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Study 167 Full Report
Study 167 Full Report
Study 167 Full Report
167
January 2018
ISBN 1-927037-52-2
January 2018
Printed in Canada
Acknowledgements:
The authors of this report would like to extend their thanks and sincere gratitude to the Canadian
Fuels Association and ClipperData; as well as all CERI staff involved in the production and editing of
the material, including but not limited to Allan Fogwill and Megan Murphy.
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Table of Contents
LIST OF FIGURES ............................................................................................................. v
LIST OF TABLES ............................................................................................................... vii
ACRONYMS AND ABBREVIATIONS .................................................................................. ix
EXECUTIVE SUMMARY .................................................................................................... xiii
CHAPTER 1 INTRODUCTION ........................................................................................ 1
CHAPTER 2 BACKGROUND INFORMATION .................................................................. 3
Crude Oil Supply and Disposition....................................................................................... 3
Refineries: Background and Trends .................................................................................. 6
The Refinery Process .................................................................................................... 6
Eastern Canadian Refineries within a North American and Global Context ............... 13
Crude Oil Transportation – Pipeline, Rail and Tanker/Barge............................................. 21
Pipeline......................................................................................................................... 22
Crude-by-Rail................................................................................................................ 26
Oil Tankers and Marine Terminals ............................................................................... 29
CHAPTER 3 METHODOLOGY AND ANALYSIS................................................................ 33
Overview of Methodology and Description of Scenarios .................................................. 33
Models and Their Approaches ........................................................................................... 39
Crude Flows Model ...................................................................................................... 39
Costs of Feedstock Model ............................................................................................ 52
Emissions/LCA Model................................................................................................... 61
CHAPTER 4 MODELLING RESULTS ............................................................................... 83
Made in Canada Scenario .................................................................................................. 83
Crude Flows.................................................................................................................. 83
Cost of Feedstock ......................................................................................................... 87
Emissions...................................................................................................................... 88
Expanded Access Scenario ................................................................................................. 91
Crude Flows.................................................................................................................. 91
Cost of Feedstock ......................................................................................................... 95
Emissions...................................................................................................................... 96
Current Reality Scenario .................................................................................................... 99
Crude Flows.................................................................................................................. 99
Cost of Feedstock ......................................................................................................... 104
Emissions...................................................................................................................... 105
International Social Concerns Scenario.............................................................................. 107
Crude Flows.................................................................................................................. 108
Cost of Feedstock ......................................................................................................... 111
Emissions...................................................................................................................... 113
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List of Figures
2.1 Canadian Crude Oil Production by Province, Conventional + Oil Sands ...................... 4
2.2 US Imports from Canada by Crude Type ..................................................................... 5
2.3 Eastern Canadian Crude Oil Imports by Country, 2016 ............................................... 6
2.4 Breakdown of an Average Barrel of Canadian Refined Petroleum Products .............. 7
2.5 Distribution of Selected Canadian and Imported Crude Oils by
API Gravity and Sulfur Content .................................................................................... 8
2.6 Refining Flow Scheme .................................................................................................. 9
2.7 A Topping/Hydroskimming Refinery............................................................................ 11
2.8 A Catalytic Cracking Refinery ....................................................................................... 12
2.9 A Coking Refinery ......................................................................................................... 13
2.10 Canada’s Refining Sector, 2016 ................................................................................... 14
2.11 Supply and Disposition of Refined Petroleum Products in Canada ............................. 15
2.12 Canadian Refining Capacity and Number of Refineries, 1948-2016 ........................... 18
2.13 Crude Distillation Capacity Additions by Region, 2016-2040 ...................................... 20
2.14 Eastern Canadian Crude Oil Transportation Infrastructure ......................................... 22
2.15 Enbridge’s Mainline System Configuration.................................................................. 24
2.16 Enbridge’s Line 9 System Configuration ...................................................................... 25
2.17 Canadian Railway Network for Crude Oil Transportation ........................................... 27
2.18 Quarterly Volumes of Crude Oil Exported by Rail to the US ....................................... 29
3.1 The Four Scenarios ....................................................................................................... 34
3.2 Schematic of the Modelling Approaches ..................................................................... 38
3.3 Crude Intake by Type by Province ............................................................................... 41
3.4 Canadian Oil Supply Routes to Central and Eastern Refineries – Base Case ............... 45
3.5 Availability and Usage of Crude and Infrastructure by
Eastern Canadian Refineries – Base Case ................................................................... 46
3.6 Canadian Crude Oil Production Forecast, 2017-2027 ................................................. 47
3.7 Available Western Canadian Crude for Central and Eastern Refineries and
Demand by Central and Eastern Refineries by Crude Type ......................................... 50
3.8 Selected Foreign Crude Oil Brands Import Volumes and Prices .................................. 56
3.9 Upstream and Midstream GHG Emissions for Selected Canadian and
Foreign Crude Oils Used in the Study .......................................................................... 68
3.10 GHG Emissions Ranges for Crude Oils Used in the Study ............................................ 70
3.11 Upstream and Midstream GHG Emissions for Canadian Proxy and
Modelled Crude Flows ................................................................................................. 71
3.12 Total Upstream GHG Emissions for Canadian and Foreign Crude Oils
Used for the Study ....................................................................................................... 73
3.13 Upstream GHG Emissions for Canadian and Foreign Crude Oils Used for the Study
Split by Main Emissions Drivers ................................................................................... 73
3.14 Midstream GHG Emissions Results for Canadian and Foreign Crude Oils
Used for the Study ....................................................................................................... 74
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3.15 Transportation GHG Emissions for Canadian and Foreign Crude Oils Used in the
Base Case, Refineries Located in ON ........................................................................... 77
3.16 Transportation GHG Emissions for Canadian and Foreign Crude Oils Used in the
Base Case, Refineries Located in QC, NB and NL ......................................................... 78
4.1 Total Crude Intake for Central and Eastern Refineries – Made in Canada ................. 84
4.2 Canadian Crude Supply to Central and Eastern Refineries – Made in Canada ........... 85
4.3 Availability and Usage of Crude and Infrastructure – Made in Canada ...................... 86
4.4 Made in Canada and Base Case Emissions .................................................................. 89
4.5 Change in Emissions Intensity – Made in Canada ....................................................... 90
4.6 Total Crude Intake for Central and Eastern Refineries – Expanded Access................. 92
4.7 Canadian Supply to Central and Eastern Refineries – Expanded Access ..................... 93
4.8 Availability and Usage of Crude and Infrastructure – Expanded Access ..................... 94
4.9 Expanded Access and Base Case Emissions ................................................................. 97
4.10 Change in Emissions Intensity – Expanded Access ...................................................... 98
4.11 Total Crude Intake for Central and Eastern Refineries – Current Reality .................... 100
4.12 Canadian Supply to Central and Eastern Refineries – Current Reality ........................ 102
4.13 Availability and Usage of Crude and Infrastructure – Current Reality......................... 103
4.14 Current Reality and Base Case Emissions .................................................................... 106
4.15 Change in Emissions Intensity – Current Reality.......................................................... 107
4.16 Total Crude Intake for Central and Eastern Refineries –
International Social Concerns ...................................................................................... 109
4.17 Canadian Supply to Central and Eastern Refineries – International Social Concerns . 110
4.18 Availability and Usage of Crude and Infrastructure – International Social Concerns .. 111
