Growing volumes of crude oil from Canada and the Gulf of Mexico should assure U.S. Gulf Coast refiners adequate supplies for years to come despite fast-declining imports from Mexico and Venezuela.
Imports from the two major Latin American suppliers have dwindled by 24 percent in the past four years, but the huge refining region they serve is unlikely to run short due to billions of dollars planned for new pipelines from Canada and exploration in the deepwater Gulf, analysts said.
Canadian oil sands production alone could make up for both losses, said analyst Martin King of Calgary-based FirstEnergy Capital Corp. "You're essentially switching to Canadian crude from Mexican and Venezuelan," King said.
In its June forecast, the Canadian Association of Petroleum Producers said it expects output from northern Alberta's vast oil sands to nearly double to 2.2 million barrels a day by 2015. Weak oil prices and the credit crunch led numerous companies to delay development projects, forcing CAPP to cut expectations from its previous forecast.
Still, pipeliners have zeroed in on the Gulf Coast -- site of 40 percent of U.S. refining capacity -- as the next big market for Canadian oil. There, Mexican and Venezuelan imports have fallen by 700,000 bpd since 2004, according to the U.S. Energy Information Administration.TransCanada Corp's (TRP.TO) proposed $7 billion Keystone XL pipeline expansion would ship as much as 500,000 bpd to Gulf Coast refineries by 2012.
Enbridge Inc (ENB.TO) and BP Plc (BP.L) are working to develop a 250,000 bpd system to the Gulf Coast by that same year at a cost of up to $2 billion.
Several other proposals, including one to move Canadian crude to the region by rail, are on the drawing board.
U.S. Gulf output is expected to rise 300,000 bpd to 1.5 million bpd by 2013, largely due to deepwater expansion, and could grow to 1.9 million bpd if ultradeep discoveries prove out, the U.S. Minerals Management Service said.
Twenty-eight offshore Gulf projects are expected to come on line by 2015, more than a dozen of them in waters below 5,000 feet, the accepted threshold for ultradeep water, according to IHS Cambridge Energy Research Associates.
The expected growth in Gulf production is an expectation I highlighted a while back...