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US imports of Canadian oilsands will continue to grow

Hydrocarbon Engineering,

A new report from IHS has said that most, if not all, crude oil that would be transported via the proposed KXL pipeline to the US Gulf Coast would not be exported, and approximately 70% of refined product derived from it would be consumed in the US. The report analyses the outlook for the oilsands and other heavy crudes in North America, and says that the amount of oilsands flowing into the US would still grow regardless of whether KXL materialises or not.

Aaron Brady, Senior Director, IHS Energy said, “there is a common misunderstanding that somehow most or all of the oil shipped to the US Gulf Coast via the KXL pipeline would be exported to other countries. The reality is that the US Gulf Coast is the world’s largest single refining market for heavy crudes such as oilsands, making it unlikely these barrels would be exported offshore. And, the overwhelming majority of refined products produced in the Gulf are consumed in the US, regardless of the crude source.”

US Gulf Coast

The US Gulf Coast is the largest refining market for crude, and particularly heavy crude that is produced in Canada, Mexico and Venezuela, in the world. Approximately 2.7 million bpd of refining capacity on the Gulf Coast has been optimised for heavy sour crudes over several decades and as a result, the IHS report has predicted that “a contest looms on the US Gulf Coast between Canadian and Latin American crudes.” The report also notes, “Venezuelan exports have also tilted away from the US market and towards Asia as a result of a set of Chinese government loans that carry along a commitment of oil supply.”

Previous research from IHS has found that the greenhouse gas emission impact from importing and processing more oilsands crude in the US would be negligible since they would take the place of other heavy crudes that are currently being imported and have a similar carbon intensity, such as those from Venezuela. Brady added, “regardless of whether the oil is imported from Canada or Venezuela, the overwhelming majority of the refined products produced in the Gulf will continue to be consumed in the US.”

Further findings

The new report from IHS has also found that even without the new pipeline capacity, the use of alternate transportation routes, including rail, would still result in the growth of oilsands imports into the US. And it has found that the overall growth in oilsands production is expected to continue despite the collapse in oil prices over the past several months. Oilsands projects, the report notes, have a very long time horizon, with production lasting as long as 30 – 40 years, making them relatively resilient to periods of low oil prices.

Kevin Birn, Director, IHS Oilsands Dialogue said, “currently there is over 1 million bpd of capacity at various stages of construction in the oilsands. IHS anticipates existing projects will continue to operate and those under construction will proceed to completion. While investment will not be immune to the drop in oil prices, significant production growth is still expected over the coming years. IHS expects oilsands production to rise 2.9 million bpd by 2020, an increase of 800 000 bpd (without diluent).”

Edited from press release by Claira Lloyd

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