China’s Sinochem buys first oil cargo from Canadian pipeline

CHINA’S Sinochem Group has purchased one of the first crude cargoes that will be shipped through a new Canadian pipeline that is designed to move more oil from landlocked Alberta to the Pacific Coast for export.

Sinochem bought a 550,000-barrel cargo from Suncor Energy, which will load from the Trans Mountain pipeline’s expansion in May to June, said traders who asked not to be identified. The oil is a heavy and sulphurous crude variety called Access Western Blend, they added.

The Trans Mountain expansion – which nearly triples the capacity of the system – is Canada’s biggest new oil pipeline in more than a decade. The larger conduit was conceived as a way to let Canadian producers sell more crude at better prices to buyers in Asia and on the US West Coast, widening its customer base beyond its current pool of mainly US Midwest refiners.

The development also holds political significance for Prime Minister Justin Trudeau, whose government purchased the pipeline from Kinder Morgan in 2018 to save the expansion from cancellation. An inaugural sale to China helps bolster the case that the project is opening new markets for Canadian producers and was worth saving despite the cost overruns and criticism from environmentalists.

The cargo purchased by Sinochem is of similar quality to Iraqi Basrah crude and will likely be refined in coker units, traders said. The sale was done at a discount of close to US$5 a barrel to ICE Brent on a delivered basis, they added.

Sinochem and Suncor did not respond to requests for comment.

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The expansion is a twinning of the existing 1,150-kilometre pipeline from Edmonton, Alberta, and Burnaby, British Columbia. The pipeline was initially slated to start in 2017, but faced repeated delays, cost overruns, construction mishaps and regulatory hurdles. BLOOMBERG