Most of the crude to be delivered through Kinder Morgan Energy Partners LP (KMP:US)’s expanded Trans Mountain pipeline, the only conduit between Canada’s oil-sands and the west coast, will be shipped to Asia, the company said.
Kinder Morgan asked Canadian regulators yesterday for permission to install the piping and pump stations necessary to increase the capacity of the Trans Mountain line to 890,000 barrels a day from 300,000. “The bulk of” the new oil on the system running from Edmonton, Alberta, to Burnaby, British Columbia, will end up on tankers, Ian Anderson, president of Kinder Morgan’s Canadian division, said yesterday.
“I don’t think there’s any question that ultimately the majority of those movements would end up in Asia,” Anderson said in the conference call with reporters from Calgary. “We estimate that there is probably a vessel a month that is probably going to China.”
Canadian Prime Minister Stephen Harper is counting on Asian markets to shrink the $30-a-barrel discount of Canadian heavy crude to the U.S. benchmark, provide job and economic growth and boost tax revenue. Harper has referred to Canada as an emerging energy superpower because it has the world’s third-largest oil reserves and output from the oil sands is growing.
The Trans Mountain expansion is one of several pipeline projects being proposed by companies including TransCanada Corp. (TRP) and Enbridge Inc. (ENB) to help Canada, the world’s sixth-largest crude producer, deliver surging supplies to markets abroad.
Production of bitumen, which is refined into fuels such as gasoline, is poised to double from last year to 3.8 million barrels a day by 2022, the Alberta Energy Regulator said.
Western Canada Select crude, a heavy, sour Canadian blend, strengthened 50 cents against the U.S. benchmark West Texas Intermediate oil to a discount of $28 a barrel yesterday, data compiled by Bloomberg show. The crude has averaged a discount of $29.38 this month.
Anderson said the Trans Mountain expansion is also expected to increase deliveries of Canadian crude to California, home to the most refining capacity in the western U.S. Exactly where the oil transported by Trans Mountain goes will ultimately “be dictated by our shippers,” Anderson said.
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