SnapChart – US Gulf Coast: Heavy Pull for Canadian Oil


Venezuela is in turmoil.  As a consequence of the country’s unfolding economic crisis, oil production has fallen from 2 MMB/d a year ago to 1.5 MMB/d now.  More output declines are still expected.

The majority of Venezuela’s production is heavy oil, like the diluted bitumen or “dilbit” blends from the Canadian oil sands.  Complex hydrocarbons like these need specialized refineries to convert the thick oils into light transportation fuels.

Most Venezuelan heavy oil barrels are processed in the US Gulf Coast refining region. The elaborate refineries that dot the Texas and Louisiana coastlines were built for the challenge of turning the world’s most dense crude oils into light transportation fuels.

The collapse of Venezuela’s output, and Mexico before that, is directly affecting the US Gulf Coast’s heavy oil refineries.  This week’s SnapChart shows the declining supply of heavy oil into the region, by country.  Despite the gains from Canada, the region is processing about 400,000 B/d less than in 2010.

Even though US domestic oil production is climbing, the locally produced light oil barrels are not well suited for the complex US Gulf Coast refineries.  Heavy oil refineries are more efficient and more profitable when they are processing the crude oils they were designed for.

Declining Venezuelan production means that the pull for more heavy barrels on the US Gulf coast will only grow stronger. Canada is a natural supplier to fill the gap. As such, expect more Canadian heavy oil to be drawn into the area by all modes possible: pipelines, rail and even barges down the Mississippi.

The outlook for Venezuela’s oil production will be a topic for discussion at the ARC Energy Investment Forum 2018, “Playing to Win,” on May 9th.  For more information visit