4.19 International Social Concerns and Base Case Emissions ............................................. 113
4.20 Change in Emissions Intensity – International Social Concerns ................................... 114
5.1 Future Availability of Canadian Crude ......................................................................... 127
G.1 Ontario – Cost of Feedstock vs. GHG Emissions .......................................................... 171
G.2 Quebec – Cost of Feedstock vs. GHG Emissions .......................................................... 172
G.3 Quebec – Cost of Feedstock vs. GHG Emissions (zoomed in portion of G.2) .............. 173
G.4 New Brunswick – Cost of Feedstock vs. GHG Emissions.............................................. 174
G.5 Newfoundland & Labrador – Cost of Feedstock vs. GHG Emissions ........................... 175
H.1 Selected Foreign Crude Oil Brands Import Volumes and Prices .................................. 179
H.2 Selected Foreign Crude Oil Brands Import Volumes and Full-cycle
Delivered Average Prices ............................................................................................. 179
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List of Tables
E.1 Key Conclusions under the Four Scenarios .................................................................. xiv
2.1 Eastern Canadian Refinery Capacity and Crude Oil Intake .......................................... 16
2.2 Canada’s Refining Sector Configurations, 2016 ........................................................... 17
2.3 Crude-by-Rail Offloading Terminals in Eastern Canada ............................................... 28
2.4 Oil Tanker Size .............................................................................................................. 30
2.5 Oil Marine Terminals in Canada ................................................................................... 31
3.1 Crude Intake by Eastern Canadian Refineries, by Oil Type .......................................... 40
3.2 Crude Intake by Eastern Canadian Refineries, by Source ............................................ 42
3.3 Oil Type Shares as Input to Western Canadian Refineries .......................................... 48
3.4 Crude Oil Demand by Western Canadian Refineries ................................................... 49
3.5 Available Oil Stock for Central and Eastern Refineries, 2017-2027............................. 49
3.6 Crude Oil Brands Used in the Study and Their Prices .................................................. 54
3.7 Pipeline Tolls for Crude Oil........................................................................................... 57
3.8 Price of Crude Oil Brands at Refinery Gate of Eastern Canadian Refineries ............... 60
3.9 Transportation GHG Emissions for Canadian and Foreign Crude Oils Used in the
Base Case and the Four Modelled Scenarios ............................................................... 79
4.1 Cost of Feedstock – Made in Canada .......................................................................... 87
4.2 Cost of Feedstock – Expanded Access.......................................................................... 95
4.3 Cost of Feedstock – Current Reality ............................................................................. 104
4.4 Cost of Feedstock – International Social Concerns ...................................................... 112
5.1 Key Conclusions under the Four Scenarios .................................................................. 115
5.2 Merchandise Trade Levels between Canada and the Nations’ Canada
Imports Foreign Oil – Made in Canada ........................................................................ 117
5.3 Merchandise Trade Levels between Canada and the Nations’ Canada
Imports Foreign Oil – International Social Concerns ................................................... 120
5.4 Comparison of Availability of Light Oil with Demand by the Central and
Eastern Refineries, by Scenario ................................................................................... 128
C.1 Inventory of Canadian and Foreign Crude Oils Used in the Study for
Crude Flows and GHG Emissions Modelling ................................................................ 147
C.2 Results of Upstream and Midstream GHG Emissions Modelling for
Canadian and Foreign Crude Oils Used in the Study ................................................... 151
E.1 Substitution of Oil in the Made in Canada Scenario ................................................... 159
E.2 Substitution of Oil in the Expanded Access Scenario ................................................... 161
E.3 Substitution of Oil in the Current Reality Scenario ...................................................... 163
E.4 Substitution of Oil in the International Social Concerns Scenario ............................... 165
F.1 Emissions in the Made in Canada Scenario ................................................................. 167
F.2 Emissions in the Expanded Access Scenario ................................................................ 168
F.3 Emissions in the Current Reality Scenario ................................................................... 169
F.4 Emissions in the International Social Concerns Scenario ............................................ 170
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Executive Summary
Canada is the fifth largest oil producer in the world, accounting for 4.8 percent of world
production in 2016, ranking behind the US (13.4 percent), Saudi Arabia (13.4 percent), Russia
(12.2 percent) and Iran (5.0 percent) (BP 2017). Canada’s proved reserves, totaling 171.5 billion
barrels or 10 percent of the world’s share of proved reserves, are behind Venezuela (300.9 billion
barrels) and Saudi Arabia (266.6 billion barrels) (BP 2017).
Yet, despite this, Canada still imports oil. Eastern Canadian crude oil imports rose slightly in 2016,
reaching 607 thousand barrels per day (Mbpd), with the majority of imports from the US (259
Mbpd), followed by Saudi Arabia (87 Mbpd) and Algeria (85 Mbpd) (Government of Canada 2017;
NEB 2017f; Statistics Canada 2017a).
The nature of the imports, however, is different between western and eastern Canada. Western
Canadian crude oil imports are entirely from the US and are attributed to diluent or condensate,
product used to dilute oil sands bitumen to facilitate transportation by pipeline. Eastern
Canadian provinces, on the other hand, use domestic oil (either from western Canada or offshore
Newfoundland & Labrador (NL)) and imported oil from various parts of the world for feedstock
into eight refineries (four in Ontario (ON), 2 in Quebec (QC) and single refineries in New
Brunswick (NB) and NL & Labrador) to process oil into gasoline, diesel, heating oil, propane,
asphalt, and petrochemical feedstock.
The scope of this study is to analyze the potential complete or partial substitution of eastern
Canadian crude oil imports via domestically-sourced oil. The research provides a cost and
emissions comparison based on four potential scenarios of substituting domestic vs. foreign
crude oil in the central and eastern Canadian refinery market.
• Expanded Access – in this scenario we allow for the economic substitution of less
expensive Canadian crude for imported oil. Again, a new oil pipeline is assumed in this
scenario.
• Current Reality – in this scenario we use the existing infrastructure but maximize the
selection of Canadian crude from an economic perspective. The Base Case which now
exists, has a portion of Canadian crude being used in central and eastern Canadian
refineries but not the full amount that would be selected if only price was used to make
the selection.
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• International Social Concerns – is a scenario that substitutes Canadian crude for imported
oil from countries where international organizations have identified some social
concerns. CERI uses the Economist’s Democracy Index as a proxy for the range of social
concerns (e.g., living standards, food security, human rights, environmental protection,
health outcomes, etc.).
This study provides a comprehensive look at the substitution impact on refinery costs and
emissions for refineries in ON, QC, NB and NL. Refineries in these provinces only process lighter
crudes and are not able to process some of the heavier crude oils from Western Canada. As such,
the substitution is on a like-for-like basis. The crude oil quality being imported is substituted with
the same quality of crude from other parts of Canada.
In all the scenarios, the substitution of Canadian crude oil for imported oil reduces overall global
CO2 emissions compared to a business as usual (Base Case) option. Emissions are reduced by 2
MTCO2eq per year to 2.8 MTCO2eq per year. In some cases, Canadian emissions increase, but
overall emissions which are linked to climate change decrease.
Cost savings range from $23 million in the Made In Canada scenario to $317 million in the
Expanded Access scenario. Both scenarios call for a new oil pipeline. In the case of Expanded
Access, only those Canadian crude oil supplies cheaper than their imported counterparts are
consumed in central and central and eastern refineries.
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One scenario results in higher costs for QC and NB refineries. This is the substitution of oil from
countries where international organizations have noted some social concerns. In this case, the
cost of this policy would be approximately $79 million in additional crude oil costs.
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Chapter 1: Introduction
Canada is the fifth largest oil producer in the world, accounting for 4.8 percent of world
production in 2016, ranking behind the US (13.4 percent), Saudi Arabia (13.4 percent), Russia
(12.2 percent) and Iran (5.0 percent) (BP 2017). Canada’s proved reserves, totaling 171.5 billion
barrels or 10 percent of the world’s share of proved reserves, are behind Venezuela (300.9 billion
barrels) and Saudi Arabia (266.6 billion barrels) (BP 2017).
Canadian crude oil imports were 759 thousand barrels per day (Mbpd) in 2016 with the majority
coming into the Eastern part of the country. ON, QC, NB, and NL imported 607 Mbpd combined,
with most of imports from the US (259 Mbpd), followed by Saudi Arabia (87 Mbpd) and Algeria
(85 Mbpd). Other imports in 2016 over 10 Mbpd include Nigeria (74 Mbpd), Norway (42 Mbpd),
Kazakhstan (19 Mbpd), and the Ivory Coast (13 Mbpd) (Government of Canada 2017; National
Energy Board [NEB] 2017f; Statistics Canada 2017a).
The nature of the imports, however, is different between western and eastern Canada. Western
Canadian crude oil imports are all from the US and are attributed to imports of diluent or
condensate, which is used to dilute oil sands bitumen to facilitate transportation by pipeline.
Eastern Canadian provinces, on the other hand, use domestic oil (either from western Canada or
offshore NL) and imported oil from various parts of the world for feedstock in local refineries.
The theoretical objective of an oil refiner is simple – to minimize operating expenses and
maximize margins. In practice, however, the economics of a refinery is dictated by a complex set
of intertwined factors, at the heart of which are three variables: crude oil type used (crude slate),
refinery size and configuration and final product range (product slate) (Natural Resources Canada
[NRCan] 2016). Other important variables include a refinery’s operational efficiency, or utilization
rate, as well as regulatory requirements, often reflecting environmental considerations (NRCan
2016).
