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U.S. Shale Is Far From Dead

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U.S. Oil Trade Imbalance With Canada Shrinking

Thanks in large part to its energy-rich oil sands, Canada exports 10 times more oil to the United States than the United States exports to Canada, but that balance has begun to shrink, primarily because of the recent U.S. oil boom.

The National Energy Board in Ottawa reports that the United States imported about 2.7 million barrels of Canadian oil per day in April 2014. In the same month, Canada imported about 263,000 barrels of U.S. crude, according to the U.S. Energy Information Administration.

While the differences remain great, U.S. northbound exports for April doubled in a year and grew six-and-a-half times over their level two years earlier. It’s the most oil the United States has exported to Canada since 1993.

There are two reasons for this shift. One is the increased U.S. reliance on hydraulic fracturing, which recently made the country the largest producer of oil on Earth, even larger than Saudi Arabia. In fact, U.S. oil production is expected to grow even larger next year, more than in any year since 1972.

The second reason is the quality of U.S. oil. Canada’s oil sands produce a tar-like bitumen, which is far heavier than U.S. crude and requires extra steps to remove sand and other impurities during refining. This, at least in part, accounts for the more attractive price of U.S. crude, which is now $7 a barrel lower than competitors from Canada and elsewhere.

Canada’s National Post reports that the country’s oil producers are lagging behind the United States in selling oil to domestic customers, even those in oil-rich Alberta.

Related Article: Canada's Oil Patch Bracing for “Retirement Tsunami”

Alberta’s energy companies are struggling to find new customers because the province has more oil than it now can sell. Canadian customers who might otherwise opt for domestic oil are instead relying on lighter U.S. crude.

“It’s been absolutely critical to our success and growth plans,” Grant Thomson told the National Post. Thomson is a senior executive at Nova Chemicals Corp., based in Calgary and owned by the government of Abu Dhabi.

Thomson said that in June 2014 the company began pipelining ethane from the Bakken energy fields in North Dakota. This easy availability of ethane, he said, helped Nova make up for years of shortages in Alberta and has allowed the company to invest $1 billion in a new polyethylene plant.

And to the east, Thomson said, Nova now can afford to invest $250 million in a plant in Corunna, Ontario, so that it can take advantage of the increased production of ethane from the Marcellus shale deposits in Pennsylvania and Ohio, just to the south.

Wood Mackenzie, a global energy, metals and mining research and consulting company, reports that since 2010, Marcellus shale production has grown from 3.4 billion cubic feet per day to 12.8 billion cubic feet per day. It says Canada’s total production, meanwhile, is flat at about 13 billion cubic feet per day.

By Andy Tully of Oilprice.com



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