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Canada explores crude re-export possibilities through US Gulf Coast

September 03, 2013
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<photocredit>Michael Watkins/iStockphoto/Thinkstock</photocredit>

Canada is increasingly pressed to look for new markets for its crude oil as the United States, its main export market, continues to ramp up its own output. The country still has very few direct outlets overseas, forcing some Canadian oil-sands producers to explore the idea of exporting from the U.S. Gulf Coast.

According to a Wall Street Journal report, theoretically the idea could be realized. While exports of American oil are unlikely to take place any time soon, it is not illegal to re-export Canadian crude on the condition that it is kept perfectly separated from U.S. production. Moves in that direction have already been made and the U.S. Commerce Department has issued eight licences, allowing crude oil re-export since October 2012.

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The main problem that prevents large-scale direct export of Canadian crude is the lack of suitable infrastructure. At present, only a small proportion of Canada's crude oil leaves the country for markets other than the United States and all of it departs via the very restricted-capacity pipelines running from Alberta's oil sands to the port of Vancouver.

While many industry professionals agree that re-exporting might result in new market opportunities, most experts believe that the activity is unlikely to start over the next few years. The re-exporting of Canadian crude is expected to face strong opposition from lawmakers in the U.S. and add to the existing controversy over the proposed Keystone XL pipeline, which will provide a new direct route from Canadian oil-sands producers to refineries in the Gulf.

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