I'm LongbridgeAI, I can summarize articles.Canada is increasing oil exports to Asia, with non-US crude exports surging to C$10 billion in 2025. However, South-east Asian refineries struggle to process Canadian heavy sour crude due to incompatible infrastructure tailored for Middle Eastern grades. While logistical advantages exist, significant capital investment is needed for retrofitting or new builds. Potential buyers include facilities in Thailand and Vietnam, though economic factors remain key drivers.
[SINGAPORE] Canada is ramping up its oil exports to Asia as the Middle East conflict disrupts energy flows, but South-east Asia’s refineries are finding that incompatible infrastructure is preventing them from readily tapping this new supply.
Ottawa’s diversification of oil exports to Asia follows the completed expansion of Canada’s state-owned Trans Mountain pipeline in 2024. Prior to that, the Canadian crude was exported primarily to the US.
In 2025, Canada’s non-US crude exports surged to C$10 billion (US$7.2 billion), averaging roughly 430,000 barrels a day, up from “effectively zero”, noted Barrett Bingley, Asia regional director at the Asia Pacific Foundation of Canada.
With Canada looking for alternative markets, Trans Mountain data showed that between May 2024 and July 2026, around two-thirds of the estimated 640 tankers loaded at the Westridge Marine Terminal in Vancouver arrived in Asia.
Most of the oil that went to Asia – 374 vessels – arrived in China, but within South-east Asia, only six went to Singapore and an estimated two cargoes arrived in Brunei.
The reason for the small numbers heading to the region is because refineries here are largely tailored to process medium sour Middle Eastern crude oil, while some such as Indonesia’s, are designed for domestic light or medium sweet grades.
Crude oil is categorised by two factors: its density – light, medium or heavy – and its sulphur content, with lower levels deemed sweet and higher levels categorised as sour.
Canadian crude, particularly those coming from the Trans Mountain pipelines, are heavy sour and possess a high total acid number, which requires specialised refining capabilities that much of South-east Asia currently lacks.
“Therefore it is quite difficult to absorb the Canadian crude meaningfully without investments in refining configuration to be able to manage the quality challenges,” said June Goh, senior oil market analyst at Sparta Commodities.
She added that a “significant amount of capital investment” would be needed to retrofit existing sites, meaning that it would be easier for newbuild refineries to be designed for this crude.
While the Vancouver-to-Asia transit takes 18 to 30 days, roughly half the time of a US Gulf Coast cargo routed through the Panama Canal, and about 30 per cent faster than a Middle East cargo, “speed alone hasn’t moved South-east Asian volumes yet due to the nature of (the region’s) refineries”, said Bingley of the Asia Pacific Foundation of Canada.
Regional potential
Bingley noted that so far, only two South-east Asian nations have officially taken shipments of Canadian crude: Singapore’s Jurong Island complex and Brunei.
As for Brunei, he reckons these were likely processed at the Pulau Muara Besar Refinery owned by Hengyi Industries – a joint venture between China’s Zhejiang Hengyi Group and the Brunei government – which is currently in its second phase of expansion for 2028/2029.
Although the shipments from Canada to South-east Asia have been limited so far, on paper, there are integrated refining and petrochemical operations in the region with the advanced deep conversion capacity and metallurgy required to process Canadian crude.
One possibility could be Thailand. Bingley said that the most likely new buyer of Canadian crude within the region will be Thaioil Sriracha Refinery, Thailand’s most complex refining facility.
Once upgrades are complete by 2028, it will be able to take Canadian heavy crude and process it fractionally into its standard medium, light crude slate, said Bingley.
Another potential option is Pengerang Integrated Complex in Johor, Malaysia. It is developed by Petronas, somewhat similar to the Jurong Island facility in terms of complexity.
In Indonesia, a possibility is the Balikpapan refinery – owned by Pertamina – which is now the country’s largest refinery with a high complexity level.
Bingley, however, noted that both Malaysia and Indonesia have their own domestic sources of oil, so it is “unclear” if they will be buyers of Canadian crude.
Meanwhile, Vietnam is considering building a third refinery.
Bingley noted that this would be an integrated petrochemical complex, and there are discussions under way that this build-out “should include the ability to process Canadian heavy sour crude blends to give Vietnam access to a wider slate of crudes”.
Currently, Vietnam’s two existing refineries are not designed to take Canadian heavy crudes.
Boiling down to economics
Despite the logistical hurdles, energy security concerns are driving conversations around feedstock diversification.
“There’s definitely a lot more desire from various refiners to seek out alternatives, but there will come a day that perhaps we will see some form of restoration of (Middle Eastern) flows,” said Fabian Ng, editor for crude oil at price reporting agency Argus Media.
“In that scenario, I would expect a lot of the refiners’ considerations, in terms of feedstock procurement, to go back down to simple refinery economics,” he added, noting that subsequently, governments might need to intervene with measures to make diversification more economically viable.
Ng cited the example of the South Korean government offering freight subsidies for importing non-Middle Eastern crude.
“So if you are talking about Singapore and Canadian crude, I would say nothing is impossible, but you will need very targeted policies in place, and it will therefore require the policymakers to think about why they want to choose to make it that way.”
He added: “But if they leave it to the free market, then the free market often, as we have seen, will go back to whatever makes the most economic sense.”
Atul Arya, chief energy strategist at S&P Global, noted that Canadian crude is “one of the most attractive supply options” for the region because of its physical location and that Canadian production is going up.
According to Canada’s energy regulator, the country’s oil output, the world’s fourth largest, is set to exceed last year’s record of 5.3 million barrels per day, in 2026.
The country also announced plans in July to build an oil pipeline from Alberta to the Pacific coast, which would give the country greater capacity to export to Asia.
Meanwhile, other diversification options for Asean include the US, which produces sweeter crude that poses fewer refining challenges, as well as Latin America and Africa.
However, longer transit times from places sucgh as Brazil or Guyana translate to higher costs, said Dr Atul.
He suggested that as Asean oil demand increases, “there may be some logic down the road” to build new refineries tailored for Canadian crude, potentially backed by supply arrangements between Canadian producers and regional refiners.
Meanwhile, Canada is likely to continue looking for alternative buyers for its crude amid its trade fight with the US. Canada’s counter-tariffs of 15 to 50 per cent on roughly C$27.6 billion of US goods took effect on Sep 8, matching the US’s 50 per cent tariffs since Aug 22.
Bingley noted that trade tensions “underline the importance of Canada continuing to build new energy export infrastructure giving access to the Indo-Pacific markets”.
As South-east Asia weighs its options, Canadian crude could continue flowing to China, with Asean countries importing the refined products back into the region.
“The bottom line is, anything you do to be more secure, for more security and diversified supply, is going to cost (money) and time,” Dr Atul noted.
“Asean countries should really think hard about this because there will be future disruptions. We don’t know how and when, but there will be, and now is probably a good time to start thinking about what’s most feasible, which could be a combination of options.”