Asian outlets beckon oil sands producers

The robust economies of Japan, Korea and China could open new doors for Canada’s heavy and synthetic crude, according to the Alberta Energy Research Institute. Because synthetic crude yields larger volumes of diesel fuel compared with gasoline, it is a “very attractive option” for Chinese refineries, said Dr Catherine Laureshen, of the institute.

She told a recent conference exploring new markets for oil sands production that the demand for diesel is especially high to support China’s agricultural economy.

China, which currently produces 2.8 million barrels per day, is consuming almost 6 million bpd and expected to reach 10 million bpd by 2010.

Korea, with no domestic output, consumes about 2.5 million bpd, while Japan imports 4 million bpd — a level that is expected to decline as it moves to alternative energy sources. Laureshen noted that long-term supply deals between producers and potential consumers are essential to support the capital investment that would be needed to move Alberta oil outside North America.

But she said growing output from the oil sands makes it necessary that “we figure out what to do with it” beyond the heavy reliance on the U.S. Midwest and possibly the Gulf Coast.

However, Bill Henderson, marketing vice president with Terasen, said Canadian crude is more expensive in the Asia-Pacific region than Middle East oil.

He suggested that over the longer term, California might be a better bet than Asia, adding it will take time for the Asian markets to develop.