Alberta Plan to Cut Oil Shipments Would Ripple Across West Coast

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Alberta’s plan to cut crude and fuel shipments to British Columbia could ripple across the entire west coast of North America, causing pump prices to surge and shifting the flow of international crude.

Legislation introduced Monday would allow oil-rich Alberta to curb the flow of crude and fuel if neighboring British Columbia doesn’t drop its opposition to Kinder Morgan Inc.’s Trans Mountain pipeline expansion. The existing pipeline supplies the Vancouver area with as much as 60 percent of its refined products.

If Alberta makes good on its threat, Vancouver drivers can expect to pay more at the pump. So too might people in Washington state and Oregon if the region’s refineries were to face a curtailment of Canadian oil shipments down the Puget Sound pipeline. Even Alberta’s own producers and refiners would take a hit, cutting off a key export link at a time when a pipeline bottlenecks have caused a glut and reduced the value of heavy oil-sands crude.

Vancouver Shortages

British Columbia would be the first to feel the the hurt if flows from the Trans Mountain pipeline are cut. The province imports more than half of its refined fuels, including gasoline, from Alberta, which also supplies Vancouver’s only refinery, Parkland Fuel Corp.’s Burnaby plant. The refinery accounts for a quarter of British Columbia’s transportation fuel.

“We cannot operate the refinery at full capacity without the Trans Mountain pipeline,” Annie Cuerrier, spokeswoman, said in an email.

Without supply from Alberta or the Parkland refinery, more than two thirds of the province’s fuel supply could be interrupted and would have to be made up with imports, said Dan McTeague, a senior petroleum analyst at GasBuddy. But Vancouver area import terminals “were not designed to replace, compensate for the dramatic loss of that substantial amount of fuel,” he said.

That could send the price of gasoline in Vancouver north of C$2 a liter ($6.02 a gallon), up from about C$1.50 now.

READ: Kinder Pipeline Battle Escalates as Alberta Readies Oil Embargo

Parkland’s refinery also supplies 40 percent of the jet fuel at Vancouver International airport via a 40-kilometer pipeline that runs directly to the airfield, according to the Vancouver Airport Fuel Facilities Corp., which represents the carriers using the airport. The airport imports the rest of its needs from BP Plc’s Cherry Point refinery in Washington state by barge and tanker trucks.

“If one of these refineries shut down for an extended period, airport and airline operations would be jeopardized,” it says on its website. It didn’t immediately respond to a request seeking comment.

U.S. Effects

A jump in Vancouver prices may be felt all the way down in Los Angeles, if traders ship suddenly cheaper gasoline, diesel and jet fuel from California refineries up north.

In Washington state, refiners that receive the bulk of oil moving down the Trans Mountain pipeline via the connecting Puget Sound line would also take a hit if shipments through the line that were cut or curtailed. The state’s five plants have the capacity to process more than 600,000 barrels a day and relied on Canada for about 35 percent of their crude supply in the first ten months of 2016, according to a report by Morningstar Commodities Research.

“You would have a spike in fuel costs but how long-term that is depends on how quick the Washington refineries could respond,” Mark Oberstoetter, lead analyst for upstream research at Wood Mackenzie in Calgary, said by phone. “It would take several months.”

An email to Kinder Morgan Canada Ltd. wasn’t immediately returned.



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