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Energy and Resources Suncor ships first crude to Europe in effort to expand markets

An oil sands worker checks the oil during the first step of separation at the Suncor processing plant at their tar sands operations near Fort McMurray, Alta., Sept. 17, 2014.

TODD KOROL/REUTERS

Suncor Energy Inc. has shipped its first batch of Western Canadian crude to Europe, extending efforts by the energy industry to tap new markets beyond the U.S.

The Calgary-based company exported a batch of heavy crude from a terminal in Sorel-Tracy, Que., near Montreal, on Sept. 21 after transporting the cargo from oil fields in Alberta, spokeswoman Sneh Seetal confirmed. She declined to discuss the destination or volume, but Bloomberg earlier reported the 700,000-barrel cargo was bound for Italy.

The terminal has 12 rail-loading racks and can receive ships with capacity of up to 350,000 barrels, owner Kildair Service Ltd. says on its website. Storage capacity at the site is 3.2 million barrels.

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"This is the first shipment for Suncor of Western Canadian crude to Europe," Ms. Seetal said Wednesday, noting the company has previously exported petroleum products as well as production from its offshore fields on Canada's East Coast to the continent.

"It's important that we establish customers outside of North America," she added. "So although Canada and the U.S. remain our key markets, it just makes good sense that we would look at opportunities that provide us with flexibility."

Canada's oil industry is desperate to boost prices for landlocked production in Alberta, but efforts to reach higher-priced markets have so far been stymied by opposition to multibillion-dollar pipeline expansions.

Some companies have managed to reach international waters anyway. Cenovus Energy Inc. has sent western crude to China via existing capacity on Kinder Morgan Inc.'s Pacific-bound Trans Mountain pipeline. Imperial Oil Ltd. has sold production from its Kearl mine in northern Alberta in Malaysia. And earlier this year, Husky Energy Inc. delivered a one-million-barrel test sale to India, a move chief executive officer Asim Ghosh said could signal the start of a brisk trade if TransCanada's proposed Energy East pipeline to the Atlantic Coast goes ahead as planned.

Ms. Seetal declined to say what blend of crude the company sold or whether additional shipments were planned, citing proprietary reasons. The company has expanded its ability to receive rail shipments of inland crude at its 137,000 bpd Montreal refinery. It has also purchased discounted crude from Texas for the plant.

The Calgary-based oil industry has been frustrated by steep discounts on Western Canada Select, the key heavy oil blend, as fast-growing production in northern Alberta outpaces available pipeline capacity.

But the spread, or differential, has narrowed in recent months with smoother pipeline access and the sharp increase in crude-by-rail deliveries. On Wednesday, WCS for November delivery traded at $14.40 (U.S.) under U.S. benchmark West Texas intermediate oil, broker Net Energy Inc. said.

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It costs between $16.30 and $22.60 per barrel to transport crude by rail from Alberta to Canada's East Coast, according to industry figures.

Oil companies including Suncor are waiting on start-up of Enbridge Inc.'s Line 9 reversal to ship crude for refining in Quebec. The industry is also keen to boost shipments to the Atlantic Coast via Energy East.

Both pipelines have faced push-back from environmentalists and local groups, however. The Quebec Superior Court on Tuesday slapped TransCanada with an injunction, effectively halting exploratory drilling at Cacouna, Que., one of two export terminals planned for Energy East.

Editor's note: An earlier version of this story incorrectly stated that the Line 9 reversal will boost shipments to the Atlantic Coast. In fact, the Line 9 shipments will go to Quebec.

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