Seeking Alpha
What's Next for Canada's Oil Sands?

Tuesday, July 05, 2011

With an oil pipeline to the west coast, Canada's oilsands could be the big swing producer in the global energy market, says Ralph Glass, Director of Energy Valuation and Operations at AJM Deloitte, an oil and gas technical consulting firm in Alberta.

Not everybody agrees with Glass's concerns on Canadian crude. Adam Bedard is Senior Director with Bentek Energy, an energy market analytics company based in Denver Colorado.

Canadian heavy crude trades back about $20 from WTI, which makes it very competitive to bring to market.

If any foreign crude gets shut out of the US, says Bedard, he expects it would be imports from Nigeria;"I think Canadian crude squeezes out other crudes. I would sure be surprised" if Canadian crude was displaced out of the US. He added that doesn't see Cushing ever being full – the builds in supply are slowing, and rail and pipeline capacity out of Cushing is being developed.

Bedard said he didn't think that storage at Cushing will be the bottleneck, but there could be a limit on refining capacity which could push back on demand for Canadian crude – though the U.S. Gulf Coast refining complex has added capacity, allowing them to refine heavy crude.

There is no stranded oilsands production right now, but Glass says that $20/barrel discount that Canadian heavy crude is getting compared to other world oils is costing the Canadian economy. Assuming 1 million barrels a day of oilsands production is going overseas, instead of down into the US, Canada could stand to gain about $3.65 billion for every $10/bbl more revenue it could get than it's receiving now.

Price and volume (of Canada's oil exports) are being impacted without a pipeline to west coast. We’re getting significantly less for our products than they could on the world stage.

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