Canadian oil in Asia won't raise Middle East ire: witness

Mon Sep 17, 2012 5:06pm EDT
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Asian oil markets should easily absorb the half million barrels per day they would get via Enbridge Inc's (ENB.TO: Quote) proposed Northern Gateway pipeline in Canada, raising little ire among traditional Middle East suppliers, an energy market expert said on Monday.

Volumes that would flow through Enbridge's proposed C$6 billion ($6.2 billion) pipeline to Canada's West Coast, for shipment across the Pacific, are not large enough to shock Chinese and other northern Asian markets, Neil Earnest, a witness for Enbridge, said at public hearings in Edmonton into the contentious project.

Northern Gateway has been touted as a way for Western Canadian oil producers to garner higher returns for their production, which is now priced against a discounted North American benchmark in glutted U.S. Midwest markets. It faces stiff opposition from environmentalists and several British Columbia native groups.

"In the context of the global crude markets, Northern Gateway is a fairly small project. I don't think you'll see a dramatic reaction on the part of the Mideast crude producers," said Earnest, vice-president of Muse Stancil, a Dallas-based consultancy that authored a report for Enbridge into Gateway's expected market impact as part of its regulatory application.

"Certainly we didn't see any particular reaction when the Russians started pushing more crude into this particular market."

Northern Gateway would open up lucrative new markets for 525,000 barrels per day of Canada's oil sands-derived crude, but Earnest stressed that it would not alter global crude supplies. Some shipments that may now reach Asian refineries would find their way to new markets in other parts of the world, he said in response to questioning by British Columbia-based intervener Terry Vulcano.

"To the extent that the Canadian crude producers, or generally Canada, ships more crude oil to northeast Asia, and lowering demand for Mid-East crudes, perhaps, in northeast Asia, that simultaneously means that somewhere else in the world - quite likely North America - there will be another half million barrels a day of imports," he said.

"The globe will rebalance, but we're not changing global crude supply. The Saudis and others will recognize that."   Continued...