With Indian deal, Husky paves the way to a new market

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Husky Energy Inc. said it sold one million barrels of Canadian oil to an Indian refinery in late 2013, a move that boosts the company's ability to capture world pricing and helps open the door for more Canadian producers to ship crude to Asia.

The test sale from Husky's White Rose oil field on Canada's Atlantic Coast to the state-owned Indian Oil Corp. Ltd. went ahead in November. Oil from White Rose – located on the northeastern Grand Banks approximately 350 kilometres east of St. John's – is now approved for use in state-owned refineries in India, according to Husky. Company officials say their first sale of White Rose light oil to India came through a tender process facilitated by commodity trader Glencore Ltd.

India is a new opportunity for Canadian oil companies. Beset by transportation bottlenecks and steep discounts in their main market in the U.S., they are eager to build business in countries such as China and India. Projects such as TransCanada Corp.'s planned Energy East pipeline to Saint John, N.B., from Alberta – where Canada's heavy oil industry is centred – could provide a conduit to high-paying global markets.

"The sale to India did open up a potentially very large new market for us," Husky chief executive Asim Ghosh said, noting the test sale paves the way for more oil exports from the East coast possibly the West coast.

"Once Energy East is up, India becomes a cost competitive destination for Canadian crude," he said during a conference call on the company's fourth quarter results Wednesday.

The shipment to India is a far-sighted business move, and is one of Canada's first major crude sales to India. "There have been very little if any sales of Canadian oil to India," said Peter Sutherland, president and chief executive of the Canada-India Business Council.

"Hopefully it's a forerunner of things to come."

According to the National Energy Board, just a small percentage of Canadian crude exports – 3.9 per cent in 2011 and 2.9 per cent in 2012 – now go to countries other than the U.S. But where exactly those exports go is kept under wraps.

"Because this is such a small volume it is considered commercially sensitive information," NEB spokeswoman Sarah Kiley said in an e-mail. "We can't release information about who is exporting the crude or its final destination."

Phil Skolnick of Canaccord Genuity Inc. said the test sale is a positive development for land-locked Western Canadian oil producers in more ways than one.

If Canada – which has no legal impediments to exporting oil – is able to find new, global markets for its crude off the East Coast, that could allow U.S. oil to go to Canada, easing a glut of U.S. light oil, and keep North American oil prices steady.

"You have to wait for Canadian oil to find new markets, and then that would start opening up the room for U.S. oil to go into the Canadian market," said Mr. Skolnick, the New York-based head of Canaccord's North American energy research group.

Also Wednesday, Husky posted a dip in profits during the last three months of 2013 compared to the same period a year earlier, but beat market expectations. Adjusted quarterly earnings were $412-million, down from $487-million a year earlier.

On a per-share basis, the adjusted earnings of 42 cents beat the average analyst estimate of 38 cents per share, according to Thomson Reuters.

Daily production was 308,000 barrels of oil equivalent per day, down from 319,000 during the same 2012 quarter. Revenues, net of royalties, were $5.9-billion, up from $5.7-billion a year earlier.

Net earnings dropped to $177-million, or 18 cents per share, from $474-million, or 48 cents per share. That included an after-tax impairment charge of $204-million related to its natural gas properties in Western Canada.

With files from The Canadian Press