Canadian oil producers can’t depend on Chinese demand for exports, a Husky Energy Inc. (HSE) executive said at a conference in Calgary.
Canada will have to compete for Chinese business with growing exports from Iraq and Venezuela, as well as oil cargoes displaced by increasing U.S. domestic production, said J.J. Chen, manager of business development and origination for the Calgary-based oil producer.
“There is no shortage of oil for China,” Chen said at the Canadian Energy Research Institute Oil Conference today. “With U.S. shale oil producing so much every day, you’ll have all these traditional imports to the U.S. being diverted to Asia, and Canadian cargoes are going to have to compete.”
Canadian Prime Minister Stephen Harper last year visited China, the world’s second-largest economy, to promote Canada’s energy industry and build trans-Pacific ties. Nearly all of Canada’s oil exports go to the U.S. Harper has said diversifying Canada’s energy exports to Asia is a “national priority.”
Alberta producers are backing several pipeline projects that would move their exports to ports and then overseas markets by 2017. Enbridge Inc. (ENB)’s Northern Gateway line would transport as much as 525,000 barrels a day of heavy oil to Kitimat, British Columbia, for shipment to China and other Asian nations, while Kinder Morgan Energy Partners LP (KMP:US) plans to almost triple the size of its Trans Mountain pipeline from near Edmonton, Alberta, to Vancouver to 890,000 barrels a day.
China’s interest in shipments of Canadian oil and gas will be limited to hedging some of their geographic risk from other sources of supply in Africa, South America, the Middle East and Russia, Chen said. Chen is a former oil trader for Nexen Inc. and former adviser to the Alberta government on Asian oil demand. The majority of Husky Energy’s shares are owned by Hong Kong conglomerate Hutchison Whampoa Ltd. (13) and its billionaire chairman, Li Ka-Shing.
U.S. oil production is expected to increase by 2.5 million barrels a day by 2019, according to the Energy Information Administration’s 2013 Annual Energy Outlook. That will lower U.S. oil imports, freeing them up for other buyers, Chen said.
Canadian production is also predicted to rise sharply this decade, by 46 percent to 4.7 million barrels a day by 2020, according to a forecast from the Canadian Association of Petroleum Producers.
“Canadian oil and gas is a nice thing to have, but it’s not a must-have” for China, Chen said.
Canadian oil that reaches the coast on new pipelines will probably find its way to buyers along the U.S. West Coast, as well as in India, Japan and developing countries in Southeast Asia, he said.
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