Additionally, refining condensate isn’t profitable. The light oil doesn’t produce the higher value distillates used to make diesel or jet fuel. So with an unexpected surge in condensate production and low demand from refineries, you have a recipe for low prices. In general, Gulf coast refineries have been paying $15 per barrel less for condensate than light oil varieties. That’s great for downstream marketers. But that discount is coming right out of the pockets of shale producers. Canada needs condensate. The U.S. has too much of the stuff. The challenge is moving it. Who’s poised to profit At the moment, the only way to export condensate to Canada is through theEnbridge (NYSE: ENB ) Southern Lights pipeline which transports 180,000 bpd from Illinois to Alberta. The problem is shipping condensate from Texas to Patoka, Illinois where the line begins. Kinder Morgan Energy Partners (NYSE: KMP ) is trying to position itself as the leading condensate shipper. The company built a condensate pipeline that can move 300,000 bpd from the shale basin to the Houston area. From Houston, condensate can be shipped through a third-party Explorer pipeline to Hammond, Illinois. Admittedly Illinois is still on long way from northern Alberta.
Cutler,Guest blogger / October 4, 2013 Pipelines carrying steam to wellheads and heavy oil back to the processing plant line the roads and boreal forest at a project 74 miles south of Fort McMurray, Alberta, in Canada. Todd Korol/Reuters/File Enlarge Asian countries continue to line up for Canadian energy to which the United States is unable to commit. This week Japan ‘s prime minister Shinzo Abe met with his Canadian counterpart Stephen Harper to discuss the potential for shipping liquefied natural gas (LNG) across the Pacific Ocean to Japan. Although no firm agreement was announced, Japanese newspapers speculated that the first Canadian exports might reach Japan as early as 2018 and no later than 2020. OilPrice.com offers extensive coverage of all energy sectors from crude oil and natural gas to solar energy and environmental issues. To see more opinion pieces and news analysis that cover energy technology, finance and trading, geopolitics, and sector news, please visit Oilprice.com . Recent posts The Christian Science Monitor Weekly Digital Edition This reflects, among other things, the greater difficulty that Canada has had in developing LNG export terminals. Low prices for gas from western Canada is another problem, and although there is reason to believe in a secular rise towards higher prices, U.S. producers are less affected by the current levels. On the other hand, as prices rise, there are fears in Canada of a typical bust-to-boom scenario; and for this, there is fear that Canada’s gas producers are and will continue to be ill-prepared, not even able to take advantage of the anticipated boom. (Related article: Despite Shale, OPEC Still Matters ) RECOMMENDED: US energy in five maps (infographics) Nevertheless, India is also getting in line for Canadian oil as well as gas. India’s High Commissioner Nirmal Verma was also in Ottawa this week to sign a nuclear cooperation agreement allowing uranium from Canada to be sold to India as reactor fuel. India seeks to triple in electricity production in the next decade, in part by building as many as a dozen new reactors. Agreement was actually reached three years ago, but the additional time is required in order to establish a process for independent verification that the fuel is used for peaceful purposes. In 1974, India used a reactor supplied by Canada to create the fuel for a nuclear bomb test. India is even willing to consider investment in the Energy East Pipeline, even as TransCanada has had to delay its filing of an application to the National Energy Board from this year until next year. Environmental concerns that need to be addressed during the regulatory process are partly responsible for the delay, but also it is now foreseen that the original estimate of 850,000 barrels per day (bpd) is low and should be increased to 1.1 million bpd. (Related article: Canada to Drill for Offshore North Atlantic Oil ) Energy talks between the two countries were elevated to the ministerial level last year when our visit India, and India’s energy minister will be visiting Ottawa later this month to continue the discussions.