Market Outlook For Canadian Heavy Crude
Authors: Crandall G.R. , Wise T.H. 
Published: March 2010

Heavy crude (including in-situ bitumen) production in Canada has the potential to greatly extend Canada's supply of oil, but Canadian markets are limited to accommodate this oil. Therefore most of these supplies, will find markets in the northern U.S. market. There are sufficient heavy oil processing capabilities and asphalt markets in the Northern Tier to process more than the available quantities of heavy crude oil expected to be available in the short term. In the longer term, insufficient supplies of pentanes plus/or use as diluent could hinder the marketing of some heavy crude. Furthermore, by the early 1990s, additional heavy oil processing facilities will be necessary in the U.S. to accommodate the increased quantities of heavy crude oil available from Canada, Mexico, Venezuela, offshore California, and the Middle East. The need for alternative diluents will become strong, and could encourage the development of heavy oil upgrading projects. Although marketing, logistical and processing challenges face the Canadian petroleum industry in its attempt to develop this vast resource, the heavy oil sector should develop into a healthy, major industry.

Introduction

Canada has extensive reserves of heavy oil. Often, these reserves have been overlooked when attention is focused on the vast potential of the Athabasca oil sands. We believe that the extensive resource potential of both the conventional heavy oil areas, as well as new in-situ recovery developments producing bitumen, will contribute significantly to the supply of crude oil in Canada in the years to come. The importance of heavy oil as a source of hydrocarbon liquids has increasingly been recognized during the last few years. Currently, both governments and industry have given special attention to approval of a number of major heavy oil enhanced recovery projects, and many more are being evaluated.

Historically, as is well known in the industry, heavy crude has faced many marketing difficulties. Its use in Canadian refineries is primarily limited to feedstock for asphalt production. As a result, the potential to use increased quantities of heavy crude in Canada is low. The primary market has been the U.S. Northern Tier refineries, although this has varied depending upon Canadian government policy with regards to export quantity and price.

This paper addresses the heavy crude marketing environment, providing insight to the heavy crude producer of the current market situation and the market outlook for the foreseeable future.

The term heavy crude oil generally encompasses crude oils with an API gravity below 27 degrees. Conventional heavy crude API gravity generally is considered to go as low as 15 degrees API. Bitumen is normally considered to be 8–12 degrees API material which is recovered by in-situ techniques such as steam stimulation. Included in this type of oil would be bitumen from the Athabasca oil sands, Cold Lake, and Peace River deposits. Bitumen, when diluted with sufficient diluent, can be transported and marketed similar to a conventional heavy crude. The qualities of the major heavy crude streams in Canada are summarized in Table 1.