These factors, as well as their proximity to crude oil producing areas and available transportation
infrastructure, help explain why each province has very different crude oil supply dynamics. The
role of transportation options (pipelines, rail, and tankers and/or barges) in determining a
refiners’ crude sources cannot be overstated. In the west, it is not surprising that western
Canadian refineries, on the other hand, use exclusively crude oil produced in the region.
In the east, the dynamics are more complicated. ON accesses western Canadian production via
the Enbridge Mainline pipeline, as does Suncor’s refinery in Montréal via the Line 9b reversal.
ON is, however, unique in that it uses feedstock from western Canada, but also imports crude oil,
primarily from the US. In QC, while Montréal’s Suncor refinery can be supplied with western
Canadian crude oil by pipeline and rail, as well as receive eastern Canadian oil through the
Portland-Montréal pipeline, QC’s Valero refinery relies more on importing foreign crudes by
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tankers. Located near Quebec City, Valero can access western Canadian crude oil from Montréal
via smaller tankers and is also able to receive oil from the west by rail. The facility can also access
eastern Canadian oil by tanker through its offloading facilities, which are primarily used for
importing foreign-sourced crude oil. Like QC’s Valero refinery, Atlantic Canada also depends on
importing crudes due to a lack of pipeline infrastructure. They access a diverse slate of foreign
crudes, including the US, via tankers. In 2016, QC received crude from nations such as Algeria,
Azerbaijan, Kazakhstan, Norway and Nigeria while NB received crude from nine different nations
including Saudi Arabia, Congo, Ivory Coast, Colombia, Nigeria and Norway (Government of
Canada 2017; NEB 2017f; Statistics Canada 2017a). The crude slate for NL’s single refinery is
equally diverse. And while the facility uses some of its offshore oil as a feedstock, it does not use
any crude from western Canada. NB’s Irving Oil refinery, however, can access western Canadian
crude oil via rail, as well as Offshore NL crude oil by tanker.
The scope of this study is to analyze the potential complete or partial substitution of eastern
Canadian crude oil imports via domestically-sourced oil. The research provides a cost and
emissions comparison based on four potential scenarios of substituting domestic vs. foreign
crude oil in the central and eastern Canadian refinery market.
It is important to note that transportation capacity is not the constraint and consideration in
foreign oil substitution. Other constraints in refinery decision-making include economics of
supply and crude availability in western and eastern Canada. The former means that refineries
modus operandi is to optimize cost of feedstock while gaining desired yields demanded by the
refined petroleum markets. Thus, if Canadian oil is more expensive at the gate of a refinery
compared to foreign oil, in a market-driven non-policy constrained decision-making world, it
would prefer the cheaper feedstock (if it can get the same desired yields). Prices of particular
brands of foreign and domestic oil as well as transportation costs play a role in the selection of
the crude slate.
This CERI study will show market- and socially-pushed scenario outcomes, via existing and
expanded transportation infrastructure, which could serve as a sign for Canadians on how
beneficial or costly such substitution could be. This research is a first of its kind comparison that
has not been done by any other organization.
Before discussing the methodology and assumptions undertaken in this study, it is prudent to
provide a brief review of several important concepts central to this study. Prior to discussing any
substitution, it is important to grasp the sheer complexity of the eastern refinery market, in terms
of the refinery business as well as the complex transportation system connecting western and
eastern Canadian producers, and their international counterparts, to the eastern Canadian
refineries.
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Figure 2.1 illustrates total oil production in Canada from 2009 to 2016. Canadian conventional
production includes light, C5+/condensate and heavy crude oil production and is shown by
producing province. AB’s oil sands production includes bitumen and synthetic.
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Figure 2.1: Canadian Crude Oil Production by Province, Conventional + Oil Sands (Mbpd)
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2009 2010 2011 2012 2013 2014 2015 2016
Data Sources: (NEB 2017a, 2017b), Canadian Energy Research Institute (CERI) calculations. Figure by CERI.
Canada is a significant exporter of crude oil, with most oil exported to the US. Figure 2.2
illustrates the US imports from Canada by type. Total US imports from Canada in 2016 were
3,264 Mbpd, up from 3,169 Mbpd in 2015 and up from 1,939 Mbpd in 2009 (US Energy
Information Administration [US EIA] 2016). In addition, it is important to mention that Canadian
production, in western Canada, does supply other provinces.
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3,000
2,500
60%
62%
2,000 60%
59%
59%
1,500 59%
55% 57%
1,000
25% 25% 21% 22%
27% 27% 26%
500 27%
-
2009 2010 2011 2012 2013 2014 2015 2016
It is interesting to note that the largest share of exports is heavy sour bitumen, accounting for
60 percent of type of crude exported from Canada to the US. Heavy sour exports to the US
increased from 1,063 Mbpd in 2009 to 1,970 Mbpd in 2016 (US EIA 2016) and are destined to
refineries capable of processing heavier crudes in the US Midwest (US Petroleum Administration
for Defense District [PADD] II) and the US Gulf Coast (PADD III).
Eastern Canadian crude oil imports rose slightly in 2016, reaching 607 Mbpd, with most of the
imports from the US (259 Mbpd). Rounding out the top 5 in 2016 is Saudi Arabia (87 Mbpd),
Algeria (85 Mbpd), Nigeria (74 Mbpd) and Norway (42 Mbpd) (Government of Canada 2017; NEB
2017f; Statistics Canada 2017a). This is illustrated in Figure 2.3.
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Figure 2.3: Eastern Canadian Crude Oil Imports by Country, 2016 (Mbpd)
Algeria 84.8
Nigeria 73.7
Norway 41.8
Kazakhstan 19.2
Azerbaijan 6.9
Colombia 5.3
Congo 2.7
Denmark 1.7
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Figure 2.4 illustrates the breakdown of an average barrel of Canadian refined petroleum
products, produced by Canadian refineries. The products are illustrated from heaviest to lightest,
by percentage. In Canada, between 2011 and 2016, the largest component is motor gasoline (36
percent), followed by diesel and middle distillates (33 percent), petrochemical feedstocks and
LPGs (7 percent), heavy fuel oil (6 percent), other heavy products (6 percent), aviation fuel (5
percent), other light products (4 percent) and asphalt (4 percent) (NEB 2017g).
Figure 2.4: Breakdown of an Average Barrel of Canadian Refined Petroleum Products (%)
The primary end-products are typically classified into three separate categories: light distillates,
middle distillates, and heavy distillates. Light distillates include liquified petroleum gas (LPG),
gasoline and heavy naphtha while middle distillates include kerosene, automotive and railroad
diesel fuels, residential heating fuel and other light fuel oils. Heavy distillates include heavy fuel
oils.
However, before discussing the complex refining process, it is prudent to review the distinct types
of crude oil. Globally, there are over 150 different types of crude and even more brands of crude
(CFA 2013). Not only do they impact the price of feedstock to the refiner, they also produce
different yields for the refiners (CFA 2013). On the simplest level, crude oils are differentiated by
sulfur content (sweet or sour) and by American Petroleum Institute (API) gravity (light or heavy).
Aside from density (kg/m3), API gravity (degrees), sulfur (percentage on weight basis [wt%]),
grades of crude are also differentiated by several other physical characteristics including micro-
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carbon residue (MCR) (wt%), sediment (parts per million weight [ppmw]), total acid number
(TAN) (mg potassium hydroxide [KOH]/g), salt (pounds per thousand barrel [ptb]), nickel (mg/kg),
vanadium (mg/kg) and olefins (wt%).
Figure 2.5 illustrates the distribution of selected Canadian and imported crude oils used in this
study by API gravity and sulfur content.
Data Sources: (PRELIM v1.1 (J. A. Bergerson et al. 2016); CrudeMonitor.ca (Crude Quality Inc. 2017)), crude oil assays from
EcoPetrol, ExxonMobil, Maersk Oil, TOTAL, Tullow Oil websites. Figure by CERI.
Notes: Canadian crude oils, foreign crude oils.
API gravity values represented in Figure 2.5 are the crude oil API gravity values at the refinery inlet gate.
