CERAWeek by IHS Markit

Valero looks to ship Canadian crude to the UK


Refining company Valero Energy, already sending U.S. crude across the border to its Canadian refinery, is now seeking to export Canadian crude to its refinery in the UK.

Valero CEO Bill Klesse told a group of journalists and others at the annual IHS CERAWeek energy conference that Valero would be joining others in the industry in shipping Canadian crude abroad. He said Valero would like to send crude from Canada to its Pembroke refinery in the U.K.

However, he does not expect it to be a great volume of crude, and said the economics of it may not work out currently.

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But these shipments are being discussed as the call to export U.S. crude gets louder, and the battle lines within the industry over exporting are being drawn. Klesse and the refiners are opposed to exporting raw crude, and the producers are in favor of it.

It also highlights the challenges and interconnected nature of the North American energy market, with the U.S. now one of the world's biggest energy producers.

At the same conference in Houston, Sen. Lisa Murkowski, (R-Alaska) Monday called on the Obama Administration to lift a prohibition on the export of U.S. crude and to open up drilling on federal land. She also said she was asking the Energy Department to study the impact of exporting crude.

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While the refining industry is opposed to exporting crude, its own exports of refined product has grown, especially distillates like diesel.

"We shipped a few million barrels this year" as exports, said Phillip Rinaldi, CEO of Philadelphia Energy Solutions, which owns two former Sunoco refineries that were headed for shutdown. Rinaldi appeared on a panel with Klesse.

Murkowski: Expand sales of U.S. oil abroad now

"Right now, crude is going out as refined product," he said. "It's jobs, real jobs." Rinaldi said he does not agree with oil producers that sending crude outside the border would not send prices higher.

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There are few cases in which U.S. oil can be exported. One is from the state of Alaska, exempted by President Bill Clinton from the export ban when Alaska oil production was higher in the 1990s. Exports are also permitted to Canada, and about 200,000 barrels a day were crossing the border as of November.

Edward Morse, head of commodities research at Citigroup estimates that exports to Canada could double by year end and that Alaska could also ship as much as 100,000 barrels a day to Asia year end.

—By CNBC's Patti Domm. Follow here on Twitter @pattidomm