New shipping rules expected to impact Canadian oilsands industry in 2020
BY DAN HEALING THE CANADIAN PRESS
Posted December 28, 2019 7:20 am A new wave of cold water is about to hit Canada’s much-buffeted oilsands industry but whether it will be a perfect storm or a tempest in a teapot is yet to be seen.
Tighter pollution rules by the International Maritime Organization are set to take effect Jan. 1. The new guidelines, dubbed IMO 2020, will limit the sulphur content of “bunker” fuel on ships to just 0.5 per cent, down from the current 3.5 per cent.
The deadline has been in place for years, but the change is still expected to wallop prices for heavy oil containing high levels of sulphur, such as raw bitumen from the Alberta oilsands. Bitumen makes up about half of Canada’s 4.6 million barrels per day of crude oil production.
The discount on Western Canadian Select bitumen blend crude prices versus North American benchmark West Texas Intermediate could almost double in January, said Alan Gelder, vice-president, refining, for consultancy Wood Mackenzie.
“In October, we’ve got the WTI-WCS differential at about US$16 per barrel. And we’ve got that widening out to the high-$20s in January,” he said in a recent interview from London.
He added the differential should moderate to about US$23 or $24 by the middle of 2020. The price difference between WTI and WCS is a closely watched figure because it dictates oilsands profitability and royalties paid to the provincial government.
Analyst Phil Skolnick of Eight Capital says there was little evidence of a major jump in WCS differentials pricing for January crude oil trades that started in early December.
The impact of the new pollution rules is being softened by disruptions in the flow of competing heavy oil from Venezuela and Mexico into the U.S., as well as new petrochemical projects in Asia that need heavy oil as feedstock, he said.
“Canada is benefiting because of Venezuela, Mexico. With that, combined with the pull from these new petrochemical plants that are consuming medium and heavy oil, it’s helping to offset the risks of IMO 2020,” said Skolnick."
https://globalnews.ca/news/6343041/marine-fuel-imo-2020-oilsands-canada/