The higher the sulfur content, the sourer the crude oil while the lower the sulfur content, the
sweeter the crude oil. Likewise, crude oil with a low API gravity is considered a heavy crude oil
and typically has a higher sulfur content, resulting in a larger yield of lower-valued products
(NRCan 2016). Therefore, the lower the API of a crude oil, the lower the value it has to a refiner,
as crude will either require more processing or yield a higher percentage of lower-valued by-
products such as heavy fuel oil, which usually sells for less than gasoline (NRCan 2016). Refiners
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are willing to pay more for light, low sulfur crude oil. While lighter grades require less upgrading
at the refinery, they are in decreasing supply (CFA 2013). Heavy crude oils, on the other hand,
are cheaper, but more expensive to refine since they require significant investments (CFA 2013).
It is important to note that at the core of this research study is the substitution of foreign crude
oils by western Canadian crude, by type. Imported light oil is, hence, substituted by light oil of a
similar crude type and physical characteristics by either western Canadian crude oil or from
Offshore NL. This is discussed in greater detail later in this chapter.
Figure 2.6 illustrates the complex refining process, as crude oil moves to its various derivative
products, such as gasoline, kerosene and jet fuel, diesel, as well as heavier products such as
lubricants (lubricating oil), fuel oil and residual, used for roads and building materials. The
derivative products are listed on the right side of the figure.
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While there are common features and processes, no two refineries are identical. Refineries
process different crude oils with different chemical characteristics and process them into a range
of refined products. In doing so, refinery configurations, or the type of processing units at the
refinery, are different. Different types of processing units can process certain types of crude oil.
As such, some refineries are simply not able to process heavier crude oils. Canadian oil
production has shifted from declining conventional reserves to heavier, higher sulfur crudes, such
as bitumen. Eastern Canadian refineries that wish to take advantage of lower priced bitumen
will need to change their refinery configurations and to invest into additional coking,
hydrocracking and hydrotreating units to process heavier barrels into the same yield of refined
products. Hydrotreating will be needed to meet the Canadian fuels regulations for lower sulphur
products, especially if the crude slate includes higher sulphur crudes.
While there are multiple processing units used, most refineries fall into three broad categories:
a topping plant with a distillation unit, a cracking refinery, and a coking refinery. They represent
increasing levels of complexity and increase in cost.
A topping refinery is the simplest type of refinery. They have a distillation tower and convert
light sweet crude oil into either light or middle distillates. Some topping refineries are also
equipped with a catalytic reformer, adding a layer of complexity, as well as the capability to
produce gasoline (Simmons and Phillip 2008). These refineries are referred to as hydroskimming
refineries. The latter provides octane to gasoline for example. In addition, some topping
refineries can be asphalt plants.
The atmospheric distillation units produce hydrocarbon boiling point cuts from resid to LPG (Sep-
Pro Systems 2009). The crude oil is heated with fire heaters to temperatures ranging between
650 and 700 degrees Fahrenheit (Inkpen and Moffett 2011). With most of it vapourizing, it enters
the atmospheric distillation tower or column, getting cooler as it goes up in the tower (Inkpen
and Moffett 2011). This process is illustrated by Figure 2.7.
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As the various hydrocarbons cool below their respective boiling points, they revert to a liquid
state. Heavier hydrocarbons such as heavy gas oil or lubricating oil are collected on the lower
trays of the distillation tower, while lighter hydrocarbons are collected near the top of the tower
(Inkpen and Moffett 2011). Vacuum distillate units are often used to separate the gas oil from
the lower quality heavy fuel or resid (Simmons and Phillip 2008). Lighter hydrocarbon products
range from the heavier middle distillate, to kerosene and naphtha and low octane gasoline.
Catalytic reformers increase the octane number of gasoline.
Light sweet crude or condensate is used as the crude slate at a topping or hydroskimming
refinery. Asphalt plants are topping refineries that run heavy crude oil because they are primarily
interested in producing asphalt.
The second type of refinery is a cracking refinery. This level of process is often referred to as
medium conversion. This type of refinery takes the gas oil portion from the crude distillation unit
and breaks it down further into gasoline and distillate components. Cracking breaks or cracks
the heavier products into more valuable products such as gasoline and diesel (Inkpen and Moffett
2011). The fluid catalytic cracker (FCC) process is shown in red and illustrated in Figure 2.8.
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The FCC, for example, converts heavier hydrocarbon molecules into lighter hydrocarbon
molecules. This is done using catalysts, high temperature and/or pressure, operating at
approximately 986 degrees Fahrenheit (Vellenga 2017).
It is important to note that cracking refineries tend to use more sour crude oils and upgrade them
to higher value products. They have increased yields of higher value products than topping
refineries.
These types of refineries, using FCC, are common in the US, due to the higher demand in gasoline.
FCC units are, on the other hand, less common in Europe and parts of Asia, due to the higher
demand in diesel and kerosene, both of which can be satisfied by hydrocracking. The latter is
similar to FCC but yields more diesel and represents a more complex type of refinery (Inkpen and
Moffett 2011).
The most complex type of refinery, or high conversion refinery, is the coking refinery. This type
of refinery processes residual fuel, the heaviest material from the crude unit and thermally cracks
it into lighter product. This is done in a coker or a hydrocracker. The addition of a FCC unit
significantly increases the yield of higher-value products like gasoline and diesel oil from a barrel
of crude. High conversion refinery processes are illustrated in Figure 2.9.
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An Economic and Environmental Assessment of 13
Eastern Canadian Crude Oil Imports
It also allows the refinery to process cheaper, heavier crude while producing an equivalent or
greater volume of high-value products (Simmons and Phillip 2008). Other processes such as
hydrotreating, which removes sulfur from finished products, give the refiners the ability to
process crude oil with a higher sulfur content.
Canada has primarily cracking refineries, using a mix of light and heavy crude oils to meet
Canadian demand for gasoline, diesel, and other products. Historically, the abundance of
domestically produced light sweet crude oils and a higher demand for distillate products, such as
heating oil, reduced the need for upgrading capacity in Canada (NRCan 2016). However, in more
recent years, the supply of light sweet crude has declined, and newer sources of crude oil tend
to be heavier.
There are 15 refineries in Canada, seven of which are in western Canada and eight located in
eastern Canada. In addition, Canada also has two refineries producing asphalt (Husky’s
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Lloydminster Refinery and Gibson Energy’s Moose Jaw Refinery) and a lubricants plant
(Hollyfrontier’s Clarkson Refinery). Figure 2.10 illustrates the location of Canada’s refineries as
well as their capacity and product demand (by region). The two main clusters are the Edmonton
area (AB) and the Sarnia area (ON). It is important to note that Canada’s first new refinery since
1984 is the North West Redwater Partnership, sometimes referred to as the Sturgeon Refinery
(AB). North West Refining and Canadian Natural Resources Limited (CNRL) have a 50/50
partnership in the Sturgeon Refinery.
Canada is a net exporter of refined products – refinery capacity exceeds domestic demand,
notably in QC and Atlantic Canada. Net exports reached nearly 17 billion litres in 2013,
decreasing to 6 billion litres in 2016 (Statistics Canada 2017e). Figure 2.11 illustrates the net
exports, as well as domestic sales of refined petroleum products by product (motor gasoline,
diesel, and other refined petroleum products [RPP]) and total refinery production. Total refinery
production reached 117 billion litres in 2010 and decreased to 105 billion litres in 2014, but
increased slightly to 109 billion litres in 2016 (Statistics Canada 2017d).
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An Economic and Environmental Assessment of 15
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Figure 2.11: Supply and Disposition of Refined Petroleum Products in Canada (billion litres)
140
120
100
80
60
40
20
0
2009 2010 2011 2012 2013 2014 2015 2016
This section delves into the eight eastern Canadian refineries and various important metrics,
including their location, capacity, use rates, crude intakes (or crude slate) and mode of supply
(transportation). Consumption of feedstock (crude slate) and product slate of the eight refineries
is reviewed, establishing the current state of refineries in eastern Canada. The crude slate is
reviewed more closely, breaking it down by domestic-sourced crude and foreign-sourced crude.
