How are heavy oil and bitumen transported?
Pipelines are the least expensive and most efficient way to move petroleum on land. In fact, pipelines transport about 95 per cent of Canada’s crude oil and natural gas production. However moving bitumen and heavy oil by pipeline is very difficult because of their inability to flow freely. To overcome this, producers reduce the density of the bitumen, generally by diluting it with light, low-viscosity petroleum.
Condensate and/or naphtha, a very light oil obtained from natural gas production, are the most common diluents. Bitumen might require as much as 40 per cent dilution.
How are heavy oil and bitumen marketed?
Like conventional crude oil, producers sell synthetic crude to refineries, petrochemical manufacturers and other consumers either directly or through producer groups 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 crude.
Prices are based on prices for benchmark crudes, such as West Texas Intermediate (WTI), North Sea Brent and Edmonton Par Price.
WTI 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.
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.
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