U.S. refiners want more Canadian oil, and pipeline companies are finding ways to get it to them.
Companies are adding space to their congested oil export pipelines from Canada even as plans for bigger expansions and new lines face delays. TC Energy Corp. - formerly known as TransCanada — will offer as much as 50,000 barrels a day of new capacity on its Keystone pipeline as early as next year by using chemicals, called drag resistance agents, to ease flows thorough the system.
That "will allow TC Energy to respond to the demand for additional transportation capacity for crude oil from western Canada to the U.S. Gulf Coast," Jamie Harding, a spokesman for the company, said in an email.
Enbridge Inc., operator of the largest oil pipeline system, is using similar methods to add about 135,000 barrels a day of extra capacity to its system by early next year. The company just began an open season, allowing shippers to sign up for secure, contracted space on the Enbridge mainline system starting in July 2021.
Since June, flows on Enbridge's Mainline are up 213,000 barrels a day from a year earlier, said Tim Pickering, founder and chief investment officer of Auspice Capital Advisors in Calgary. Rail exports are also ramping up and are forecast to reach half a million barrels a day, said TimMcKay, present of Canadian Natural Resources Ltd.
"When you put the Enbridge mainline and increased rail, that's whats bringing in differentials" between heavy Canadian crude and WTI futures, Pickering said.
Enbridge has optimized its pipeline system to create about 220,000 barrels a day of new capacity over the past "couple of years," Jesse Semko, a spokesman for the company, said in an email.
Canadian oil producers have been struggling to export their crude for more than a year after pipelines filled to capacity.
Prices are strengthening even after Enbridge announced that its Line 3 pipeline expansion won't start operation until late next year, about 12 months behind schedule.
Still, demand for heavy crude by refiners in the U.S. Gulf Coast and abroad has strengthened as Venezuelan production collapsed amid sanctions and political unrest, as OPEC cut output and as sanctions were tightened on Iran. A cargo of Kearl crude was shipped from the Gulf Coast to Malaysia last month, the first such shipment in five years.
"The demand we are seeing from the refiners for heavy barrels is unrelenting," Pickering said.