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Canada Has Oil For Asia, But Can’t Ship It

The export market expansion ambitions of Canadian oil sands producers could soon hit a wall of capacity problems at the port of Vancouver, according to shipping brokers cited by Reuters.

According to the brokers, the port of Vancouver can only receive Aframax tankers, which carry between 500,000 and 700,000 barrels of crude but can only be filled to about 80 percent of capacity at Vancouver because of depth restrictions. This, brokers say, makes maritime exports uneconomical.

The problem is serious, because Vancouver is the only major port in western Canada that could have started the wave of Canada’s oil sands exports to Asia—a lucrative market eyed by every oil producer in the world.

Unlike Canada, however, those other producers, and most notably Middle Eastern countries, can load bigger tankers, Suezmaxes, which can carry up to a million barrels of crude, or even larger vessels, which can load as much as 2 million barrels.

What further aggravates matters is the very real possibility of oil sands output exceeding available transportation infrastructure. Currently, almost all of Canada’s oil exports flow south, to U.S. refineries, via a network of pipelines, which is itself in urgent need of expansion.

This expansion is necessary as it is, but it becomes all the more necessary in view of Alberta producers accessing Asian markets. New pipelines could transport Canadian crude to some U.S. ports that have the capacity to accommodate those giant tankers that are too big for Vancouver.

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According to a spokeswoman for Kinder Morgan’s Trans Mountain pipeline expansion project – one of the biggest on the table awaiting a decision by PM Justine Trudeau – the port of Vancouver, which was recently expanded, is seen to receive one Aframax a day, up from five a month.

This could lead to traffic jams and, what’s more, shipping brokers warn that getting the Aframaxes to Vancouver would be a challenge in itself: many of them are stuck on a “popular route” between Russia and China, and diverting them would increase shipping costs.

Canada is eager to diversify its oil export markets, as stated clearly by Natural Resources Minister Jim Carr last week. The success of this diversification, it seems, will be contingent on expanding its pipeline capacity to the U.S., its main market.

By Irina Slav for Oilprice.com

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  • Bill Simpson on November 21 2016 said:
    After January 20, 2017 pipeline construction into the USA will be no problem. But the Trump businesses might have to get a piece of the action with a hotel building permit, or something, like in Argentina. That is a small price to pay to make billions in future profits.

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