Canada oil sands Asia export dream faces port bottleneck

Sun Nov 20, 2016 7:34pm EST
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By Catherine Ngai

VANCOUVER (Reuters) - The bullish view for Suncor Energy Inc (SU.TO: Quote), Cenovus Energy Inc (CVE.TO: Quote) and other Canadian energy producers calls for Prime Minister Justin Trudeau by next month to approve a major pipeline expansion to the west coast, boosting sales of land-locked oil sands crude to Asia.

But a growing number of shipping brokers and physical oil traders warn that any new influx of oil will hit a bottleneck in Vancouver, because of the port's inability to accept the megaships that dominate oil trade globally.

This bottleneck marks one of the more under appreciated hurdles facing Canadian oil sands crude being shipped from its busiest port of Vancouver, these shipping brokers say.

Middle Eastern producers already ship oil ship to Asia far more cheaply, thanks to the bigger vessels they employ. And U.S. Republicans winning out in this month's election have revived hopes that TransCanada Corp (TRP.TO: Quote) could build the Keystone XL pipeline to the United States, sidestepping Vancouver altogether.

Natural Resources Minister Jim Carr told reporters Tuesday that Keystone "doesn't get oil to export markets in Asia, and it's a goal of the government of Canada to expand its export markets."

The decision in front of Trudeau is whether to expand Kinder Morgan Inc's (KMI.N: Quote) 300,000-barrel-per-day (bpd) Trans Mountain pipeline, which carries Alberta crude to Vancouver. The project, fiercely opposed by many environmentalists and aboriginal groups, would increase total capacity to 890,000 bpd.

Currently, some 98 percent of Canadian crude exports reach the United States, where it sells at a discount to world prices. Vancouver is the only west coast port where it can be sold on to Asia.

"If Canada can't get their oil to another market besides the U.S. (market), you'll always be a price taker, not a price maker," said Sandy Fielden, director of oil and products research at Morningstar.   Continued...

Cargo ships anchor in English Bay off Stanley Park, outside the Port of Vancouver, British Columbia, Canada November 19, 2016. REUTERS/Chris Helgren