The ability of Canada to send more oil to Asia has been proven by the successful startup of the Trans Mountain pipeline, and it could continue to grow with the removal of trade barriers this week. The Alberta government is highlighting the issue by announcing two new deals involving South Korea.
Tariff Waiver on Canadian Oil
The first deal, unveiled Monday, saw the Republic of Korea's customs commissioner ink a joint statement waiving a three percent tariff on Canadian oil exported to the country of 52 million. The energy accord confirms that diluted bitumen from Alberta qualifies as a product originating in Canada and should not be subject to an import levy under an existing free-trade agreement between the two countries. Most oil shipments had previously faced the tariff.
While the free-trade deal between Canada and South Korea came into force in 2015, a technical issue affected Alberta bitumen diluted with condensate sourced from the United States, noted Robert Johnston, director of energy and natural resources policy at the University of Calgary's School of Public Policy. The new waiver removes that fee and should increase the potential for more Alberta oil to head to refineries in South Korea.
"If you have a $3 swing on a $100-a-barrel oil, it could be quite material," Johnston said Tuesday. "It was a not-insignificant hurdle, and now they can focus on the commercial side of the Korean demand and the Korean refiner."
Memorandum of Understanding with Hanwha Group
On Tuesday, the province announced it has signed a memorandum of understanding with Seoul-based Hanwha Group, creating a framework for future potential investments by the conglomerate in several economic sectors, including energy, manufacturing, and defence.
"Alberta wants to have a tariff-free relationship where possible, and we are taking a step forward and removing this key barrier for trade," Jobs and Economy Minister Joseph Schow said in an interview. "It improves competitiveness and definitely helps the position of Alberta as a reliable global energy supplier."
Surge in Exports to Asia
Thanks to the startup of the Trans Mountain pipeline expansion in May 2024, exports of Canadian oil to Asia, including South Korea, have surged. It has opened new markets for crude from Canada and helped lower the discount on heavy oil. Last year, nearly $400 million worth of oil from the province was sent to South Korea, a 500 percent jump from the previous year, according to the province. The government believes those sales could increase to $1 billion annually, depending on refinery demand in the country.
"This is a really good chance for Canada to be a reliable supplier in the long term," said Sun Ryung Park, a senior research specialist with the Asia Pacific Foundation of Canada. China and India are the largest customers in Asia for energy exports, but South Korea is likely the next best market for increasing Canadian oil sales, said Johnston.
