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SOURCE: Bloomberg

DATE: September 25, 2019

SNIP: A Canadian law barring oil tankers from the northern coast of British Columbia hasn’t stopped crude from setting sail there.

Two Calgary-based companies, Melius Energy and BitCrude, are exploiting a loophole in the law passed this summer — by shipping semi-solid bitumen mined from oil sands on a cargo ship rather than in liquid form on an oil tanker. About 130 barrels of bitumen left Prince Rupert, B.C., on Saturday bound for a refinery in China, according to Cal Broder, founder of both companies and chairman of BFH Corp. He declined to name the cargo’s buyer.

Canada’s Senate in June passed Bill C-48, banning oil tankers off the northern B.C. coast, against the objections of the oil sands-producing province of Alberta. Broder was able to get around the ban by sending the bitumen in a 20-foot shipping container in a semi-solid state, undiluted with lighter oils such as condensate.

The concept of sending bitumen in solid form in shipping containers isn’t new. Companies have been developing technologies to send oil in the form of bricks or pellets for several years. The technology could help Canadian oil producers overcome a pipeline shortage that’s caused local oil prices to collapse last year and prompted the Alberta government to impose production limits on large producers.

The bitumen shipped to China came from an oil sands producer that Broder didn’t identify. After diluent was removed, it was loaded onto a rail car and sent to Prince Rupert. Broder said he is currently setting up a processing center near Edmonton and plans to start shipping his undiluted bitumen on a commercial basis to China as early as this year.