Go-to-guide to knowing Oil Sands and related Crude Streams in Canada.
North American Oil Reserves
North America is a continent with abundant oil reserves both- conventional and unconventional. Countries like USA and Canada have abundant resources of shale oil and oil sands in their respective geographies. The crude produced there has proved to be a benchmark for oil prices around the world. For instance, WTI is bench mark crude which is accepted globally in the market for trading.
The surge in demand and supply of any of the crude types plays an important factor in change of crude prices and related commodity product prices around the world. It is to be noted that the spike and slump in crude oil prices has always been backed by geopolitical or economic dynamics.
Here are the different crude types that come from the region:
|API Gravity||Crude Type|
|22||Western Canadian select|
|11.2||Intermediate Fuel Oil 380 (Bunker)|
|14.7||Intermediate Fuel Oil 180 (Bunker)|
What are Oil sands?
Oil sands are generalised as heavy bituminous crude which comprise of a mixture of bitumen, water and sand. The oil sands are spread across three regions within the provinces of Alberta, Athabasca basin, Cold Lake and Peace River, which when combined, cover an area more than 142,000 square kilometres. The oil sands are located at the surface near Fort McMurray, but deeper into the ground in other regions. The active mining footprint is only 953 square kilometres. Only 3 crude streams are derived from oil sands which are,
High Bitumen Based Crude oil streams (7-14 % Bitumen)
There are two major crude blends that are derived from heavy bitumen stream they are,
In order to meet viscosity and density requirements, shippers dilute bitumen before shipment, following the common carrier pipeline tariff rules. By selecting different diluent types and blend ratios, bitumen shippers attempt to reduce component costs, enhance blend value, and maintain pipeline transportability. The blend ratio may consist of 25 to 55% diluent by volume, depending on characteristics of the bitumen and diluent, pipeline specifications, operating conditions, and refinery requirements.
- Dilbit: It is a relatively clean bitumen (containing less than 1% water and solids) diluted with condensate, usually in the order of 30 to 40% by volume. The processing of Dilbit can only take place in a high-conversion refinery and therefore sells at a discounted rate to the US benchmark West Texas Intermediate (WTI). A majority of Alberta’s exports are now Dilbit, mostly originating from in-situ operators. It is categorised as heavy crude with bitumen content of 80% and 20% diluent. One of the common diluents used for Dilbit is CRW. CRW is a fully blended aggregate of many light sweet feeder streams and only begins its existence in blend tanks in Edmonton, Alberta.
- Synbit: It is a mixture of synthetic crude and bitumen, typically a 50/50 blend. Since Synbit has a lower fraction of bitumen than Dilbit, it is slightly better in quality. Synbit volumes have diminished in recent years in favour of Dilbit production. One of the common diluents used for synbit is SCO. Synthetic crude oil is used in case there is unavailability of Natural gas condensate and naptha for transportation purpose. Canada imports a major quantity of SCO from the US. The major reason is that it has a good blend stability.
Upgrader Stream (<7% Bitumen)
- Synthetic Crude Oil (SCO): It is a light sweet crude produced by the upgrader, typically a blend of naphtha, distillate and gas oil streams from the hydrotreater. The term “synthetic” distinguishes upgraded bitumen from conventional crude, although the two crude streams are chemically identical. Since synthetic crude is light and sulphur-free, it can be sold to a conventional refinery. Synthetic crude sells approximately on par with WTI, representing about 40% of Alberta’s production. The province’s largest SCO producers are Syncrude, Suncor, Canadian Natural Resources and Shell.
Understanding Bitumen Netback
The price that an oil sands producer will receive for their bitumen at the wellhead requires answers to many questions, such as:
- What market is the bitumen sold to?
- What are the components of the produced bitumen?
- What is the actual product? Dil-bit or raw bitumen?
- How much diluent is in the blended product?
- What is the cost of diluent?
- What is the cost of transporting the diluent to the field?
- What is the cost of transporting the final product to market?
Each of these factors has an effect on the ultimate value of the raw product. Transporting by rail to the Gulf of Mexico, for instance, was a popular option just a few years ago, but has fallen out of favour with tightening differentials between WTI and Brent and lower commodity prices in general. For this reason, it would be disingenuous to present a bitumen price forecast without understanding the specifics of the individual circumstances.
The basics of bitumen marketing can be modelled relatively simply, allowing for straightforward evaluation of different pricing options and/or changing price forecasts.
Apart from these factors, other costs are also taken under consideration to estimate the profitability of oil produced per barrel. For an in-situ bitumen producer, whose main customers are refiners in the Midwest- in order to transport the bitumen by pipeline, it is blended with diluent on-site and shipped and sold as diluted bitumen (dil-bit). The process to get the final product to market would be;
- Acquire the diluent
- Transport the diluent to the field
- Blend the bitumen and diluent
- Transport the dil-bit to the sales point
- Sell the dil-bit at sales point
The GLJ benchmark price for Western Canadian Select (WCS) is used as a reasonable benchmark for dilbit sold at Hardisty, AB. Dilbit is transported from the field to Hardisty. This can be done by pipeline (cheaper), or by a more expensive option like truck or rail. Since the mode of transfer is different, the amount of diluent used in pipeline is more than the amount of diluent used in rail road transport. This helps in reducing the overall cost of the product sold. In this scenario, it is important to check how much money we are making on one barrel of bitumen to make use of these modes of transport for the supply of dilbit to other regions via pipeline or rail roads.
Pwh = (P1 + D1 – T1) *(1+B)-(P2+D2+T2)*B
Pwh: Wellhead bitumen price
P1: Benchmark price for final sales product
D1: Differential to benchmark price
T1: Transportation cost of final sales product to sales point
P2: Benchmark price for diluent
D2: Differential to diluent benchmark price
T2: Cost to transport diluent to field
B: Blend ratio (bbl diluent per bbl bitumen)
Crude Streams derived from Oil Sands
|1.CNRL light sweet synthetic
2.Husky synthetic blend,
3.Premium Albaina synthetic,
4.Shell synthetic light,
5.Suncor synthetic A,
6.Syncrude sweet premium,
7.Hardisty synthetic crude,
9.Synthetic sweet blend
|1.Access western blend
2.Borealis heavy blend
3.Christina Dilbit blend
4.Cold lake blend
5.Kearl Lake blend
6.Statoil cheecham blend
7.Western Canadian select
|1.Long lake heavy
2.Statoil Cheecham synbit
3.Surmont heavy blend
4.Albian heavy synthetic
|API 31- 38
2.8-3.0 % sulphur
Crude Blends of Canada
What lies ahead for Canada’s oil sands?
Myriad opportunities will continue to emerge for the oil majors amidst the background of ever changing oil price dynamics and the long-term nature of oil sands projects of Canada. The leading Canadian producers of oil sands are making sizeable investments to bring about efficiency, innovation and sustainability in oil sands operations. The vision is to enhance the economics of projects as they work towards bringing down the costs by moving for more in-situ projects. They are employing the best technology to streamline technology to streamline operations and reduce dependency on non-renewable resources.
Let’s look forward to a more opportune environment for the energy landscape with oil sands!