Pacific Rim Refiners Won’t Wait Forever for Canadian Crude Oil

January 24, 2014 By

February 8, 2013

Pacific Rim refineries have the capacity for Canadian heavy crude oil, but the window for opportunity is narrow. Unless crude oil producers in Alberta can find a way to get their product to refiners in the Pacific Rim consistently, those refiners will start looking for heavy crude elsewhere. On Thursday, the University of Calgary School of Public Policy released a paper co-authored by Stillwater Associates entitled Pacific Basin Heavy Oil Refining Capacity, in which the case is made for redirecting Canadian crude oil out of the Mid-Continent bubble and sending it to refineries in the Pacific Rim, including California, China and Korea.

While refineries on the Pacific Rim have the capacity for what could be an additional 1.1 million barrels per day of Canadian crude oil production, some refinery modification may be needed to accommodate the special characteristics of Western Canadian Select. In order to convince Pacific Rim refiners to upgrade their refineries to accommodate WCS, policy makers and business leaders must ensure that the Canadian brand will be of consistent quality and supply. Long-term agreements with Pacific Rim refiners must be backed up by evidence of adequate transportation capacity. The pipeline approval process is crucial to these agreements being signed. If proposed pipeline expansions take too long to be approved or are denied, Pacific Rim refiners will look for heavy Venezuelan or Persian Gulf crudes to fulfill capacity.

Professor Michal Moore of the University of Calgary School for Public Policy and co-author of the paper discusses the issues in this video.