Canadian imports of foreign crude are soaring, swamping refineries in Quebec and New Brunswick, while efforts to connect the plants with Alberta supplies encounter fresh roadblocks.
The National Energy Board said Canadian crude oil imports leaped by 16 per cent last year to 736,000 barrels a day, including growing supplies from U.S. shale producers and OPEC kingpin Saudi Arabia.
From less than 100,000 barrels a day as recently as five years ago, imports of U.S. crude surged to more than 400,000 barrels a day in 2015. They now account for 62.4 per cent of total Canadian imports, the energy watchdog said.
Led by Saudi Arabia, members of the Organization of Petroleum Exporting Countries have also increased their share of the Canadian market.
Saudi imports are up sharply and now comprise 11.4 per cent of the total, while Nigeria's market share nearly tripled last year to 5.2 per cent, according to the federal agency.
The upsurge underscores the dramatic upheaval that has rocked global oil markets since mid-2014, cutting U.S. and international prices by roughly 70 per cent and throwing growth prospects of major energy producers into neutral.
It comes as debate rages over TransCanada Corp.'s proposed $15.7-billion Energy East pipeline, billed by supporters as a way to increase consumption of Canadian oil by refineries in the east.
For now, however, the plants run by Suncor Energy Inc., Valero Energy Corp. and Irving Oil Ltd. are benefiting from a broader range of supply options that includes a steady diet of cheap U.S. crude – a trend analysts say will persist even if the pipeline is built.
"They would still take the cheapest barrel. If it was Canadian-based or U.S.-based, or North Sea, they're going to take that," FirstEnergy Capital Corp. analyst Martin King said.
It's a sharp reversal. For years, eastern refineries sought to increase their diet of North American crude by investing heavily in rail offloading terminals.
A boom in crude-by-rail shipments was underpinned by a wide price gap between benchmark North American West Texas intermediate oil and international Brent crude.
Today, that gap has largely evaporated. It shrunk from an average of $6.52 (U.S.) in 2014 to as little as 45 cents earlier this month, according to FirstEnergy, making deliveries by tanker more attractive relative to inland crude streams.
Meanwhile, pipeline giant Enbridge Inc. in December started up its Line 9 route to Montreal, further undermining demand for rail shipments.
"The refineries tend to run lighter crude oils in Eastern Canada, and there's an abundance of light crude oil in the U.S.," said Jason Parent, vice-president of consulting at London, Ont.-based Kent Group Ltd.
"They're going to take what makes sense to them and what their facilities can run. If that's available to them on Energy East, then they will take advantage of that. If not, it's an avenue for Canadian producers to get their product to export markets."
Irving Oil's 300,000-barrel-a-day plant in Saint John is sourcing primarily global crude types, taking only "occasional" batches of synthetic crude oil from Alberta "when price justifies," a refining industry source with knowledge of the facility said.
A spokeswoman for Valero said the company retains flexibility to obtain supply "from where it's most economical to do so," although it can now supply its refinery in Levis, Que., entirely from North American crude following the startup of Enbridge's Line 9.
TransCanada has said Energy East could start up by the fourth quarter of 2020. The project would send up to 1.1 million barrels a day of crude to refineries and export terminals in the east.
This week, Quebec sought an injunction to force Calgary-based TransCanada to submit the project for a provincial environmental review, ratcheting up inter-provincial tensions.
Mr. King of FirstEnergy Capital said U.S. producers have probably saturated the East Coast and that the surge in foreign supplies does not undermine the case for sending more Canadian crude east. "It would still end up being competitive at the end of the day and the market would price it as such," he said.
With files from reporter Shawn McCarthy in Ottawa.