It is first important to note the sources of data used. The data was obtained from several sources
including Statistics Canada, Natural Resources Canada (NRCan), Canadian Fuel Association (CFA),
Canadian Association of Petroleum Producers (CAPP), various refinery websites, midstream
companies’ websites (Enbridge and others), Clipper Data (transportation of oil by tankers), as
well as calculations and estimates by CERI where needed. Statistics Canada CANSIM Table 126-
0003 Supply and Disposition of Crude Oil and Equivalent and Table 134-0001 Refinery Supply of
Crude Oil and Equivalent were used (Statistics Canada 2017c, 2017d). If the data was suppressed,
missing, or conflicted with one another, CERI reconciled using multiple sources to infer quality
and certainty in data. For instance, for QC, 10 months of 2016 were used to determine the shares
of the different crude oil intake; likewise, for ON, five months of 2016 were used due to the
availability of data (other months are either not available or suppressed by Statistics Canada’s
data). Information on type and volumes of crude that Irving Oil Refinery and North Atlantic
Refining are receiving is not available from Statistics Canada. As such, numbers are estimated by
CERI using data from other sources and various publications.
Refining capacity in eastern Canada is represented by eight refineries with a total capacity of
1,228 Mbpd (CFA 2017b). Four refineries are in ON, two in QC, and one each in NB and NL. All
eight refineries, their capacities, use rates and total 2016 crude intakes are illustrated in
Table 2.1.
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Table 2.1: Eastern Canadian Refinery Capacity and Crude Oil Intake
Province Refinery Capacity Utilization Rate Total Intake
(Mbpd) (%) (Mbpd)
ON Imperial, Sarnia 121 86% 104.1
Shell Canada, Corunna 75 88% 65.9
Suncor Energy, Sarnia 85 92% 77.8
Imperial, Nanticoke 112 86% 96.3
ON Subtotal 393
QC Valero, Lévis 265 88% 232.8
Suncor Energy, Montréal 137 92% 125.4
QC Subtotal 402
NB Irving Oil, Saint John 318 87% 277.8
NL North Atlantic Refining, 115 81% 93.1
Come By Chance
Atlantic Canada Subtotal 433
Total 1,228 1,073.0
Data Sources: (CFA 2017b; Statistics Canada 2017c, 2017d), various refinery websites & CERI (calculations and estimates). Table
by CERI.
All of ON’s refineries are in the south of the province, with three refineries found in the Sarnia
area (Suncor Energy and Imperial Oil operate refineries in Sarnia while Shell Canada operates the
Corunna Refinery in nearby St. Clair). Imperial Oil operates a refinery in Nanticoke. As can be
seen from Table 2.1, Imperial Oil’s Nanticoke Refinery and Sarnia Refinery have capacities of
112,000 and 121,000 bpd, respectively. Suncor Energy’s Sarnia refinery has a capacity of
85,000 bpd and Shell Canada’s St. Clair refinery has a capacity of 75,000 bpd. QC has two
refineries, Suncor Energy’s Montréal Refinery and Valero’s Jean-Gaulin Refinery, in Lévis, near
Quebec City. The refineries have capacities of 137,000 bpd and 265,000 bpd, respectively.
Atlantic Canada also has two refineries, Irving Oil Refinery in Saint John, NB, and the North
Atlantic Refinery in Come By Chance, NL. The former has a capacity of 318,000 bpd and is
Canada’s largest refinery. The North Atlantic Refinery has a capacity of 115,000 bpd.
Table 2.2 illustrates the refinery configurations for Canada’s central and eastern refineries. These
include coking (25.5 Mbpd in ON), visbreaking (5 Mbpd in ON and 40 Mbpd in Atlantic provinces),
hydrocracker (around 60 Mbpd in ON, 22 Mbpd in QC, and 72 Mbpd in Atlantic provinces),
catalytic cracker (116 Mbpd in ON, 100 Mbpd in QC, and 95 Mbpd in Atlantic provinces), catalytic
reformer (107 Mbpd in ON, 84 Mbpd in QC, 69 Mbpd in Atlantic provinces), and hydrotreating
(291 Mbpd in ON, 321 Mbpd in QC, and 148 Mbpd in Atlantic provinces) (Oil & Gas Journal
2016b).
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Eastern Canadian Crude Oil Imports
The economics behind whether to invest in these additional coking units is determined by the
current and expected spread between light and heavy oil prices. The gain in value for investing
in additional units must yield a high enough return to offset the increased costs of building more
units. Refining capacity to process heavy crude is limited because recently the light-heavy crude
differential has not been consistently wide enough to cover the cost of installing additional
upgrading or refining capacity.
It is important to put the current state of Canadian refineries into a historical and global context.
The former is illustrated in Figure 2.12.
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From a historical perspective, the number of refineries has been decreasing over the past several
decades. With the closures of Shell’s Montréal refinery in 2010 and the Imperial Oil refinery in
Dartmouth, NS, there are now 15 refineries. Recall, Figure 2.12 also includes the Hollyfrontier
Refinery, the Moose Jaw Refinery, and the Lloydminster Refinery, which are either asphalt or
lubricant plants. This is down from 36 in 1980 and down from a high of 45 refineries in 1958.
The same is true south of the border. The number of operating refineries decreased from 300 in
1982 to 137 in 2017 (US EIA 2017).
Refinery capacity in Canada increased dramatically from 264 Mbpd in 1947 to a record-high of
2,232 Mbpd in 1980. The capacity subsequently decreased in the 1990s, hovering around the
1,800 Mbpd level. It has increased to 1,910 Mbpd in 2016 (Oil Sands Magazine 2016). Again,
these totals include asphalt and lubricant plants. A similar pattern occurs in the US. Operating
refinery capacity decreased from 18 million barrels per day (MMbbl per calendar day) to a low of
15 MMbbl per calendar day in 1993, where capacity increased back to 18 MMbbl per calendar
day in 2017 (US EIA 2017).
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Eastern Canadian Crude Oil Imports
However, the number of refineries in Canada is likely to decrease further, due to several factors.
First, like their global counterparts, including in the US, refineries are getting larger and more
efficient, and increasingly satisfying local demand for gasoline and diesel. With cars and trucks
increasing fuel efficiency, the future demand for refined petroleum products is flat in North
America, if not decreasing. While increased vehicle efficiency and renewable fuels will likely
impact the near-term, another question is the penetration of electric vehicles into the US
transportation fleet. As a net exporter of refined petroleum products, this will leave several
Canadian refineries vulnerable. It should, however, be emphasized that the rate of decline varies
widely depending on the assumptions made by different studies; factors include the growth of
electric vehicle sales, growth in biofuel production and consumption, and the effectiveness of
current climate and transportation policies.
Within a global context, North America’s share of global refining capacity decreased slightly from
25 percent to 24 percent between 2005 and 2015 (Oil Sands Magazine 2016). Over the same time
frame, Europe and Eurasia decreased from 28 percent to 25 percent. While the Middle East’s
share of the global refining capacity stayed at 9 percent, the largest growth occurred in the Asia
Pacific, which increased from 28 percent to 34 percent between 2005 and 2015. The latter is led
by rapid growth in China, increasing from a capacity of approximately 9,000 Mbpd in 2008 to
over 14,000 Mbpd in 2015 (Oil Sands Magazine 2016).
North American refineries, particularly Canadian, face competition from abroad as global refining
capacity is capable of processing heavy crudes at lower costs than in North America. Aside from
the economic challenges, locational and political issues affect access to this processing capacity.
Refineries tend to be found close to their markets for refined products.1 Some of the reasons
behind this are that it is less expensive to transport crude oil than refined products, the
specifications for gasoline vary across the world, and countries prefer energy security for refined
products. For example, historically the US refinery configuration has been to maximize gasoline
production, but in Asia, refinery configurations support industrial development especially for
diesel and petrochemical production (Hackett et al. 2013).
1
Even though the scale of refining capacity and proximity to tidewater could mean that the refineries do not
necessarily need to be in close proximity to their markets.
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Refiners also face challenges in that the North American market has peaked in its product
demand, meaning that an expansion of refining capacity to meet oil production would mean
selling refined products to the export markets, specifically in developing nations of the Asia
Pacific (IHS CERA 2013).
Figure 2.13 depicts crude distillation capacity additions by region. Forty-six percent of the
capacity additions are projected for the Asia-Pacific region between 2016 and 2040 (OPEC 2016).
This is followed by the Middle East, Africa and Latin America at 17 percent, 16 percent and
11 percent, respectively (OPEC 2016).
