The new US administration, while likely to cause some problems for the productive fabric of Mexican industry, could represent a great opportunity for Canada’s. In spite of the statements made by the newly elected President and protectionist policies promised during the election campaign, the first actions of the new administration have confirmed its intentions to strengthen and expand energy cooperation with its northern neighbour. Beyond the symbolic value, the exhumation of the Keystone XL project and the green light for new connecting pipelines in North Dakota are relaunching the energy integration between the two countries, already significantly strengthened, though without much fuss, by the previous administration. The two productive fabrics, moreover, are perfectly complementary.
The North American energy cluster
About 50% of Canada's oil production consists of heavy and extra-heavy oil, bitumen and primary derivatives, of which the country has estimated reserves of trillions of barrels. The target market of these unclean fossil fuels are US refineries in the Midwest and, to a lesser extent, in the Gulf of Mexico, designed according to extremely complex production schemes, which make them the most efficient in the world in mixing and refining these products. Moreover, due to its excessive viscosity, bitumen requires preliminary dilution processes to be pumped into a pipeline and the Canadian production of light oil and synthetic crude is not sufficient to cover their need for diluents. Over the past decade the Shale Revolution has made increasing amounts of light tight oil and condensed gas available in the US, ideal diluents for the Canadian bitumen, stimulating an ever greater synergy between the two energy sectors and changing the medium/longterm prospects of the global market. Worldwide reserves of light oil are in fact beginning to run low, while the technological and logistical capacity to effectively exploit unconventional hydrocarbons, extra heavy oil and bitumen is concentrated in North America.
The return to dominance
Given the extent of their reserves, the constant influx of investment, the gradual downsizing of operating costs and the evolution of mining and refining technology, the North American energy cluster is likely to regain its position as first global energy hub, toppling the Middle East from an almost century-old primacy. Although production volumes will probably remain lower than those in the Middle East for quite some time to come, the margins guaranteed by a diversified basket of commodities and advanced refining capacities, added to technological leadership and dominance in the financial markets - all of which put US companies at the apex of the energy value chain, will guarantee the US a growing influence over the crude oil and refined products spot market, and as a result over the main financial market price quotations. The strengthening of the north-south ridge and the connecting lines in PADD 3 (Petroleum Administration for Defence District: NM, TX, AR, LA, MS, AL) will add the final piece to the restructuring of the North American cluster, ensuring an increase in the flow of synbit and dilbit towards the Mexican Gulf refineries and paving the way of the US towards global energy hegemony.
World light oil reserves are in fact beginning to run low, while the technological and logistical capacity to effectively exploit the unconventional hydrocarbons, the extra heavy oil and bitumen is concentrated in North America