Panama may be cheaper option to ship TMX crude to Asia

Very large crude carriers (VLCCs) off the Pacific coast of Panama could offer the cheapest option to ship Canadian crude to Asia-Pacific destinations when the Trans Mountain Expansion (TMX) project comes on line next year.

The cost of shipping crude from the Aframax-restricted Westridge Marine Terminal near Vancouver, British Columbia, to be reverse-lightered onto a VLCC in Panama and sent to China was about $6.70/bl for heavy sour Cold Lake on 28 August, compared with $7.14/bl to ship Cold Lake from Vancouver to China on an Aframax, according to Argus estimates. Between the two routes, the VLCC option has been an average of 39¢/bl cheaper than the Aframax option since 5 July.

Shipping economics would improve even more if the reverse lighterings were to occur off the coast of Vancouver or the US west coast, but this would not be possible due to environmental concerns, shipbroker BRS said in July. The cost to ship Cold Lake via Aframax from Vancouver to be reversed-lightered onto a VLCC in the Pacific Area Lightering zone off the coast of southern California then sent to China was about $5.99/bl on 28 August, according to Argus estimates.

VLCCs have hauled about 135,000 b/d of mostly Latin American crude from Panama's west coast to the Asia-Pacific region, according to data from analytics firm Vortexa. Crude from western Canada can be co-loaded with Latin American crudes for delivery in Asia.

The TMX project will boost pipeline capacity from Alberta to Vancouver by 590,000 b/d to 890,000 b/d, and will increase the number of Aframax berths at the Westridge Marine Terminal from one to three. Work on those berths was about 94pc complete as of August 9.

The project likely will start commercial service in the first quarter of 2024, but a specific in-service date appears premature for the massive project.

The original intent of the expansion was to better target refiners in Asia-Pacific, but some incremental crude may be coaxed to the US west coast or elsewhere in North America initially. About 23,000 b/d, or 93pc, of crude exported from Vancouver has gone to the US west coast this year, compared with about 2,000 b/d to China, according to Vortexa.

By Tray Swanson