Pipelines exiting Western Canada are operating at near full capacity, and producers are looking at a number of ways to secure new markets for growing crude oil production.
Until recently the focus has been on pipeline projects that would move crude oil to the U.S. Gulf Coast and to Canada’s West Coast. Two newer proposals focus on moving crude oil east.
A west-to-east pipeline could serve domestic markets in Eastern Canada, as well as international markets.
Consider this: Although Canada is a net exporter of crude oil, we import around 40 per cent of our oil. That’s due to the fact that refineries in Eastern Canada (Quebec and the Atlantic provinces) currently rely on crude imported from overseas.
According to Statistics Canada, in 2012 (as of October):
Refineries in the Atlantic provinces imported 80 per cent of their crude oil, while Quebec imported more than 90 per cent of its requirements.
In the past, it was cheaper to import crude to meet the needs of the east. That’s no longer the case.
A west-to-east crude oil pipeline would not only secure new markets for Canadian crude oil producers, it would also benefit Eastern Canada.
So how would Quebec and the Atlantic Provinces (and really all of Canada) benefit from western crude travelling to eastern refineries?
Petroleum price data for 2012 from MJ Ervin & Associates, a research and consulting firm for the downstream petroleum industry, indicates that refiners in Eastern Canada currently experience much lower refining margins than their western counterparts.
President Mike Ervin says that western crude would improve these margins, which would have positive repercussions for their economic stability – and benefit consumers.
“Access to western crude would result in higher refining margins for Eastern Canada refiners: this would come at a welcome time given that refiners on the U.S. and Canadian east coast have been struggling to remain financially sustainable,” he says.
“Keeping these refineries in operation is as important to consumers as it is to the oil companies themselves – it will help ensure security of domestic supply of products like gasoline and diesel fuel. We all want to be sure that when we drive up to a gas station, there’s going to be gasoline for sale.”
In buying Canadian crude, the money stays with Canadian producers. This will positively impact the Canadian economy.
“Importing less crude oil (by displacing it with domestic crude) would be a great benefit for the Canadian economy – it would improve our country’s balance of trade, and that would result in a stronger Canadian economy,” says Ervin.
The Canadian Energy Pipeline Association represents Canada’s transmission pipeline companies who operate approximately 110,000 kilometres of pipelines in Canada. In 2011, these energy highways moved approximately 1.2 billion barrels of liquid petroleum products and 5.3 trillion cubic feet of natural gas. Our members transport 97 per cent of Canada’s daily natural gas and onshore crude oil from producing regions to markets throughout North America.