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Researched by Industrial Info Resources (Sugar Land, Texas)--With the stalling of multiple megaprojects meant to add takeaway capacity to Alberta and allow Western Canadian Sour (WCS) crude oil to flow freely to market, a new class of projects have emerged, offering alternative routes to market. One of these newer megaprojects is Energy East, a massive, 1.1 million-barrel-per-day (BBL/d) pipeline project by TransCanada Corporation (NYSE:TRP) (Calgary, Alberta), which would carry WCS from the Hardisty area of Alberta to a port in Saint John, New Brunswick, where it would be exported.
While most megaprojects aim to take Canadian crude oil to the Gulf Coast refining hub, Energy East has the potential to access other markets, such as the U.S. East Coast, and may even find demand in areas of Western and Northern Europe or South America. This could be a major change for a country whose exports of heavy crude only constitute about 13% of its total exports to non-U.S. nations, according to Canada's National Energy Board (NEB).
To measure demand for WCS, it is necessary to understand how heavier crudes are processed. In order to handle the longer hydrocarbon chains, i.e. the heavier oil, refiners need to use a coker. The coker cracks these longer hydrocarbons down and extracts more product than distillation alone. Thus, where there are cokers, there are potential customers for heavy crude.
Energy East would ship oil off the east coast of Canada, giving it access to the Atlantic, and thus to Europe as well as the U.S. East Coast. While the East Coast has only two coking units, both owned by affiliates of PBF Energy Incorporated (NYSE:PBF) (Parsippany, New Jersey), the closest cokers in Europe, located in Spain and the U.K., represent roughly three times the coking capacity of the U.S. East Coast across seven active units, according to Industrial Info's data. South America has a healthy appetite for heavy crude, with 25 cokers, and more on the way.
However, with more than 90 cokers in North America, and its geographic proximity, the closest market for WCS still will be the Gulf Coast. That said, as geopolitics continue to shift and laws regulating shipping change, the potential to access new markets, such as Europe and South America, may prove beneficial for Canadian producers in the long run.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
While most megaprojects aim to take Canadian crude oil to the Gulf Coast refining hub, Energy East has the potential to access other markets, such as the U.S. East Coast, and may even find demand in areas of Western and Northern Europe or South America. This could be a major change for a country whose exports of heavy crude only constitute about 13% of its total exports to non-U.S. nations, according to Canada's National Energy Board (NEB).
To measure demand for WCS, it is necessary to understand how heavier crudes are processed. In order to handle the longer hydrocarbon chains, i.e. the heavier oil, refiners need to use a coker. The coker cracks these longer hydrocarbons down and extracts more product than distillation alone. Thus, where there are cokers, there are potential customers for heavy crude.
Energy East would ship oil off the east coast of Canada, giving it access to the Atlantic, and thus to Europe as well as the U.S. East Coast. While the East Coast has only two coking units, both owned by affiliates of PBF Energy Incorporated (NYSE:PBF) (Parsippany, New Jersey), the closest cokers in Europe, located in Spain and the U.K., represent roughly three times the coking capacity of the U.S. East Coast across seven active units, according to Industrial Info's data. South America has a healthy appetite for heavy crude, with 25 cokers, and more on the way.
However, with more than 90 cokers in North America, and its geographic proximity, the closest market for WCS still will be the Gulf Coast. That said, as geopolitics continue to shift and laws regulating shipping change, the potential to access new markets, such as Europe and South America, may prove beneficial for Canadian producers in the long run.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
