The paper discusses the continuing need for as a result of dwindling supplies of light crude constraints in marketing Canadian heavy crudes. the impact of government policy on the prospects heavy ail upgrading in Canada and discusses the economic In addition, it comments on for heavy oil upgraders.

Thank you Mr. Chairman. Ladies and gentlemen. I Am pleased and it is a great honour for me to be asked to address a gathering such as this again.

My address this morning - "Heavy Oil Development In Canada - The Need For Upgrading" - will first review Canada's petroleum reserves, then summarize the problem facing Canada regardi ng dwindling supplies of conventional light and medium crude oils and briefly describe Canada's refining capability. With that background, I will then attempt to analyze the problems that face heavy oil producers in attempting to market their product and propose a potential solution to these problems as illustrated by husky oil's approach - the construction of a heavy oil upgrader. I will close by sharing my views with you on the future of heavy oil development and the policy issues facing our governments.

Canada is in a unique position among industrialized nations - it has the long term potential to be self-sufficient in crude oil supplies.

In fact, at the beginning of 1984, Canada overall was exporting slightly more crude than it imported. However, this surplus situation can be misleading. While the potential for self-sufficiency is very real, in the short term Canada remains strongly susceptible to world wide fluctuations in oil supply and price in both the import and export markets.

At first glance, Canada's crude oil resource base is enormous. However. It is necessary to examine the make-up of this resource base in order to understand the canadian oil development scene and the concern for self-sufficiecyy. The oil reserves are comprised of approximately 10 percent conventional crude oil and 90 percent bitumen. Of the conventional crude oil, about half is in western Canada, with the other half in the frontier regions (arctic and atlantic offshore). Although Canada is in the early stages of offshore frontier development, western Canada currently produces all of Canada's crude oil, 87 percent from conventional resources and 13 percent from bitumen resources. Production from the conventional resource base is now in decline and there is virtually nothing that we can do to significantly extend these conventional resources.

The National Energy Board forecasts that by 1995 (based on a price scenario of $27.00 U.S. Dollars per barrel in 1995) Canada's productive capacity of crude oil, including condensate, synthetic crude and increases due to future reserves additions, will fall from 1.3 million barrels per day to less than 800 thousand barrels per day. (The estimated reduction is approximately 500 thousand barrels per day, or 40 percent.)

In the same period, total Canadian refinery requirements for oil are forecast to rise from 1.3 million barrels per day in 1985 to 1.36 million barrels per day in 1995. An increase of 4.5 percent.

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