Suncor Looks East to Find Buyers for Western Canada Crude By Sheela Tobben and Dan Murtaugh Sep 24, 2014 11:14 AM GMT-0300

Western Canadian crude may be crossing the Atlantic Ocean soon as Canada’s oil

companies seek buyers outside North America.

Suncor Energy Inc. (SU), the largest Canadian oil company by market capitalization,

loaded its first tanker of heavy crude out of Canada’s eastern coast this week. Enbridge

Inc. (ENB)’s Line 9B is scheduled to complete its reversal next month, bringing 300,000

more barrels a day to the Saint Lawrence River, which empties into the Atlantic.

Canada’s search for overseas markets comes as its crude production is rising along with

that of its traditional buyer, the U.S. Combined output of those countries has risen 51

percent in the past five years to 12.2 million barrels a day, according to their

governments. Unlike the U.S., Canada has no restrictions on exporting crude.

“As we get more and more production in North America, prices will get

lower and companies will have more opportunities to ship crude into

international markets,” Jackie Forrest, vice president at Calgary-based

ARC Financial Corp., said by phone yesterday.

Suncor on Sept. 21 loaded about 700,000 barrels of railed Alberta crude onto the

Minerva Gloria at the port of Sorel near Montreal, according to a person familiar with the

booking who asked not to be identified because the information is not public. The crude

is going to Italy, the person said.

The ship is heading to Sarroch, on the Italian island of Sardinia, according to ship-

tracking data compiled by Bloomberg.

First Shipment

This is Suncor’s first waterborne shipment of Western Canadian Select

from Canada’s eastern coast, Sneh Seetal, a Calgary-based

spokeswoman, said by e-mail yesterday. She declined to comment on the

shipment’s size.

“Canada and the U.S. remain the key markets for us, but it’s important that

we establish customers outside of North America,” Seetal said.

The cargo is heading for Europe, Seetal said by e-mail today.

Western Canadian Select, a heavy, high-sulfur blend of Alberta oils and

bitumen, is among the cheapest crudes in the world, priced at about $76 a

barrel yesterday, according to data compiled by Bloomberg. That’s about

$19 less than Dated Brent, the global benchmark. Two cargoes of Russian

Urals, a medium, sour grade, recently sold for about $2 less than Dated

Brent.

Rail Costs

It costs about $12 a barrel to rail WCS from Alberta to Montreal, and $3.50 more

to ship by tanker, said Simon Jacques, a Saint John, New Brunswick-based

consultant who advises energy traders on shipping economics.

Suncor built a rail terminal near Montreal at the end of 2013 with capacity to

offload about 36,000 barrels a day of crude, according to company regulatory

filings. It had been used to supply crude to the company’s 137,000-barrel-a-day

refinery there.

That refinery began an 11-week-long maintenance project on Sept. 22, Suncor

said in a news release.

This shipment might have been tied to the refinery maintenance,

Jacques said. There will be more opportunities to ship crude out of Montreal

when Enbridge completes the reversal of Line 9B, which will connect Montreal

with the company’s mainline that carries crude from Alberta and North Dakota

into the Chicago area.

Line 9B

Enbridge is scheduled to begin filling 9B with crude by Oct. 15, subject to regulatory approval,

Calgary-based spokesman Graham White said by e-mail. The line will be able to deliver 300,000

barrels a day to Montreal.

“The landscape is completely changing,” Jacques said. “The Saint

Lawrence River is going to become a little Mississippi River.”

Canadian producers are looking for other ways to get their crude to water. Pipelines already

connect Alberta to the Houston Ship Channel, the largest U.S. export hub. Federal laws prohibit

most exports of unrefined crude oil from the U.S., although re-exports of foreign oil are allowed,

as are shipments to Canada.

The U.S. Commerce Department approved 118 crude export licenses from October

through the end of May, the last time the department made the information public. Of

those, 63 licenses to re-export foreign crude. The department approved 66 total oil export

licenses in 2012, up from 45 in 2011 and 22 in 2007. A license is good for one year and

allows a company to export a set amount of crude.

Kinder Morgan Inc. (KMI) has proposed expanding its Trans Mountain pipeline that runs from

Alberta to British Columbia and the U.S. Northwest to 890,000 barrels a day from 300,000. “The

bulk of” the new oil on the system will end up on tankers heading to Asia, Ian Anderson,

president of Kinder Morgan’s Canadian division, said in December.

Enbridge and TransCanada Corp. (TRP) have also proposed pipeline projects to bring

Alberta crude to Canada’s coasts.

To contact the reporters on this story: Sheela Tobben in New York at vtobben@bloomberg.net;

Dan Murtaugh in Houston at dmurtaugh@bloomberg.net