Shale Oil Growth in U.S. Hurts Canadians as Well as OPEC


By Robert Tuttle and Dan Murtaugh

OPEC isn’t the only victim of the growth in U.S. shale oil.

A surge of light oil from North Dakota and Texas is cutting into the earnings of Canadians who turn heavy oil sands into a lighter crude that fetches more from refiners. Producers in Alberta, home of the country’s greatest reserves, upgraded 20 percent less of the region’s crude in October than four years earlier, according to the province’s energy regulator.

Two of five plants under construction were canceled and the province’s upgrading and refining capacity fell in 2013 for the first time in three decades. Companies are now sending record amounts of the heavy stuff on pipelines and trains to refineries in the U.S. Midwest and Gulf Coast.

“Producers are not motivated to spend at least $10 billion building a facility to upgrade heavy oil into light oil, a product that is in oversupply,” Jackie Forrest, vice president of Calgary-based ARC Financial Corp., said in an e-mail. “When producers sell heavy oil directly, a product that is in short supply, they get a better return.”

Light synthetic crude produced by upgraders has been worth just $10.75 a barrel more then heavy crude in Alberta this month, down from about $25 in 2013, according to data compiled by Bloomberg. Projects including Suncor Energy Inc. (SU)’s Voyageur joint venture with France’sTotal SA (FP) and Value Creation Inc.’s BA Energy Heartland were abandoned.

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