Downstream Planning And Innovation For Heavy Oil Development- A Producer's Perspective
Authors: Todd C.M. 
Published: March 2010

Abstract
The complexion of the Canadian oil industry will change rapidly in the next ten years as a dramatic increase in heavy oil production replaces dwindling conventional oil reserves. This sharp rise in Canadian heavy oil production will result in unique demands on the downstream sector of the industry. These demands will present a whole new range of technical problems and opportunities for innovation. Downstream concerns specifically include a potential diluent shortage, pipeline capacity restrictions and availability of markets. Failure to address these concerns could result in the use of expensive substitute diluents, allocated capacity in pipelines, reduced prices and shut-in production.
Potential solutions including upgrading and others must be viewed from the producer's perspective. The issues are large in scope and practical solutions may take years to develop. Significant planning and technical creativity, as well as cooperation among producers and with the downstream sector, will berequired in order to resolve the issues. The heavy oil producer must be prepared to address the key downstream questions if heavy oil development is to proceed.

Introduction

Increasing Heavy Oil Production
With the decline of conventional crude oil reserves in Canada, Alberta's large reserves of heavy oil and bitumen are becoming increasingly attractive. Although the recent price collapse has had a dampening effect on many producers' current operations, the over-all prospect of heavy oil development has not been severely impacted. Technology advancements (along withmoderate price gains) are expected to result in attractive economics for many large heavy oil projects by the early 1990s. Based on current ERCB forecasts (Fig. 1), bitumen production levels are projected to reach over 65000 m3/d by the year 2000, an ambitious expansion from current levels of approximately 16 000 m3/d(1). A review of existing, planned and potential projects demonstrates that such expansion is feasible (Table 1).
Thus, in the space of a little more than ten years, the nature of Alberta's oil industry will change dramatically (Fig. 2). Conventional light and medium crude oil from Alberta will decline from over 135000 m3/d in 1986 to less than 65 000 m3/d in 2000 (a 52% decline): Conventional heavy oil and bitumen will move from a current production level of 50 000 m3/d to 80 000 m3/d (a 160% increase)(1). Heavy oil* will, therefore, assume a position as the cornerstone of Alberta's oil industry moving into the 21st century. Such a dramatic swing in production will have farreaching impacts on all aspects of the Canadian oil industry.

Demands on the Downstream Sector
The downstream sector is composed of the brokers, pipeliners, refiners and marketers who handle the oil once it has been produced in the field. They react to market forces, i.e. price swings and changes in supply and demand. These effects are then passed back to the producer (generally also in the form of price changes or allocation cutbacks). In the past, Canadian producers have been too small to significantly impact the marketplace.