On a global scale, China and the Asia-Pacific region are leading the growth of refined product
demand. This is reflected in the region’s refining capacity. The region is leading the worldwide
trend of larger, more efficient refineries. The Asia-Pacific, including China, is expected to add
around 3.3 MMbpd of new distillation capacity in the medium-term to 2021, while the Middle
East should expand by 1.7 MMbpd (OPEC 2016). This is followed by growth in Latin America and
Africa. The figure reflects that markets in Canada, US and Europe are mature and growing at a
slower rate.
It is not surprising that the 10 largest oil refineries in the world are primarily situated in the Asia-
Pacific region: Reliance Jamnagar Refinery, India (1.24 MMbpd), Paraguana Refining Centre,
Venezuela (955,000 bpd), Ulsan Refinery South Korea (840,000 bpd), Yeosu Refinery, South
Korea,(775,000 bpd), Onsand Refinery, Ulsan, South Korea (669,000 bpd), Port Arthur Refinery,
Texas, US (600,000 bpd), ExxonMobil’s Singapore Refinery (592,000 bpd), ExxonMobil’s Baytown
Refinery, Texas, US (584,000 bpd), Ras Tanura Refinery, Saudi Arabia (550,000 bpd) and Garyville
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An Economic and Environmental Assessment of 21
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Refinery, Louisiana, US (522,000 bpd) (Dudu 2013). The largest Canadian refinery is NB’s Irving
Refinery at 318,000 bpd.
This section highlights the various elements of the three modes of transport primarily used in this
study: pipeline, rail, and tankers. In the context of this study, the pipeline and rail are used to
transport crude oil from western Canada and the US to refineries in eastern Canada. Tanker, and
to lesser extent barges, on the other hand, are used to transport crude oil from the US and other
parts of the world to refineries in eastern Canada.
Figure 2.14 illustrates the complex web of liquids pipelines in eastern Canada and the US. While
the pipeline illustrates Enbridge’s Line 9 Reversal, the Portland-Montréal Pipeline, and the Energy
East Pipeline (as proposed), the map does not show the Enbridge Mainline, transporting crude
from AB, SK, and MB to eastern Canadian markets. The Energy East pipeline was cancelled on
October 5, 2017. It is interesting to note that the Trans-Northern Pipeline, from Nanticoke, ON
to Montréal, QC, and the St. Lawrence Pipeline, from Quebec City to Montréal, are transporting
refined petroleum products. Also illustrated are the locations of Canada’s central and eastern
refineries, as well as the rail network in eastern Canada. Rail infrastructure is, however, discussed
in greater detail later in this chapter.
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Pipeline
There are approximately 41,000 kilometers of crude oil pipelines in Canada, transporting
3.7 MMbpd (Canadian Energy Pipeline Association [CEPA] 2017). In addition, there are
approximately 77,000 kilometers of natural gas pipelines in Canada, transporting 15.3 billion
cubic feet per day (CEPA 2017). While it is not prudent to review over two dozen existing liquids
pipelines that either originate in or operate within Canada, it is important to review several
pipelines, within the context of this study, that transport liquids to eastern Canada that directly
influence the movement of crude oil into eastern Canadian refineries, whether from western
Canada or from the US.
Western Canadian production is connected to domestic and US refining and export centers,
through an extensive network of pipeline but also through rail. For example, most Canadian
exports are destined for the US Midwest (PADD II) and the US Gulf Coast (PADD III) – the latter
being one the world’s largest refining centers, with a refining capacity of 9.4 MMbpd.
Nevertheless, 400 Mbpd of western Canadian crude oil was transported to refineries in ON, QC
and NB, the bulk of which was transported by pipeline (CERI Crude Flow Model).
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An Economic and Environmental Assessment of 23
Eastern Canadian Crude Oil Imports
The following section is divided into three parts: Enbridge’s Canadian Mainline (with a focus on
Line 5 & Line 78), Enbridge’s Line 9b Reversal and the Portland-Montréal Pipeline.
Enbridge’s Canadian Mainline, or simply referred to as the Enbridge System, begins in Edmonton
and runs to Montréal. It is 2,306 kilometers in length (Enbridge 2016a; Enbridge Inc. n.d.). The
Canadian Mainline ends at Gretna, MB when the pipeline enters the United States and starts
again in Sarnia, ON, where it extends through Toronto and on to Montréal (Enbridge 2016a;
Enbridge Inc. n.d.). The Canadian Mainline transports crude oil and diluted bitumen, while the
Enbridge Lakehead transports crude oil, condensate and NGLs (Enbridge Inc. n.d.). In
combination with the Enbridge Lakehead System the capacity of the pipeline is 2,500,000 bpd
(Enbridge Inc. n.d.).
The US Mainline, or Enbridge’s Lakehead System, connects the western portion of the Canadian
Mainline from Edmonton, AB, to Gretna, MB and the eastern portion of the mainline that runs
between Montréal and Sarnia, ON. The Lakehead System loops around Lake Michigan, as far
north as Lewiston and runs southward through Bay City, Michigan and northwards to Sarnia, ON.
The US Mainline is 3,057 kilometers in length and is owned by Enbridge Energy Partners LP
(Enbridge Inc. n.d.).
Figure 2.15 illustrates the Enbridge Mainline System configuration. The schematic includes 14
lines, or pipelines, as of Q1 2016. The Canadian Mainline system includes Lines 1, 2, 3, 4, 7, 9, 10
and 11. The US Mainline, on the other hand, includes Lines 5, 6, 14/64, 61 and 62. It is important
to note that Line 55 (Flanagan to Cushing) and Line 17 (Stockbridge to Toledo) are not part of the
Enbridge Mainline system. The previously mentioned Line 9b, known as the Line 9b Reversal,
runs between Sarnia, ON and Montréal, QC. It is discussed separately.
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Lines 4, 6, 7, 10, 11, 62, 14/64, 61 and 67 can transport heavy crude. Lines 4 and 67 are dedicated
to heavy oil. Lines 2, 3, 5, 7, 10, 11 and 14/64 are used, in part, to transport condensates. All the
lines, except for Lines 62 and 67 are used to transport various products (i.e., Line 2 is used to
transport condensates, light synthetics, sweet crude, and light and high sour crude). The
proposed multi-billion-dollar Line 3 Replacement Program expands capacity to satisfy Canadian
crude oil production growth, as well as Canadian and US refinery demand (Enbridge 2017c). The
Canadian-side and the US-side of the project are both 1,660 kilometers and the pipeline is
expected to have an initial capacity of 760 Mbpd (Enbridge 2017d).
In establishing crude flows in this study, both Line 5 and Line 78 play important roles. The
Mainline enters Sarnia via two entry lines – Line 5 and Line 78 with a total capacity of
1,040 Mbpd. The former transports western Canadian crude along Lines 1, 2, 3 and 67 to
Superior, Minnesota, where it is transported to Sarnia. Line 78, on the other hand, expands
Enbridge’s capacity to transport crude produced in the Williston Basin region, North Dakota, and
light and heavy crude production in western Canada and also transports product to Sarnia
(Enbridge 2017b). Line 78 begins in Flanagan, Illinois and terminates in Sarnia, via
Griffith/Hartsdale and Stockbridge (Enbridge 2017b). The pipeline runs parallel to Line 62
between Flanagan and Griffith/Hartsdale.
As ON refineries consume 344 Mbpd (total refining capacity 393 Mbpd) (see Table 2.1), the
incoming pipeline capacity is enough to carry more Canadian oil east of ON.
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Eastern Canadian Crude Oil Imports
In 2012, Enbridge applied to reverse the flow direction and expand the capacity of Line 9, from
240,000 bpd to 300,000 bpd (NEB 2016b). Line 9, which now carries light crude from the Williston
Basin to refineries in QC, allows refineries in QC to use North American light oil as a feedstock
instead of importing crude oil from overseas, which trades at a premium to North American
grades of crude.
In QC, the two refineries in Montréal and Lévis can be accessed by western and eastern Canadian
oil producers. Montréal’s refinery, with oil intake of 125.4 Mbpd (total capacity 137 Mbpd), can
be fully supplied from the west through the 300 Mbpd Enbridge Line 9, which is connected to
Sarnia.
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Portland–Montréal Pipeline
Today, the Portland-Montréal Pipeline consists of two pipes: one 18-inch diameter pipe, and one
24-inch diameter pipe. The two pipes that connect Montréal to Portland tidewater have a
combined engineering capacity of 602,000 bpd of light crude (24” – 410,000 bpd, 18” –
192,000 bpd) (Gillies 2009).
