Suncor to Ship First Ever Western Canadian Crude to Europe

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September 23, 2014

ReutersBy Nia Williams

CALGARY, Alberta, Sept 23 (Reuters) – Canada’s largest oil and gas producer, Suncor Energy Inc, is shipping its first ever tanker of Western Canadian heavy crude from Canada’s East Coast to Europe, a company spokeswoman said on Tuesday.

Suncor spokeswoman Sneh Seetal confirmed Reuters shipping data that shows the aframax tanker Minerva Gloria was set to pick up a cargo of crude oil from the port of Sorel-Tracy on the St. Lawrence River in Quebec.

Seetal declined to comment on where in Europe the crude cargo is going, citing commercial confidentiality. According to Reuters data it will be discharged in the Mediterranean.

The crude was delivered by rail to a storage facility in Sorel-Tracy that is owned by Kildair Service Ltd.

Barclays analyst Michael Cohen said he did not know of any other instances of a cargo of Western Canadian crude making its way to Europe via rail and tanker from Canada’s East Coast.

For years producers in the oil sands in the landlocked province of Alberta in Western Canada have been desperately seeking ways to get their crude to tidewater and higher-priced international markets.

The emergence of this new and largely unnoticed export route is likely to incense environmentalists who are seeking to block any avenue for shipping crude from the Alberta oil sands, where production entails high greenhouse-gas emissions, to refiners.

But it shows that despite environmentalists’ efforts for the past six years to stall the Keystone XL pipeline from Alberta to the U.S. Gulf Coast, companies facing growing production of oil sands crude, and deepening discounts, are seeking other means, including rail, to get their crude to markets.

The shipment also shows how Canada’s heavy crude is starting to compete with crude from producers such as Russia and Saudi Arabia for customers in Europe. Pipeline company Enbridge Inc shipped a first cargo of re-exported Canadian crude from the U.S. Gulf Coast to Europe earlier this year.

Seetal declined to say what grade of inland heavy crude is being exported, adding it is not necessarily oil sands crude and that Suncor shipped both its own crude and crude bought from other producers in Western Canada.

Limited space on oil export pipelines can to lead to bottlenecks in Alberta, where production is ramping up rapidly, forcing producers to accept deep discounts on their crude relative to U.S. domestic grades.

“Canada and the United States remain our key markets but it’s important that we establish customers outside North America,” Seetal said.

“The crude is inland crude, shipped by rail to the Kildair terminal, where it is loaded on to tankers. This is the first time Suncor has done that.”

Since July 19 Suncor has been sending 30 rail cars per day from Western Canada to the Sorel-Tracy terminal, according to Kildair Chief Executive Officer Daniel Morin.

Suncor also regularly ships crude by rail to its 137,000 barrel-per-day Montreal refinery.

The Sorel-Tracy facility has a rail offloading terminal, 3.2 million barrels of crude oil and petroleum-product storage capacity, and a dock that can accommodate vessels up to 260 metres in length.

Kildair receives the rail cars from Suncor and offloads the crude into storage tanks before it is loaded on to a tanker, Morin said, adding that Suncor retained ownership of the crude throughout.

“They can export the product to locations overseas or alternatively decide to bring it back to Montreal,” Morin said.

He declined to say how much storage capacity Suncor is leasing from Kildair.

Companies including Suncor and Husky Energy already export light crude from deep-sea fields off the coast of Atlantic Canada.

Seetal declined to say whether the Minerva Gloria shipment was a one-off cargo or whether Suncor had plans to regularly ship Western Canadian crude to Europe.

The company has a history of gaining access to markets via imaginative routes. Three years ago Suncor sent Alberta crude by pipeline to the Pacific Coast in British Columbia, before loading it onto a tanker and shipping it through the Panama Canal to Quebec. (Additional reporting by Dave Sherwood; Editing by Peter Galloway)

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