Skip to main content

Bill McCaffrey, president and CEO of MEG Energy, at his office in Calgary in 2011.

Jeff McIntosh/The Globe and Mail

MEG Energy Corp. says it is studying possible exports of Canadian-sourced oil from the U.S. Gulf Coast, as it awaits pipeline connections to the southern refining hub.

Calgary-based MEG has not applied for a licence from the U.S. government to export Canadian crude from U.S. shores, chief executive officer Bill McCaffrey said Wednesday, but the company is eyeing potential opportunities in international markets while it waits for crude to start flowing on Enbridge Inc.'s Flanagan South pipeline. MEG has booked capacity for 25,000 barrels a day on the pipeline, due to start up in early December, with potential to boost shipments to 100,000 b/d over time.

Canada's oil industry has eyed exports from U.S. shores amid difficulty reaching coastal markets from home. Enbridge's contentious Northern Gateway to the west coast has been bogged down by opposition, while rival TransCanada Corp. has yet to file for regulatory approval for its eagerly anticipated $12-billion Energy East line to New Brunswick.

Story continues below advertisement

Flanagan South would transport up to 580,000 b/d of heavy oil from the Chicago region to Cushing, Okla., where the oil could be transferred to Enbridge's Seaway system for shipment to the Houston refining corridor. From there, oil could be loaded onto ocean-going tankers for sale in higher priced global markets.

"We certainly are looking at those types of things," Mr. McCaffrey said Wednesday on a conference call announcing third-quarter results.

"We're well positioned. If you take the Flanagan-Seaway combination obviously it lands us in the Houston area, and obviously you can move crudes out of those areas. So we do obviously evaluate that as one possible area to move crudes offshore and I think it makes a lot of sense that that is a possibility."

Such shipments are rare but permitted despite a U.S. ban on exports so long as the oil is not mixed with domestic U.S. crude. The exports could climb to 500,000 b/d per day, from about 25,000 b/d today, FirstEnergy Capital Corp. analyst Martin King has estimated.

MEG on Wednesday reported a third-quarter net loss of $100.9-million, or 45 cents per share, compared to a $115-million profit, or 51 cents a share, a year earlier. MEG attributed the loss to an unrealized foreign exchange loss of $203-million.

The company said bitumen production more than doubled to 76,471 b/d versus 34,246 b/d in the year-ago period. Cash flow climbed to $238-million from $144-million.

Mr. McCaffrey said MEG is steadily boosting shipments to U.S.-based refiners with the help of so-called unit trains. There is also interest in the company's oil from global buyers, he said without providing specifics.

Story continues below advertisement

"So a natural trend over time is we'll continue to strengthen our connections and transportation methods to North American refiners, but then we'll also look to broaden that as we go forward," he said.

Potential exports of Canadian oil via the U.S. could face pushback from environmentalists, who have long opposed TransCanada's contentious Keystone XL pipeline on grounds that it will help oil sands crude reach international markets.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Discussion loading ...

Cannabis pro newsletter