The pipeline reported no throughputs from January to March 2016, likely in part due to the
beginning of Enbridge’s Line 9 Expansion and the Line 9b Reversal (NEB 2017d). QC refiners could
access western Canadian oil through the latter. The reversal of Line 9 has also had an impact on
oil tanker traffic in Portland. Not even a decade ago, with nearly 200 tankers each year, Portland
was the largest oil port on the US east coast (Bell 2008).
While refineries in QC are likely using a combination of light crude oil from Enbridge’s Line 9, as
well as overseas imports through the Portland-Montréal Pipeline, the pipeline’s utilization rate
was actually 22 percent in 2015 (61 Mbpd out of 280 Mbpd capacity in 2015, according to the
NEB (NEB 2017d). There is speculation that the Portland-Montréal Pipeline could be reversed. By
reversing the flow direction of one of the pipelines, western Canadian heavy oil could be
transported from AB to Portland, where crude oil is later loaded onto tankers and shipped to
refineries along the US Gulf Coast for refining.
The Portland Pipe Line Corp. filed a lawsuit against the city of South Portland that has blocked
the company from reversing the pipeline’s flow (that the company would immediately undertake
if not prohibited by legal barriers) (Bouchard 2017).
Crude-by-Rail
Non-intermodal traffic is primarily comprised of bulk cargo and tank cars, and includes
commodities such as petroleum products, wheat, coal, or potash. Railcars are used to transport
petroleum fuels (gasoline, diesel, aviation fuels, fuel oil and lubricants), chemical products
(ethylene glycol, chlorine, ammonia, vinyl chloride and caustic soda), and LPG products (propane,
butane, and pentanes).
Crude-by-rail emerged several years ago, stemming from various regulatory issues that proposed
pipelines faced. Rapid growth in western Canadian crude oil production (especially from oil sands
operations) has outpaced pipeline capacity and pipeline companies’ expansion efforts. In more
recent years, rail transport of crude oil has subsided as an alternative mode of transport to
accommodate surplus volumes that exceed pipeline capacity, as the economic downturn reduced
or eliminated the surplus.
Figure 2.17 shows the current Canadian railway network for crude oil transport, and outlines the
key shipping terminals and main refining centers receiving the product.
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Eastern Canadian Crude Oil Imports
By global standards, Canadian National (CN) and Canadian Pacific (CP) are major players, both
considered Class I rail carriers by US definition. As of June 8, 2017, CN had a market value of
US$55.9 billion (ranked second in the world behind Union Pacific at US$86.9 billion) while CP had
a market value of US$22 billion, ranked eighth in the world, between Central Japan Railway and
China’s Daqin Railway (Statista 2017).
Of the two Canadian railways, CN has the longest railway network in Canada, reaching from the
Pacific coast in BC to the Atlantic coast in NS, and extending to the US Gulf Coast. CN operates
in 8 provinces and 16 US states (Meyer 2009).
Oil from western Canada can be transported from as far north as Fort McMurray to marine
terminals in Vancouver, to terminals in eastern Canada, as well as to refineries in the southern
US and US Gulf Coast. CN-served ports include the Port of Halifax, Port Montréal, Prince Rupert
Port Authority, Port Metro Vancouver (PMV) and Port of New Orleans (CAPP 2017a).
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While CP was Canada’s first transcontinental railway, it now does not reach the Atlantic coast.
Its rail network stretches from Vancouver to Montréal, and as far north as Edmonton. The CP rail
network serves several major US cities, such as Minneapolis, Detroit, Chicago, and New York.
Various arrangements give CP access to terminals in Detroit, Buffalo, New York, Philadelphia, and
Binghamton. Intermodal terminals located in Canada and the US include Vancouver, Calgary,
Edmonton, Regina, Saskatoon, Winnipeg, Montréal, Minneapolis, Milwaukee, Detroit, and two
terminals in Toronto and Chicago (CAPP 2017a). CP-served ports include Port Montréal, Port
Metro Vancouver, and Port of Thunder Bay. CP’s rail network is frequently divided into four
primary corridors: Western, Southern, Central and Eastern (US Securities and Exchange
Commission 2006). With the purchases of the Dakota, Minnesota and Eastern Railroad (DM&E)
and the Iowa, Chicago and Eastern Railroad (IC&E) in September 2007, CP’s rail network extends
into the US Midwest as far as the natural resource-rich Powder River Basin in Wyoming (Dowd
2007). Additionally, CP connects with Kansas City Southern (KCS), Norfolk Southern (NS) and
Union Pacific (UP) at Kansas City and connects with UP at Minneapolis and Minot, North Dakota
(Canadian Pacific 2016).
CAPP estimates current rail loading capacity originating in western Canada at 754,000 bpd (CAPP
2017b).
Most of this capacity has come online in recent years. Table 2.3 illustrates the operator, location,
and capacity of rail offloading terminals in eastern Canada.
Irving’s oil rail terminal in Saint John is the largest in eastern Canada and the country’s second
largest. While Irving Oil in NB stands on the water and has direct access to Eastern offshore oil
(47,000 barrels of eastern crude were used in 2016), the refinery also has a large rail offloading
capacity of 145 Mbpd, the largest in Canada. Usage of rail however has decreased in recent years,
as Irving Oil used to import around one-third of its intake by rail. This decrease also coincides
with the fatal accident in Lac-Mégantic on July 6, 2013, when a train derailment resulted in 47
deaths. The unattended train, operated by Montréal, Maine & Atlantic Railway (MMA), was
carrying crude oil from the Bakken formation to the Irving Oil refinery (Transportation Safety
Board of Canada 2014).
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Eastern Canadian Crude Oil Imports
Recall, Montreal’s Suncor Energy refinery can receive up to 35 Mbpd by rail. Valero can also
receive oil from the west by rail (up to 60 Mbpd) as well as eastern oil directly by water to its
offloading facilities.
In western Canada, there are 14 rail terminals in AB and 13 terminals in SK (Oil Sands Magazine
2017b). The largest three terminals in western Canada are Kinder Morgan’s Edmonton facility
(210,000 bpd), Gibson/USDG’s Hardisty terminal (140,000 bpd) and Cenovus’ Bruderheim
terminal (100,000 bpd) (Oil Sands Magazine 2017b).
Figure 2.18 illustrates the crude-by-rail exports by quarter to the US. The figure includes data
from the NEB and the EIA. Monthly volumes as of July 2017 are 92.5 Mbpd, down considerably
from the record high of 179 Mbpd in September 2014 (NEB 2017h).
Oil tankers are divided into subclasses: Product Tanker/Seawaymax, Panamax, Aframax,
Suezmax, Very Large Crude Carriers (VLCC) and Ultra Large Crude Carriers (ULCC) (Rodrigo de
Larrucea 2010). Table 2.4 illustrates the typical minimum and maximum deadweight tonnage
(DWT).
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Product tankers and Panamax vessels are known as product tankers or general purpose or
Medium Range (MR) tankers, by the Average Freight Rate Assessment (AFRA) scale. These
tankers often carry refined petroleum products. Panamax, or the Large Range 1 (LR1), as the
name suggests, refers to ships that are able to travel through the Panama Canal with a crude
capacity of up to 500,000 bbls (Marine Insight 2016). The Panama Canal, opened in 1914, has
undergone an expansion so that ever-growing tankers can make use of the facility. New Panamax
vessels with dimensions of 427 m in length, a 55 m beam and depth of 18 m will be able to use
the new locks (Marine Insight 2016). The new Canal dimensions will not be able to fit vessels
categorized as VLCCs and ULCCs, or supertankers.
Aframax tankers, or Large Range 2 (LR2), have a DWT of less than 120,000 and the name is based
on the AFRA tanker rate system (Marine Insight 2016). The latter was a rating system started by
Shell in 1954 to categorize the size and purpose of vessels (AUUUU.com 2015). Aframax tankers
are generally used in the North Sea, Black Sea, the Caribbean Sea, the China Sea and the
Mediterranean (Marine Insight 2016). Aframax tankers have a capacity of approximately
650,000 bbls (National Research Council 1998).
