canada is one of the world's largest holders of proved crude oil reserves, with over 300bn bbl, Gunaseelan said. Most is in the Athabasca basin in western Canada and is in the form of bitumen or heavy oil sands.

Many companies, including US-based firms, have major investments in Canadian oil sands, and several refinery upgrade projects are in the works to handle the heavy crude.

Motiva's $7bn (€5bn) Port Arthur refinery expansion in Texas will add 325,000 bbl/day of heavy-crude processing capacity by 2010, and Marathon's heavy-oil upgrade project at its Detroit, Michigan, refinery will come on line in 2012.

ConocoPhillips formed a partnership with EnCana to increase Canadian production of oil sands and refining capacity at its refineries in Wood River, Illinois, and Borger, Texas.

In December 2007, Husky Energy also announced an alliance with BP which included a retrofit of BP's Toledo refinery in Ohio to run on bitumen.

"Every major refinery upgrade project is planned to handle heavier crude," Gunaseelan said.

According the Canadian Association of Petroleum Producers (CAPP), approximately 1.6m bbl/day of crude oil was transported from western Canada to US refineries in 2007 via three major pipeline systems - the Enbridge system and Kinder Morgan's Express and Transmountain pipelines.

In addition to the existing three pipelines, several pipeline projects are ongoing, and those will serve to increase Canadian oil supply by an estimated 1.1m bbl/day by 2011, Gunaseelan said.

Key pipeline projects include the construction of TransCanada's 435,000 bbl/day Keystone pipeline from Hardisty, Alberta, to refineries in ConocoPhilips' Wood River and Patoka in Illinois by 2010, and which will have a subsequent extension to the US Gulf coast by 2013.

Flint Hills Resources' MinnCan project will add a second pipeline from northern Minnesota to refineries in the Minneapolis area.

Enbridge's Southern Access pipeline will increase the capacity of its existing system by 400,000 bbl/day into Chicago and extend the system from Chicago to Patoka, Illinois.

($1 = €0.73)

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By: Steven McGinn
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