U.S. to supply half its oil needs, report says – by Jeff Lewis (National Post – March 21, 2013)

The National Post is Canada’s second largest national paper.

CALGARY • Domestic crude oil production in the United States is on track to surpass imports, Washington’s energy fact-finding arm says, in another sign of shifting market conditions that have punished Canadian energy stocks and cast doubt on multibillion-dollar oil sands expansions.

The Energy Information Administration (EIA) said Wednesday monthly crude oil production in the Lower 48 could surpass net imports this year for the first time since 1995. By the end of next year, the gap between how much oil the U.S. imports and what it produces could grow to roughly two million barrels per day, as domestic oil output climbs past eight million barrels per day, the highest level since 1988, the EIA said.

Led by production from North Dakota’s Bakken and the Eagle Ford shale in Texas, U.S. oil output is expected to climb to 7.3 million barrels per day this year from an average of 6.5 million barrels last year, rising to 7.9 million in 2014, according to a short-term energy outlook. At the same time, the share of total U.S. consumption of liquid fuels met by net imports, including crude oil, is expected to decline to 32%, the lowest level since 1985, from 40% last year, the EIA said.

The numbers belie an uptick in Canadian crude exports to the United States, as U.S. refiners capitalize on a flood of cheap Alberta oil. “There’s still a six-million barrel-a-day import market available to the Canadian producers,” Robert Mark, a director and research analyst at MacDougall, MacDougall & MacTier Inc. in Toronto, said in a telephone interview.

“The issue is not that the market’s not there; the issue is that they can’t access the market — specifically the Gulf Coast.”

A decision on TransCanada Corp.’s Keystone XL pipeline by the U.S. State Department is not expected before summer. The pipeline’s $5.3-billion northern leg would connect growing oil sands output in Alberta and Bakken crude in North Dakota to refineries in Louisiana and Texas.

The pipeline’s uncertain future has not plugged the southbound flow of Canadian crude, which is increasingly replacing U.S. oil imports from Nigeria, Angola and the United Kingdom.

“Canadian oil is faring well from a market-share perspective but not faring well from a price perspective,” Peter Tertzakian, chief energy economist and managing director at ARC Financial Corp. in Calgary, said in a telephone interview.

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