* Over 2 mln barrels booked to Europe in rare arbitrage
* India's Essar adds Canadian oil to suitable crudes list
* Competes with West African crude in Europe
By Emma Farge and Julia Payne
GENEVA/LONDON, Jan 22 The United States now gets
so much crude from its own shale deposits that Canadian
exporters are selling as far afield as Europe, showing how
deeply the U.S. energy revolution is transforming global oil
As recently as 2011, close to 100 percent of Canada's crude
exports went to its neighbour the United States, according to
the U.S. government's Energy Information Administration (EIA).
But trade and shipping sources said more than 2 million
barrels of light crude from Canadian offshore oilfields have
gone to Europe in the last month, in a taste of what is to come.
The change is due to technological advances the U.S. expects
will bring a 900,000 barrels per day (bpd) record jump in its
oil output to 7.3 million bpd in 2013, the EIA said ealier this
month, from places like the Bakken shale deposit in North Dakota
that now feeds U.S. East Coast refineries served by Canada.
These refineries' traditional suppliers in West Africa,
notably Nigeria, are also having to seek alternative customers
and are feeling the pinch of the new Canadian competition in
their established European markets.
"Globally Canada has been trying all the exports
routes...U.S. east coast refineries are also taking more from
Bakken fields so that should replace the flow from Canada and
West Africa," said Olivier Jakob of consultancy Petromatrix.
The drilling technique hydraulic fracturing, or fracking, in
which water, sand and chemicals are forced deep underground to
drive out trapped oil and gas, have allowed access to millions
of barrels of U.S. oil that were previously unattainable.
This shale oil is sweet - meaning it has low sulphur levels
and is suitable for the U.S. refiners - like the Canadian oil it
So it is only these light Canadian crude grades, such as
Hibernia, that have been exported to Europe.
"Shale oil is making its way to the east coast of the United
States by rail so this is backing out offshore sweet east coast
Canadian production," said a trader with a European refiner.
The trader said that the profit margin had widened
sufficiently for arbitrage as it allowed for a nominal profit of
nearly $1 million on an 600,000 barrel shipment.
Arbitrage denotes sale or buy opportunities, which arise
with price gaps between regions that normally trade rarely or
not at all.
Trade and shipping sources said two Hibernia cargoes of
600,000 barrels each arrived at Britain's east coast in late
December to early January.
A Hibernia cargo of 1 million barrels is due to load from
Whiffen Head, a Canadian offshore loading platform, this week
and will go to Valero's Pembroke refinery, trade sources
Hibernia is largest stream of three sweet crude oil grades
produced in the Grand Banks formation, off Newfoundland, along
with Terra Nova and White Rose. Canadian eastern offshore
production was around 265,000 bpd in 2010, according to the EIA.
Rising U.S. shale oil output has already started re-routing
flows of West African and Algerian light, sweet crude oil which
used to flow regularly to the United States.
U.S. imports of light, sweet crude will fall to virtually
zero by 2014, an executive of French energy company Total's
trading arm predicted in October.
This progressive upheaval in crude oil patterns has prompted
European refiners to look at changing their slates - lists of
suitable crude oil grades for use as feedstock - to adapt.
India's Essar Oil Ltd, which owns the 296,000 bpd Stanlow
refinery on Britain's east coast, has taken Canadian grades, a
"(Hibernia) was one of the 11 additional crudes we have
added over the past year or so at Stanlow as part of initiatives
to lower our crude costs and improve margins."
Traders said that the extra volumes of Canadian crude
arriving in Europe have depressed prices for Nigerian grades,
which have fallen around $1 since early December.
"(Canada) is not that far, if you can contemplate lifting
West African then you might as well take Canadian," one European
trader who has previously bought Canadian oil said.
The crude trade from Canada to Europe has until now rarely
been profitable except at times when severe supply disruption
made the shipping cost worthwhile.
During the Libyan war of 2011, Hibernia arrived in the
Mediterranean as traders sought substitutes for Libya's light
sweet crude. Cargoes of Terra Nova and White Rose have
occasionally crossed the Atlantic to Northwest Europe.
Total Canadian crude oil production was around 3 million bpd
in 2011, with about 70 percent heading to refineries in the U.S.
Midwest, according to the EIA.
While oil from Canada's eastern coast can find other buyers,
much onshore crude output is trapped in the continent's centre,
as infrastructure to target the Asian market remains limited.