Where is oil produced?

World

In 2008, the Middle East produced 25.9 million barrels per day, or approximately 30.3 per cent of total world production. The Organization of Oil Producing Countries which currently comprises Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela, accounted for 35,724 barrels per day or 41.8 per cent of world production. The top ten producing countries are listed blow:

Canada

Alberta produces 503,000 barrels per day of conventional oil, or 37.3 per cent of Canada’s total. Saskatchewan is second with 439,868 barrels per day or 32.6 per cent and the East Coast Offshore is third with 342,371 barrels per day or 25.4 per cent. When Alberta’s oil sands production is included, it produces about 2.3 million barrels per day, or 71.9 per cent of Canada’s crude oil Production.

How is oil transported?

Approximately 95 per cent of Canada’s crude oil and natural gas is transported by pipeline. Canada’s pipeline network totals approximately 540,000 kilometres and comprises everything from thin plastic gathering lines to steel conduits more than one metre in diameter. The system runs from the Northwest Territories through Edmonton, Alberta west to Vancouver and the northwestern United States, east to Sarnia, Toronto, Montreal and the northeastern United States, and south to Montana and the United States Midwest. Pumps move the oil, natural gas liquids and refined products through pipelines at four to eight kilometres per hour. Where gathering systems are not available, oil is transported by truck to trunk lines. Crude oil and refined products are also transported by tankers and railway.

How is oil refined?

Crude oil consists of many different hydrocarbon molecules, from relatively simple short single carbon and hydrogen strings to long, complicated chains and rings. Refining sorts, splits and reassembles the molecules into a variety of usable forms.

The first step in the refining process is fractional distillation which separates the oil into its component parts or fractions. The crude oil is first vaporized and the vapour is piped into a tall tower divided by a series of perforated horizontal trays. As the vapour rises through the tower via the perforations on each tray, the heavier fractions condense first and settle out on the lower trays. The perforations are fitted with bubble caps that force the vapour to bubble through a previously liquefied fraction on the tray. This bubbling cools the vapour slightly, which causes that fraction to condense out of the vapour while the remaining vapour, consisting of lighter fractions, continues to move upward in the distillation tower. The process is repeated at each tray, with each fraction condensing at the tray where the temperature is slightly below that fraction’s boiling point. Several trays collect each fraction, and the fractions are piped off for further processing into diesel, furnace fuels, stove oil, gasoline and petrochemicals.

How is oil marketed?

Crude oil is sold by producers to refineries, petrochemical manufacturers and other consumers either directly or through groups of producers or marketing companies. The field price received by Canadian producers, after transportation and marketing costs, is largely established in the Chicago area where Canadian crude competes with U.S. and foreign crudes. Prices for various crude oils are based on prices for benchmark crudes, such as West Texas Intermediate (WTI), North Sea Brent and Edmonton Par Price.

The WTI price is determined through futures trading on mercantile exchanges and reflects global supply and demand. WTI has an API gravity of 40° and a sulphur content of 0.5 per cent. Other crudes are compared to WTI and priced according to API gravity, sulphur content and location, all of which affect processing and transportation costs. Sweet light crude comprises a higher proportion of usable fractions and requires less refining. It is therefore priced higher than heavier crudes or crudes with higher sulphur content. North Sea Brent has an API gravity of 37° and a sulphur content of one per cent. It is therefore priced lower than WTI. The Edmonton Par Price is based on 40° API gravity and 0.5 per cent sulphur content similar to WTI.