Canada Squeezing Out Mexico in Heavy Crude Oil Delivery to US: Reports

© East News / Polaris ImagesVeracruz, Mexico: La Muralla IV, semi-submersible drilling rig for ultra deep water operations, owned by Mexican Grupo R and operated by Pemex, the state-owned Mexican oil company
Veracruz, Mexico: La Muralla IV, semi-submersible drilling rig for ultra deep water operations, owned by Mexican Grupo R and operated by Pemex, the state-owned Mexican oil company - Sputnik International
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Canadian companies plan to provide large volumes oil to region of the Gulf of Mexico, it could hit hard Mexican oil suppliers.

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MOSCOW, December 29 (Sputnik) — Mexican suppliers of heavy oil to US refineries on the coast of the Gulf of Mexico are expected to be hit hard by Canadian companies planning to provide larger volumes oil to the region, Bloomberg reported Monday.

US refineries are the only ones in the world able to process heavy crude oil. As such, Mexican producers are largely dependent on the US market and will have to reduce their prices to match Canadian suppliers.

For instance, Mexican oil supplier Pemex was forced to increase a discount given to its US buyers from 90 cents per barrel in November to $3.70 per barrel in January, according to Bloomberg. At the moment, the cost of Canadian heavy crude oil delivered to US refineries by pipeline is estimated to be at the same as Mexican oil delivered by tanker.

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Canadian shipments to the United States are expected to grow significantly from January because of newly constructed infrastructure, pipelines and rail terminals. One of such projects is a pipeline built by infrastructure company TransCanada in 2013 able to deliver 700,000 barrels per day. The Seaway Twin pipeline built in 2014 by energy company Enbridge and infrastructure company Enterprise Products Partners LP will be able to deliver more than 400,000 barrels per day. The total amount of Canadian heavy oil delivered to the United States in September 2014 was 3.1 million barrels, Bloomberg says.

Exports of Canadian oil to the United States have been growing in the past 10 years as an increase in oil prices made the use of steam recovery and bitumen mining in the Alberta tundra profitable. Shipments to the United States increased by 63 percent in five years, according to the news outlet. While imports from Canada have been growing recently in the United States, imports from other countries have been falling. Mexican shipments of heavy crude oil fell from 835,000 barrels per day in September 2012 to 675,000 barrels per day in September 2014.

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