With new oilsands projects and expansions of existing projects coming onstream, it is anticipated that production of heavy crude and bitumen will reach more than two million barrels per day by 2012, and over five million barrels per day by 2030 (on a synthetic crude oil basis). It is assumed that most of this anticipated production can be marketed in the United States; however, the U.S. currently only accepts limited volumes of synthetic crude oil (SCO), as it must be blended with other crude to meet refinery specifications. This combination of limited U.S. refinery capacity and current SCO quality means there is risk that much of this new production either cannot be marketed, or that market price will be reduced because of oversupply, unless new markets can be found.

An obvious new market for Canadian heavy oil and bitumen is the Asian-Pacific region, due both to increasing demand for petroleum products and proximity. The Alberta Energy Research Institute, in partnership with industry from Asia and Canada, is investigating both short and long-term exports of Alberta crude and value-added products to Asia. This paper provides an update on this study, which will identify the technology gaps that should be addressed to match Alberta products to Asian refineries.


In recent years, markets have overtaken supply as the main concern for Alberta's heavy oil and bitumen producers and the Alberta government. Although the province has proven reserves second only to Saudi Arabia, the higher production costs and lower quality of our heavier feedstocks have made it more difficult to export the rising volumes of bitumen and synthetic crude production to existing markets in the United States.

Although Canada is favorably positioned both geographically and politically to continue as a supplier to U.S. markets, economic reality shows that the refineries in the U.S. Midwest (PADD II), which is the single largest traditional market for Canadian oil producers, cannot absorb further imports of heavy feedstock without the addition of significant residual upgrading capacity. These refineries are already facing significant capital expenditures for process units to meet Clean Fuels Initiatives (low-sulphur gasoline phased in over a threeyear period from January 2004, and low-sulphur on-road diesel in 2006 and off-road diesel in 2007) and other regulatory requirements (for example, the replacement of MBTE); thus, the likelihood of the addition of further conversion capacity is low(1). In addition, Alberta producers are facing increasing competition in the PADD II market from the U.S. Gulf Coast, which refines heavy crude from Mexico and Venezuela.

Although there is some room for further imports to refineries in PADD IV, other potential U.S. markets, such as California and the U.S. Gulf Coast, cannot be accessed by Alberta producers without the addition of new pipeline capacity, or the reversal of existing pipelines. The other option is to export outside of North America, which will also require new infrastructure. An obvious new market for Canadian heavy oil and bitumen is the Asian-Pacific region, due both to a rapidly increasing demand for petroleum products and proximity, and the potential of reaching the California market with the same pipeline.

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