Production has been booming in regions such as North Dakota's Bakken oil play, causing some to wonder whether the U.S. will become energy independent, forcing Canadian exports to find another home.
IHS CERA says some 2.2 million barrels per day flowed out of so-called tight reservoirs in the U.S. in 2012, surpassing current oilsands production of 1.7 million barrels.
And growth from both resources is expected to be huge. IHS expects tight oil to growth to 4.8 million barrels per day by 2020 and the oilsands to hit 3.2 million barrels per day in that time frame.
The boom has come about thanks to recent advances in extraction techniques, such as drilling long wells horizontally through the rock and breaking it open using hydraulic fracturing or "fracking" methods.
However, IHS says U.S. tight oil only has the potential to supplant about one third of U.S. net oil imports by the end of the decade, assuming flat demand and declining conventional supply.
The difference in the quality of oilsands crude versus tight oil is also an important part of the equation.
Bakken oil is light and sweet — the type refineries along the Eastern Seaboard are configured to handle. In the past, about half of the oilsands supply was upgraded to be on par with light oil.
But now that processed oilsands crude, called synthetic crude oil, is competing head-to-head with tight oil. As a result, IHS says most future oilsands supply will be in the form of heavy bitumen blends.
Given that dynamic, the potential for oilsands market expansion in the eastern part of the continent is "limited," IHS says.
That makes the U.S. Gulf Coast — with 2.4 million barrels per day of heavy processing capacity — the best destination for oilsands crude in the future, as the U.S. looks to displace declining heavy crude imports from Mexico and Venezuela.
"Far from being an either/or proposition, the Canadian oilsands and U.S. tight oil are both important sources of U.S. oil supplies for the foreseeable future," said IHS vice-chairman Daniel Yergin.
"Tight oil is not a replacement for oilsands in the U.S., but the development is altering the opportunity for oilsands."
TransCanada Corp.'s (TSX:TRP) controversial Keystone XL pipeline is meant to bring more Alberta crude to Texas refineries. Construction is underway on a portion between an oversupplied storage hub at Cushing, Okla., to the Gulf. The company hopes to win a long-awaited federal permit for the northern leg, from the Canadian border to Nebraska, in the coming weeks.
Rival Canadian pipeline giant Enbridge Inc. (TSX:ENB) also has its sights set on the Gulf Coast. Last year, Enbridge and partner Enterprise Products Partners reversed the flow of the Seaway pipeline between Cushing and Gulf, and last week expanded its capacity from 150,000 to 400,000 barrels a day. Plans are in the works to more than double its size next year.
California also holds huge potential as an oilsands market. Some 90 per cent of its refining capacity is geared toward heavier crudes, with market potential exceeding 700,000 barrels per day, IHS says.
But there are big hurdles in the way of more oilsands crude heading to California. Pipeline proposals to Canada's West Coast are the subject of fierce opposition across British Columbia. There are concerns that a spill from the lines themselves, or from tankers along the coast, could have dire environmental consequences.
California's low-carbon fuel standard could also penalize oilsands-derived fuels.
Asia provides more of a long-term market opportunity for oilsands crude, IHS said. China currently has 10 million barrels per day of refining capacity, which is expected to double by 2030.
Though most of China's refineries are geared to handle light crude, future expansion could be heavy-focused if that type of oil is readily available from Canada. That's a big "if" considering the furor over West Coast pipeline proposals.
"Issues of timing create uncertainty," IHS said. "Decisions on the type of refineries to be built are currently being made. If Asian investors decide that access to oilsands is unsure, they will not construct refineries geared to consume heavy oilsands. This will create a major timing question for Canadian policy decisions."
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