Canadian heavy crude exported from the country's west coast has become a steady supply source for Chinese refiners in the six months since the opening of the Trans Mountain Expansion (TMX) pipeline in May, even as refiners elsewhere in Asia-Pacific have been more cautious about embracing the new flows.
China-bound exports of Canadian heavy sour crude delivered along the TMX pipeline to Vancouver climbed to a fresh high of around 240,000 b/d in October, analytics platform Vortexa data show (see graph). This left average TMX loadings to China at around 150,000 b/d in June-October. The 590,000 b/d TMX project started loading cargoes in May.
While Chinese refiners have been quick to embrace the convenience of the shortened time to import crude from Canada's Pacific coast, this has not been the case for other Asian refiners. China looked set to absorb all the October TMX exports to Asia-Pacific. Exports to other Asian destinations — South Korea, India, Japan and Brunei — averaged just 37,000 b/d in June-October.
Weak refining margins may have encouraged Chinese buyers to turn to TMX-shipped crude, which has become their cheapest supply source not under sanctions. Private-sector Rongsheng has become a key buyer to meet its spot requirements of 4mn-6mn bl/month for the 800,000 b/d ZPC refinery in Zhejiang. The firm now buys between three and seven cargoes a month, or 53,000-125,000 b/d, of TMX crude, mainly Access Western Blend (AWB), a heavy sour grade with a higher total acid number (TAN) than Cold Lake, the other heavy sour TMX export.
China's largest state-owned refiner Sinopec has also been a consistent buyer of AWB for its 470,000 b/d Maoming and 540,000 b/d Zhenhai refineries, and the increased Chinese buying of Canadian crude has displaced some of the country's usual intake from the Mideast Gulf. Rongsheng in the past bought large amounts of UAE grades including medium sour Upper Zakum through monthly spot tenders. Upper Zakum exports to China fell to around 380,000 b/d in June-October from just over 430,000 b/d in January-May and 615,000 b/d in 2023. The steep drop from last year might also be down to lower availabilities after Abu Dhabi's state-owned Adnoc started to divert more Upper Zakum to its domestic Ruwais refinery late last year as part of its crude flexibility project.
But Iraqi Basrah Heavy flows to China have risen this year from 2023, defying early expectations that the heavy sour grade would be squeezed out by TMX crude. Traders in Asia-Pacific say medium sour grades have been most affected, including US Mars, with Asian imports this year falling to the lowest since the grade started moving to the region in 2017.
Stuttering start
Demand for TMX crude has not picked up as quickly elsewhere in Asia. Early interest surfaced from India, with private-sector Reliance Industries receiving a 2mn bl cargo of AWB in July, but no crude shipments have left Vancouver for India since then. Indian refiners may be wary of AWB's high TAN and the logistical challenges facing shipments. The July cargo made its way to India after three ship-to-ship transfers and the voyage took nearly two months. Reliance may instead prefer even cheaper Venezuelan crude.
Flows to South Korea appear to have dried up after just under 3mn bl of Cold Lake loaded in July-August for the country, with Vortexa data showing no departures for South Korea since. A cargo of Cold Lake was exported in August to Japan, and another in September to Brunei. Interest from Asian refiners other than China and India is likely to be focused on Cold Lake rather than the more acidic AWB, which would be harder to process at their plants.
