For decades, the United States has bemoaned its dependence on oil imports. But now, the worldâs biggest oil consumer is looking at seaborne oil exports of its own.
Royal Dutch Shell PLC is among the companies that have applied to export oil from the United States, with oil-tanker shipments out of the Texas Gulf Coast to refining complexes on Canadaâs East Coast one possible destination. This comes as energy companies in Canada also eye Atlantic shipping routes, although some hope to bypass domestic processing facilities and get their oil to India and China.
Exporting oil is a politically contentious issue in the U.S., where politicians repeatedly push for energy independence and exports are highly restricted. Shellâs move, however, is not about independence.
Instead, it is struggling with a backlog of oil in certain areas of the continent â bottlenecks that push North American crude prices below the global benchmark.
âWhat this is simply showing is the pipeline imbalance in the U.S.,â said Len Waverman, a professor of strategy and global management at University of Calgaryâs Haskayne School of Business.
âSo the reason for exports is the fact we have regional markets in the U.S.,â Prof. Waverman said. âWe donât have a national market.â
Shellâs application is part of an industry-wide rush to deal with the glut of oil hitting the North American market, thanks to expanding production in new and revived oil fields in North Dakota, Texas, Alberta and Saskatchewan.
As the prospects of major pipeline projects to Canadaâs West Coast and the Texas Gulf Coast remain muddy, oil companies must find ways to expand their traditional markets or continue to receive a discounted price for their crude.
âWe can confirm we applied to the Department of Commerce for licences to export domestic crude oil,â Kayla Macke, a spokeswoman for Shell in the United States, said in an interview Thursday. âCrude oil trades on a global scale, and imports and exports follows supply and demand.â
She said Shell can not yet specify which markets it hopes to reach.
BP PLC and Vitol Group, the worldâs largest oil trading house, have also applied for licences, the Financial Times reported. It said the Department of Commerce refused to confirm the existence of licences or licence applications, citing U.S. law. But the newspaper quoted the department as saying exports to Canada had a âpresumption of approval.â The paper said BP and Vitol declined to comment
The political debate, however, could extend beyond the United States. TransCanada Corp., for example, has faced regulatory roadblocks in its quest to connect Albertaâs oil sands to refineries on the Texas Gulf Coast via the proposed Keystone XL pipeline.
Canadians may want to retaliate if Shell and its competitors try to reach refineries such as the Irving Oil complex in Saint John, in their bid to better their bottom lines.
âOne might say: âWhy should oil be going to Canada if the U.S. right now is blocking the XL pipeline?ââ said Jack Mintz, a director at the University of Calgaryâs School of Public Policy.
The political issues could open negotiations for a North American energy strategy, a more âholistic approach,â he said.
Energy companies are pushing a variety of export options, such as expanding existing U.S. networks, replacing natural gas with oil in an existing line, building new lines such Enbridge Inc.âs Northern Gateway pipeline, and turning to rail cars to transport crude. Shellâs export ambitions could add further pressure to major projects such as Gateway.
âOver time, things change and you donât want to have an opportunity lost,â John Carruthers, president of the Gateway project, said in an interview on the sidelines of the projectâs regulatory hearings in Prince George, B.C.
But, he said, Asia will continue to be a desirable market, and the possibility of U.S. exports emphasizes the need for Canada to find another destination for its oil.
With files from reporter Nathan VanderKlippe in Prince George, B.C.
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