Canadian refineries, like those in the United States, are working to increase their use of growing production of crude oil from Texas and North Dakota. Monthly exports of crude oil from the United States to Canada have historically averaged 24,000 barrels per day (bbl/d) and were principally delivered to refineries in central Canada. However, U.S. exports to Canada averaged nearly 100,000 bbl/d over the first 3 months of 2013 (Figure 1).
While the Midwest (PADD 2) has been the traditional delivery source for U.S. crude oil exports to Canada, the recent increase in exports is being led by deliveries from the Gulf Coast (PADD 3) and the East Coast (PADD 1). Nearly all of the PADD 3 crude exports to Canada were light crude oil. Trade press reports indicate that Suncor Energy, Irving Oil, Trafigura, and Valero are among the companies that have already shipped, or will soon ship, crude oil from the U.S. Gulf Coast to refineries in eastern Canada. PADD 1 exports were barrels that moved east from North Dakota's Bakken region by rail and then were exported through New York state.
According to the Canadian Association of Petroleum Producers, Canadian refineries in 2011 processed 878,000 bbl/d of western Canadian crude, 110,000 bbl/d of eastern Canadian crude, and 680,000 bbl/d of imports. The imports primarily supply refineries in eastern Canada that have limited access to western Canadian production or are configured to run light crude oil.
Rapidly growing crude oil production in western Canada, North Dakota and Texas has overloaded crude oil transport infrastructure, resulting in discounted pricing for Western Canadian Select, Bakken, and Eagle Ford barrels. Crude movements by rail are addressing some of the midcontinent supply overhang, but rail alone cannot keep up with the rising production. Refiners in eastern Canada are starting to make logistical changes needed to replace imports of Atlantic Basin crudes with lower-priced oil produced in North America.
Texas crude oil production has risen sharply since 2009. After averaging 1.1 million bbl/d from 2000 to 2009, production reached just over 2 million bbl/d in 2012. Much of this growth is attributable to light sweet crude oil production in the Eagle Ford shale formation in South Texas. Roughly half of the refinery capacity in the United States is located in PADD 3, but many of these refineries are configured to run heavy sour crude, and thus may not be well-suited to absorb increasing light crude production. At the same time, the opportunity for "like for like" displacement of imported light sweet crude into the Gulf Coast market is rapidly being exhausted as PADD 3 light sweet crude imports dropped from 886,000 bbl/d in 2010 to 279,000 bbl/d in 2012 and have fallen substantially lower in recent months.