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Canada Aims to Push Exports Beyond US

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Canada’s long-standing oil bottleneck along its border with the US is on the cusp of being resolved as critical pipeline projects are completed. But a concurrent series of events and market dynamics imply that even as this thorn in oil sands producers' sides is removed, another may emerge: Canadian crude’s next challenge could well be accessing markets outside of North America. After years of delay, Enbridge’s $8.2 billion Line 3 replacement came into service late last quarter. It allows Enbridge to roughly double its capacity to 760,000 barrels per day on the 1,097 mile-long pipeline, which carries oil from Edmonton, Alberta, to refineries in the US Midwest. In a matter of weeks, a reversed Capline is set to begin service, moving crude south from Patoka, Illinois, to St. James, Louisiana. Although initial volumes will be small and market players say they expect them to consist mostly of light, sweet grades, the pipeline will soon start carrying heavy crude also. Saturation in the US market presents a challenge for Canadian suppliers. Canada already ships almost 4 million b/d of crude to the US, accounting for almost 60% of the latter’s total crude imports and virtually all of Canada’s exports. But Canadian barrels have already displaced all other imports in the Midcontinent. To be sure, more can be consumed on the US Gulf Coast, which runs just over 500,000 b/d of Canadian heavy crude now, but that requires broad displacement of look-alike imports. Some of those are term contracts, and others come from Latin America, which means Canada’s logistical advantage is somewhat muted.

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