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After the US oil boom, Canada, together with Brazil, is another
country whose production will expand dramatically over the next
decade. The North-American country accounts for around 25% of new
crude oil supply to be added globally through 2050. New pipeline
projects have so far faced significant delays, primarily due to
environmental concerns and regulatory obstacles. Canada's proven
oil reserves are estimated close to 170 billion barrels, coming
third globally to Saudi Arabia and Venezuela. Since Canada's
domestic needs are only expected to grow slowly, exports will only
continue to grow, assuming that the required infrastructure will be
built along the western coast. Canada's exports to the US have
reached 4.7 million b/d, with its heavier sour barrels remaining
quite popular across US refiners, especially during periods of
fast-declining output across other traditional suppliers to the US,
such as Venezuela and Mexico.
However, Canadian oil still faces some major challenges before
further expanding. The increasing sense of uncertainty and the
political scene heavily focusing on climate action could prove
enough to affect drilling activity in 2020 and beyond. Some
exploration and production companies have now avoided reinvesting
in Canada, while energy giant Encana recently decided to move its
HQ from Calgary to the US. The Petroleum Services Association of
Canada now expects a total of 4,500 wells to be drilled in Canada
in 2020, down from 5,000 wells this year and 6,950 in 2018. The
association's estimate a year ago suggested that 6,600 wells would
have been drilled this year.
Focusing on Canadian seaborne exports of crude oil, activity
seems to have recovered quickly in October, after a sharp decline
observed in September. According to IHS Markit Commodities at Sea,
shipments reached almost 350,000 b/d, with around 290,000 b/d of
Canadian crude oil heading to the US. Flows to Europe and other
importers remained at low levels.
Meanwhile, Canadian pipeline operator Enbridge managed to keep
the Line 5 crude oil pipeline running, passing under the Straits of
Mackinac, after a state court ruled in favour of the Canadian
company. Enbridge had previously agreed to pay between USD 350 and
500 million for the construction of a tunnel for the pipeline in
the Straits of Mackinac, a project which could take up to ten years
to complete.
Elsewhere, TC Energy's Keystone pipeline leaked an estimated
383,000 gallons of oil in North Dakota. The pipeline carrying tar
sands oil from Canada through seven states was shut down after the
leak was discovered. The company has been seeking to build the USD
eight billion Keystone XL pipeline that would carry tar sands oil
from Alberta to refineries in Texas. The proposal has been facing
opposition due to environmental concern. The Obama administration
previously rejected the expansion, before President Donald Trump
issued a federal permit in 2017. This is not the first spill for
this pipeline. There was another major leak of more than 14,000
gallons of oil in south-eastern North Dakota in 2011. More
recently, the pipeline leaked around 407,000 gallons of oil onto
farmland in north-eastern South Dakota, in 2017.
Posted 06 November 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime, Trade & Supply Chain, S&P Global Market Intelligence
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