COLUMN-Keystone, the long way round to China: John Kemp

Fri Feb 8, 2013 11:17am EST
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By John Kemp

LONDON Feb 8 (Reuters) - Canada badly needs to find a way to get its crude to customers in Asia and avoid the oversupplied North American market to fetch a better price for its oil.

Surging output of light sweet oils from North Dakota and Texas is crowding out demand for heavier, sourer crudes from Alberta - pushing the price of blends such as Western Canadian Select (WCS) to a $25 discount against West Texas Intermediate (WTI) and down as much as $45 against Brent.

Until recently, TransCanada's Keystone XL pipeline appeared to be the most promising option. If it is eventually given the go-ahead, Keystone will take crude from Alberta south across the United States to the U.S. Gulf Coast, from where it is likely to be loaded onto tankers for export via the expanded Panama Canal or the Cape of Good Hope to refineries in China, Korea and Japan.

Enbridge's Northern Gateway pipeline is the main alternative. It would carry 525,000 barrels a day of Albertan crude west into British Columbia and across the Rockies to a marine terminal at Kitimat, where it would be loaded onto tankers bound for refineries in California or North East Asia.

The problem for Keystone is that its original rationale of exporting oil to the United States has disappeared. The replacement aim of exporting to China can be met more sensibly by developing a western pipeline across the Rockies.

RIVAL ROUTES   Continued...