(Bloomberg) — Canadian crude shipments are bypassing a pit stop off the California coast and heading straight to Asia as skyrocketing shipping rates make the detour less economical and the nation’s oil producers look to reduce dependence on the US during an ongoing trade war. <\/p>\n
Most Read from Bloomberg <\/p>\n
Last month, no Canadian crude from Vancouver to Asia was first transferred to a supertanker while en route. The switch typically happens in the Pacific Area Lightering zone off Southern California as the marine terminal near Vancouver isn’t equipped to handle large oil tankers. In June 2024, 78% of the Canadian oil shipped to Asia was first moved onto so-called Very Large Crude Carriers, or VLCCs, before reaching its destination. <\/p>\n
Fallout from the Iran War has shrunk the availability of VLCCs, sending shipping rates to record highs. Combined with a greater availability of smaller Aframax vessels in the western Pacific, shipping Canadian oil directly to Asia on those vessels is now about 54% of the cost of going the long route on VLCCs, according data provided by Nick Watt, head of freight pricing at Argus. <\/p>\n
The 2024 startup of the expanded 890,000-barrel-a-day Trans Mountain pipeline, which runs from Alberta to the Westridge terminal near Vancouver, opened up Asian markets to significant exports of heavy Canadian oil sands crude for the first time. But the terminal itself, and the constraints of the Burrard Inlet, mean VLCCs can’t access Westridge while Aframax ships can. A VLCC can carry about 2 million barrels compared with an Aframax, which hauls up to 750,000 barrels when full. <\/p>\n
Trans Mountain Corp., which is owned by the Canadian government, has been commissioned to spearhead work on a new million-barrel-a-day pipeline that would roughly follow the existing conduit route but would terminate at a new deep-water port that can accommodate VLCCs. <\/p>\n
The project, an initiative of Alberta’s government that’s been approved by Canadian Prime Minister Mark Carney, is designed to boost exports to Asia, allowing Canadian oil producers to reduce their dependence on the US amid a trade war that’s frayed relations. <\/p>\n
Most Read from Bloomberg Businessweek <\/p>\n
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