IHS CERA: Market shifts for Canadian oil sands crude

The Gulf Coast is poised to be a major market for bitumen harvested from Canada’s oil sands, despite a surge of domestic crude extracted from North Dakota, Texas and other states, according to a report released Monday.

But that supply will increasingly enter the United States as a heavy bitumen blend rather than a lighter synthetic crude that directly competes with the sweet oil being pulled from tight or low-porous U.S. formations, the IHS CERA study found.

The amount of “tight oil” extracted in North America has increased by 1.5 million barrels per day over the past two years, overtaking the daily oil sands harvest in Canada. And the amount is expected to climb even higher, with tight oil growing at twice the pace of oil sands.

IHS CERA’s report concludes that Canada can offer its bitumen blends to Gulf Coast refineries as an alternative to heavy crudes from Venezuela and Mexico. According to the report, Gulf Coast refineries have the capacity to process 2.4 million barrels a day of heavy crudes.

California is another possible destination for Canadian oil sands crude, as 90 percent of the state’s refining capacity is geared toward heavier crudes.

“Tight oil is reshaping opportunities for oil sands in the United States and prompting Canadian industry and governments to seek new sources of demand in the United States, offshore and elsewhere in Canada,” IHS CERA says.

The report underscores the urgency for Canadian officials and industry players seeking swift approval of the Keystone XL pipeline that would connect Alberta with the Gulf Coast.

In 2011, more than 70,000 barrels of oil sands product made it to the Gulf Coast daily by another pipeline and by rail. But another 2 million barrels per day of new pipeline capacity connecting western Canada and  the Gulf Coast is planned in the next three years, IHS CERA notes.

“The U.S. Gulf Coast will be a critical part of the future for oil sands, particularly for bitumen blends,” the report concludes.