Canadian oil exports stop in California to save money
Canada’s newest oil pipeline has turbo-charged exports of the country’s heavy crude to Asia and a diversion through California is making for a longer but potentially cheaper journey.
Close to 3 million barrels have been shipped off Vancouver for China or India since the expanded Trans Mountain pipeline began operating in May, almost tripling the capacity of the sole system linking Alberta to a Canadian port. More than 55 per cent of those volumes have first journeyed south to Southern California where the crude was transfered onto very large crude carriers, or VLCCs, according to Vortexa ship tracking data.
The transfers have offset one of the key disadvantages of exporting Canadian crude off the West Coast versus the U.S. Gulf: the port of Vancouver can only accommodate Aframax-size tankers or smaller, which hold less than half of what VLCCs hold. As such, shipping directly from Western Canada to distant markets would typically cost close to twice as much per barrel per day than on VLCCs, according to a ship broker familiar with rates who asked for anonymity because he is not authorized to discuss the information. However, the diversion to California has lengthened the time of the journey to Asia, reducing a key advantage of exporting Canadian crude off the West Coast versus the U.S. Gulf.
The practice is expected to become more common as Aframax tankers are redeployed for making shorter voyages, the broker said. Other’s aren’t as sure.
“Sending an Aframax directly to China is costly, but so are multiple reverse lighterings onto a VLCC off California,” Matt Smith, head analyst at Kpler, said by email. “It seems more likely that direct Aframaxes to Asia will win out because China will take more of the volume.” Using
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