* BP, Shell and Vitol eyeing US crude exports to Canada
* Shale oil boom reshapes world energy flows
By David Sheppard and Chris Baltimore
NEW YORK/HOUSTON, Oct 11 Oil major BP Plc
has secured U.S. government permission to ship U.S. crude oil to
Canada, and Royal Dutch Shell has applied for an export
license, as rising production in the world's top oil consumer
upends global energy flows.
A surge in output from shale oil reserves in the Bakken of
North Dakota and Eagle Ford of Texas has raised U.S. domestic
production to the highest level since 1995.
While the United States still imports more than 8 million
barrels of crude oil per day, a glut of light, sweet crude oil
created by the controversial hydraulic fracturing or 'fracking'
boom could fetch higher prices on international markets.
This summer BP Plc received a license to export crude
oil to specific Canadian refineries from the Bureau of Industry
and Security, a branch of the US Commerce Department, a source
familiar with the issue said on Thursday. BP has yet to export
any crude oil on that license, the source said.
Shell spokeswoman Kayla Macke told Reuters they have also
now applied for a license, but would not comment on likely
export destinations or the volumes of crude involved.
"We have applied to the Department of Commerce to export
domestic U.S. crude oil," Macke said, adding that as a global
commodity, imports and exports would follow supply and demand.
A nearly century-old U.S. law requires companies to get a
special license to export crude oil. Until recently, there has
been little or no demand for overseas shipments, apart from a
trickle of crude from Alaska that has been routinely exported.
So far, the export business appears geared toward sending
supplies of light, sweet Bakken crude from North Dakota to a
clutch of Canadian refiners on the East Coast, which are
otherwise dependent on costlier European imports.
Those refiners in turn export much of their refined fuel to
the United States. Pipeline bottlenecks have pushed prices in
the U.S. Midwest to more than $20 below international marker
Brent crude, which traded above $115 a barrel on Thursday.
Many experts are now watching for signs that companies are
pressing for a much more controversial move than shipping oil to
Canada: permission to ship crude overseas from the Gulf Coast,
allowing traders to sell American oil to importers as far afield
The Financial Times first reported the news, saying
Swiss-based trading firm Vitol had also applied for a license,
citing people familiar with the matter.
"Other than routine movement between Canada and the United
States, we have not been involved in any crude oil export
requests," a Vitol spokesman told Reuters, adding they had been
shipping crude to Canada for some time.
U.S. oil production has become a fiercely contested issue in
the Presidential election race, with gasoline and diesel prices
near $4 a gallon.
Republican nominee Mitt Romney has promised North American
energy independence by 2020 by supporting fracking and opening
up parts of the Atlantic Coast for drilling.
President Barack Obama wants to cut U.S. oil imports in
half over the same time period while promoting an
"all-of-the-above" policy that backs renewable energy alongside
increased U.S. production of fossil fuels.
Government data shows U.S. domestic crude oil production hit
6.6 million barrels per day last week, the highest level since
May 1995 due to the rise in fracking.
But domestic U.S. refiners, especially on the Gulf Coast,
have been upgraded to process cheaper, heavier types of crude
from Mexico or Saudi Arabia, and are often ill-suited for
refining the lighter crudes from fracking.
PRESUMPTION OF APPROVAL
By law, the Department of Commerce cannot confirm or deny
whether it has received license applications or granted
licenses, but companies have been exporting crude oil for
several decades. Exports to Canada have a "presumption of
approval," a Commerce spokesperson said in an email.
U.S. crude oil exports to Canada have been growing slowly
and steadily. Shipments reached 77,000 barrels per day (bpd) in
July, the second-highest volume on record, according to U.S.
government data. It was not clear whether the data also counted
crude that was re-imported.
Exports to Canada are double what they were five years ago,
but are still a tiny drop next to 8 to 9 million barrels the
U.S. imports each day, including 3 million bpd from its northern
Lacking pipeline access to Alberta's oil sands, Canadian
refineries in Quebec, Nova Scotia, New Brunswick and
Newfoundland are dependent on foreign crude. According to the
most recent figures from Canada's National Energy Board, Canada
imported almost 650,000 barrels per day in May, 23 percent
higher than the prior month but down 5.3 percent from May 2012.
While most of the imports come from overseas, U.S. crude can
be exported to Canada by rail, barge or pipeline. Indeed,
Enbridge Inc's massive Lakehead pipeline system can
take Bakken crude to the refining hub at Sarnia, Ontario, while
the 300,000 bpd Irving Oil refiner at Saint John, New Brunswick,
is taking railcars of Bakken crude to replace more-expensive
Canadian imports of Bakken crude could rise when Enbridge
completes its Eastern Access project that will expand the
capacity of its system to handle rising production from North
Dakota and the oil sands and reverse an existing pipeline to
bring Western crude as far east as Montreal.
"I believe the assumption that the Commerce Department works
on is that crude oil shipped to Canada comes back to the U.S. as
product. It equals out more or less," said Lucian Pugliaresi,
president of the Energy Policy Research Foundation in Washington
"The working assumption is that if you were to submit an
application for a waterbourne export to Brazil or somewhere
else, then Commerce might treat that much different."