Comin' to America, Part 3 - PADD 2 Refineries Continue a Years-Long Shift to Canadian Crude

Fifteen years ago, just before the dawn of the Shale Era, more than 1.8 MMb/d of Gulf Coast and imported crude oil was being piped and barged north from PADD 3 to refineries in the Midwest. By 2019, those northbound flows had fallen by half, to less than 930 Mb/d, and in the first nine months of  this year they averaged only 550 Mb/d. Refineries in PADD 2, many now equipped with cokers and other hardware that enables them to break down heavy, sour crude into valuable refined products, have replaced those barrels — and more — with piped- and railed-in imports of favorably priced crude from Western Canada, including a lot of dilbit and railbit from Alberta’s oil sands. Today, we discuss the evolution of feedstock supply to the Midwest refinery sector.

This is the third episode in our series on the changing face of U.S. crude oil imports in each of the five PADDs. In Part 1, we said that the Shale Revolution, combined with the development of the oil sands and other hydrocarbon resources in Western Canada, led to a dramatic decline in U.S. oil receipts from OPEC countries in particular and, to a lesser extent, from non-OPEC countries (other than Canada), and a big increase in imports from Canada. In 2005, the U.S. imported an average of 4.8 MMb/d from OPEC, 1.6 MMb/d from Canada, and 3.7 MMb/d from other non-OPEC countries, including 1.6 MMb/d from Mexico, according to the Energy Information Administration (EIA). By last year, imports from OPEC had decreased by almost 70%, to 1.5 MMb/d, while imports from Canada had increased by more than 135% to 3.8 MMb/d. Imports from other non-OPEC countries, in turn, had fallen by almost 60% to 1.5 MMb/d, and imports from Mexico — a subset of the non-OPEC countries — had plummeted by more than 60%, to about 600 Mb/d.

The trends generally continued in 2020, which like this year’s baseball, basketball, and football seasons will have an asterisk because of COVID-19 and its broad impacts. In the first nine months of this year, imports from OPEC averaged about 930 Mb/d, while imports from Canada averaged 3.6 MMb/d, and imports from other non-OPEC countries averaged 1.5 MMb/d — Mexico’s slice of that averaged about 690 Mb/d. There were also big shifts in imports on a PADD-by-PADD basis, as we discussed in Part 1.

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