Valero to begin shipping crude from Gulf Coast oilfields to Quebec refinery

Surging U.S. production has reduced the price of domestically produced crude oil to a more competitive level.

Valero Energy Corporation recently received approval from the U.S. Department of Commerce to start sending shipments of crude oil from production plays along the Gulf Coast to a company-owned refinery located in Quebec.

In a December email, Bill Day, a spokesman for Valero, told Bloomberg’s Dan Murtaugh that the company had not yet begun making major shipments to Quebec. Its export permit is valid until November 2013.

Oil market analyst Amrita Sen told the news source that industry watchers should expect to see an increasing volume of oil being transported from the Gulf Coast to refineries in Canada as production continues to pick up in the United States.

The surge in domestic production and export opportunities is being driven by technological developments that have enabled oil and gas wells to tap into previously inaccessible fuel reserves trapped in shale rock formations.

Texas’ Eagle Ford Shale is a prominent example. According to Bill Day, the crude oil that Valero intends to ship to Quebec will be sourced from the Eagle Ford. The formation holds as much as 3.4 billion barrels of technically recoverable oil reserves, according to the U.S. Energy Information Administration.

The Valero spokesman explained that the Commerce Department’s approval of an export permit “demonstrates the amount of domestic crude that’s produced now.” Previously, it would have been more economical for the company to purchase foreign oil to feed its refineries.

During a call with reporters that was focused on Valero’s third-quarter earnings, CEO Bill Klesse asserted that the company would be able to ship Eagle Ford crude to its Quebec facility for an average of about $2 per barrel or less. This will help the company ensure the profitability of the endeavor.

At the same time, efficiency at the oilfield cannot be neglected. Using artificial lift equipment can help companies achieve high efficiency in the drill stem testing, drilling and extraction processes.