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APPEC: Cosmo Oil buys Canadian Cold Lake crude as it expands Sakai coker

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APPEC: Cosmo Oil buys Canadian Cold Lake crude as it expands Sakai coker

Singapore — Japan's Cosmo Oil is set to load its rare Canadian crude cargo of Cold Lake Blend on a Suezmax tanker over the next few days from the US Gulf, as it tests more varieties of crude grades amid expansion of coker capacity at its Sakairefinery, sources with knowledge of the matter told S&P Global Platts Monday.

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Cosmo Oil will load around 300,000 barrels of Cold Lake crude, together with about 700,000 barrels of US WTI Midland crude on Suezmax tanker Athens Spirit September 10, sources said on the sidelines of the Asia Pacific Petroleum Conference in Singapore.

The 158,529-dwt tanker was fixed by Cosmo Oil for a US Gulf-Japan voyage at a lumpsum freight of $4.2 million, andis currently waiting in the Sabine queue to enter Nederland, Port Arthur, to load the cargo, according to shipping sources and cFlow, Platts trade flow software.

The vessel is due to discharge its crude cargo in Japan in early November, the sources said.

The Canadian crude originates from landlocked Alberta, Canada, and was transported via pipeline -- which takes about a month -- down to the US Gulf for export, sources said.

Cold Lake blend is an asphaltic heavy crude blend of bitumen and condensate, with production currently around 200,000 b/d, according to equity holder ExxonMobil.

MORE COLD LAKE INFLOWS POSSIBLE

Australia's dwindling heavy sweet crude oil production and the sanctions barrier blocking Asia's access to Venezuela could prompt Asian refiners to consider importing Cold Lake Blend crude on a more regular basis, Asian refinersources said on the sidelines of the Asia Pacific Petroleum Conference in Singapore.

Chinese independent refiners and South Korean end-users were some of the most active buyers of heavy sweet Canadian grades over the past year or so. The companies occasionally turn to Cold Lake Blend when they struggle to secure regional heavy sweet grades including Indonesia's Duri and Australia's Vincent, Pyrenees and Van Gogh, a trading desk manager at a South Korean refiner told Platts.

Cold Lake Blend has a gravity of around 21 API and sulfur content of around 3.75%, while Western Canadian Select has a gravity of around 20 API and sulfur content of around 3.72%. Venezuela's Merey crude has a gravity of 16 API with 2.46% sulfur content.

Australia's Vincent is a heavy sweet crude with a gravity of around 17.4 API and sulfur content of 0.37%. Pyreneeshas a gravity of 19.3 API with sulfur, according to the grade's assay report dated September 16, 2011.

The higher sulfur content in Canadian heavy crude compared with Australian crude is not an issue for Chinese independent refiners as they have been primarily using heavy crude for asphalt production since September 2018, instead of for motor fuels production, industry sources with knowledge of the matter told Platts previously.

Heavy, sour Canadian crudes are typically priced at a large discount to their benchmarks. Cold Lake at Hardisty was assessed by Platts at an average discount of $13.15/b to the NYMEX WTI CMA in August, or a discount of $17.22/b to the Canadian Dated Brent strip.

However, the complex logistics involved in transporting the crudes to the coast means that the actual price quotedto Asian end-users can be much higher.

Sources at Northeast Asian refiners had indicated last month that heavy, sour Canadian crudes such as Access Western blend were being offered to them at a discount of around $2/b to ICE Brent on a delivered basis.

Cosmo Oil's purchase of the Canadian crude cargo came to light amid scheduled maintenance at the 100,000 b/d Sakairefinery until around the second week of October, during when it will boost the capacity of a 29,000 b/d coker to 31,000 b/d at the refinery in western Japan.

Prior to 2018, it was rare for Asian refiners to purchase Canadian crude, and exporting from Vancouver in the westcoast of Canada involved hefty transportation and logistics costs due to strict environmental regulations for tankers. In 2018, Chinese and South Korean refiners were spotted sourcing Canada's Cold Lake Blend, Platts earlier reported.

Japan last imported crude oil from Canada in December 2011, when it imported 203,286 barrels of Cold Lake crude, according to data from the Ministry of Economy, Trade and Industry. In 1988, Japan posted record crude imports from Canada at 1.82 million barrels of Cold Lake, METI data showed.

-- Wanda Wang, wanda.wang@spglobal.com

-- Takeo Kumagai, takeo.kumagai@spglobal.com

-- Philip Vahn, philip.vahn@spglobal.com

-- Andrew Toh, andrew.toh@spglobal.com

-- Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com