OG 101

Petroleum 101: Heavy Crude Oil

Heavy oil and light oil are different products; neither is superior and both are produced in Canada and yield an array of necessary refined products to growing markets.

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Heavy oil. Bitumen. Light sweet crude. Synthetic crude. Many different varieties of oil come from Canadian sources both in Western Canada and offshore Newfoundland and Labrador. On its own, no type of oil is superior to others — preferences come down to how a given refinery is configured. Some are set up to process heavy oil, which yields different varieties and volumes of refined products than other types of crude.

Heavy oil is not bad — it’s just different. In fact, it’s a preferred type of oil for creating a number of end products such as asphalt, fuel oil and certain petrochemical feedstocks.

What is heavy oil?

According to the Canadian Fuels Association, there are more than 150 different types of crude oil in the world. Heavy crude oil has a higher proportion of heavier hydrocarbons composed of longer carbon-plus-hydrogen molecule chains. It is referred to as “heavy” because it has a higher density than light crude oil and actually appears thicker and flows slower. Heavy crude oils are less expensive for a refinery to purchase but more expensive to refine, since they have greater costs from higher energy inputs and additional processing to meet environmental requirements. 

The American Petroleum Institute (API) gravity number is a standard to express the density or specific gravity of oil. API gravity can vary greatly from 10 to 50; the higher the API gravity number, the lighter and more liquid the oil. Most crude oil falls into the range of 20 to 45. Heavy crude oil has an API gravity of less than 20. Western Canadian Select (WCS), Canada’s largest heavy crude oil stream, typically has an API of 19 to 22. For context, West Texas Intermediate (WTI) light crude produced in the U.S. has an API gravity of 40.

Producing and refining heavy oil vs light oil

Refineries process crude oils into a broad range of refined products. The refining process separates, breaks, reshapes and recombines the molecules of crude oil into refined products. While no two refineries are identical, they all share a number of common features and processes.

Many of the refineries along the Gulf Coast in the United States are adapted to receive and process heavy oils.

Each kind of crude yields a different array of refined products. Light crude oil is primarily used to create fuels such as gasoline, diesel and aviation fuels. Heavy crude oil provides feedstock for plastics, petrochemicals, other fuels and road surfacing. Heavy oil can also be refined into transportation fuels. Since the cost of crude oil is a refinery’s largest input cost, processing cheaper heavy crude into higher-value refined products usually improves a refinery’s profit margins. 

Much of Canada’s heavy oil is produced in the oil sands region of northeastern Alberta, and near Lloydminster on the Alberta / Saskatchewan border. Bitumen is the raw material produced from oil sands operations. On its own, bitumen has limited marketability, not because it’s an inferior product but because it must be diluted with a lighter hydrocarbon in order to transport via pipeline. Bitumen can be diluted in this way to form a mixture called ‘dilbit,’ or bitumen can be upgraded to create refined and semi-refined products including Western Canada Select (WCS), a heavy oil. Other heavy oil is produced by drilling wells and pumping the thick oil to the surface.

Refining is the crucial intermediate step between crude oil and refined products. Canada has 18 refineries located in eight provinces. 

Uses for heavy oil and light crudes

Heavy and light crudes are different products; neither is superior. For example, consider the difference between gasoline and diesel. Both are refined from crude oil but they are not interchangeable. Gasoline cannot be used to fuel a locomotive, nor can diesel fuel a race car because gasoline provides horsepower while diesel provides torque. To follow this analogy into the realm of refining, every refinery is built and configured to process a certain type of input and does not operate well using the wrong input. Heavy crude oil refineries include cracking and coking units designed to break long-chain hydrocarbons into smaller hydrocarbons.

Transportation fuels typically account for 75 per cent of a refinery’s output. The remaining 25 per cent includes home heating oil, lubricants, heavy fuel oil (often used to fuel ocean-going tankers and other large vessels), asphalt for roads, and feedstocks the petrochemical industry transforms into hundreds of consumer goods and products that Canadians use and rely on every day — from plastics to textiles to pharmaceutical products.

A global market for Canadian heavy oil

Canada produces more oil than it uses domestically, and the oil sands deposits in northern Alberta represent the largest single deposit of crude oil in the world. Given the many important uses of heavy oil, there’s strong and growing global demand for Canadian heavy crude.

For example, the U.S. and China have many refineries configured to process heavy oil. Virtually all the oil produced in the U.S. is light crude, unsuitable for heavy oil refineries in the Midwest and Gulf Coast. Both these regions are major markets for Canada’s heavy oil exports.

Although global markets for heavy oil are strong and growing, Canadian exports are held back due to lack of pipeline capacity that would transport oil to marine shipping facilities. Completion of the Trans Mountain Expansion Project is expected to help ease this situation and, for the first time, allow substantial export potential to overseas markets.

This is good news for Canada: heavy oil is a valuable commodity that employs hundreds of thousands of Canadians, spurs economic growth and creates revenues for government.