Suezmax, ranging between 120,000 and 200,000 DWT, refers to the category of vessels able to
pass through Egypt’s Suez Canal (Rodrigo de Larrucea 2010). Once regarded as supertankers, this
distinction is now reserved for the much larger VLCC and ULCC vessels. Suezmax tankers have a
capacity of approximately 1,000,000 bbls (Kinder Morgan Canada 2013). The VLCC can transport
between 200,000 and 320,000 DWT and average 331 meters in length and 60 meters in width.
The capacity of a VLCC is approximately 2,000,000 bbls (US EIA 2014; Maritime-Connector.com
n.d.; AllOilTank.com n.d.). The latest generation of supertanker is the Ultra Large Crude Carrier
(ULCC) and has a capacity of up to 550,000 DWT, or approximately 4,000,000 bbls (US EIA 2014;
Maritime-Connector.com n.d.; AllOilTank.com n.d.). It is interesting to note that because of their
sheer size, they are usually not permitted to enter a port fully loaded (Huber 2010).
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Eastern Canadian Crude Oil Imports
As of end-2016, there were 688 VLCCs, 509 Suezmaxes/LR3, 971 Aframaxes/LR2, 430
Panamaxes/LR1 and 1,986 MR-type (TankerOperator 2017). For comparison, as of January 2008,
there were 492 VLCCs, 360 Suezmaxes, 783 Aframaxes, 329 Panamaxes and 981 MR-type (or
Seawaymaxes) (TankerOperator 2008).
While there are numerous marine terminals in Canada, there are seven marine terminals suitable
for loading and offloading oil. Table 2.5 illustrates oil marine terminals in Canada. It is interesting
to note that a single terminal is found on the west coast, the Westridge Marine Terminal in
Burnaby. The terminal lies at the end of the TMX pipeline, transporting crude oil from Edmonton,
AB to Burnaby, BC.
Montréal can also accept at least Panamax (60,000-80,000 DTW) size tankers directly from the
eastern offshore projects.
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32 Canadian Energy Research Institute
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An Economic and Environmental Assessment of 33
Eastern Canadian Crude Oil Imports
The scope of this study is to analyze the potential complete or partial substitution of imported
foreign oil in the central and eastern Canadian refinery market with domestically-sourced oil
supply. The research provides a cost and emissions comparison of four potential scenarios of
feedstock for eastern Canadian refineries, substituting domestic versus foreign crude in central
and eastern Canadian refinery markets. Modelling the different scenarios and their effects are
in turn compared to the Base Case.
The Base Case provides a snap shot of the crude flows in 2016, representing the reconstruction
of current flows (Canadian and imported feedstock supply). It also explores the refineries
themselves, their technologies, as well as existing and potential transportation routes for
western and eastern Canadian oil to central and eastern refineries, as used in 2016. The data
however is incomplete and CERI made assumptions where information is either missing or
suppressed in the collected statistics. For instance, if crude brands of imported oil are not certain
per refinery from an export country, the most abundant brands available in the export country
were taken. Or, if there is no certainty of how crude oil is supplied per refinery from western
Canada, an assumption was made based on the distances from the western crude sources,
railway network and other available information. The objective was to reconstruct the existing
flows accurately.
While there are an infinite number of potential scenarios for displacing central and eastern
refineries’ foreign oil imports, CERI created four scenarios defined in terms of two separate
uncertainties: the level of infrastructure available to transport crude to central and eastern
refineries transportation infrastructure (existing versus expanded) and the general approach of
decision-making (a market- or policy-based approach). This is illustrated in Figure 3.1.
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34 Canadian Energy Research Institute
Expanded Infrastructure
Made in Expanded
Canada Access
Social Push/ Economic Pull/
Policy-based Market-based
Approach Approach
International Current
Social Reality
Concerns
Existing Infrastructure
Mirroring the four quadrants and their scenarios in Figure 3.1, this research explores four key
questions:
1. How much additional oil can be economically sourced through existing infrastructure to
central and eastern refineries (from west and from east) substituting foreign oil, and how
will this impact emissions? In this case, more expensive foreign oil volumes are
substituted.
2. How would the cost of feedstock and emissions levels differ if oil from authoritarian states
was substituted?
4. What would the cost of feedstock and emissions levels be if all foreign crude was
substituted with Canadian crude using expanded transport infrastructure?
Before exploring the four scenarios, it is prudent to review several major assumptions.
First, this research is not from the perspective of the producers and transportation sector, but
from the refinery level, and more particularly, from central and eastern Canadian refineries. As
such, this study explores the cost impacts in course of substitution for the refineries, but not for
producers or transportation companies. Note that in this study, midstream is defined as the
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Eastern Canadian Crude Oil Imports
refining sector, while services of oil delivery (by any mode) is defined as the transportation sector.
This deviates from the industry conventional value chain breakdown, but it is done so to be more
consistent with LCA models used for the study (typically the transportation sector would be under
midstream, and refining would fall under downstream activities).
Second, this study assumes that Western Canadian crude oil used by eastern Canadian refineries
in the various scenarios is assumed to be taken from the current export markets and redirected
to eastern Canadian refineries. As such, this analysis does not assume incremental production
to offset Canadian crude oil displacing foreign crude in eastern Canadian refineries.
In addition, it is beyond the scope of this study to delve into downstream markets and
implications due to substitution, if any. CERI does not explore where the refined petroleum
products go, but focuses on displacing like-for-like foreign oil with domestically-sourced
equivalents (i.e., light-for-light, etc.). The latter assumption enables CERI to assume that
refineries’ yields in the Base Case and in the various scenarios remains the same, and allows a
comparison of costs of feedstock and emissions between different hypothetical scenarios while
keeping the sales variable constant. Recall, this a scenario-based approach and, as such, is not a
forecast. This means there is limited impact on GDP associated with indirect and induced
economic activities from changes in the trade balance (lower value of imports).
The four scenarios and their main assumptions are summarized below.
Current Reality adopts a market-based approach, optimizing for cost of feedstock and emissions.
However, the difference is that it assumes crude oil can be transported from western and eastern
Canada to eastern Canadian refineries via existing infrastructure – pipelines, marine tankers, or
rail. Crude oil substitutes feedstock in eastern Canadian refineries utilizing three modes of
transport. Enbridge Mainline (Line 5 and Line 78) connects Hardisty, AB to Sarnia, ON, while
Enbridge’s Line 9 reversal transports oil from Sarnia to Montréal. Quebec City is connected via
two tankers from Montréal. This scenario will identify the throughput capacity of existing
pipelines and rail systems to move additional oil from west to central and eastern refineries. The
remainder will be supplied by foreign crude oil from the sources which supplied central and
eastern refineries in 2016. This is a market-based approach to substituting foreign crude oil in
Canadian refineries meaning that more expensive foreign crude is displaced; cheaper foreign
crude is kept in the slate of refineries. Proponents include the transportation sector and
refineries. Of the four scenarios, Current Reality represents the closest to status quo, simply a
more optimal solution regarding costs of feedstock and emissions utilizing the existing
infrastructure available.
Expanded Access is a market-based approach. Western and eastern Canadian crude oil is
transported to central and eastern refineries via an expanded transportation infrastructure. The
difference here is that Expanded Access allows for more domestic volumes to be substituted
economically. Thus, even if more is available, if Canadian oil is more expensive at the refinery
gate compared to foreign oil, in this market-driven decision making a refinery will prefer the
cheaper imports (if it can get the same desired yields). Prices of particular brands of foreign and
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36 Canadian Energy Research Institute
domestic oil as well as transportation costs play a role in the selection of the crude intake slate.
Tankers are cheaper transport options than pipelines and rail. As western production is far from
the central and eastern refinery market, transportation costs by pipeline and rail will almost
always be at a cost disadvantage to foreign tanker costs. In other words, in the Expanded Access
scenario, more expensive foreign crude is displaced; cheaper foreign crude is kept in the slate of
refineries.
Made in Canada assumes that all Canadian crude, be it from western or eastern parts of the
country, will substitute for all foreign imported crude oil via an expanded transportation
infrastructure. The pipeline infrastructure with a new pipeline is used and transports oil from
Hardisty to Saint John, NB, via Montréal and Lévis. This is in addition to existing infrastructure,
mainly the Enbridge Mainline (Line 5 and Line 78), which connects Hardisty, AB to Sarnia, ON,
while Enbridge’s Line 9 reversal transports oil from Sarnia to Montréal. While western Canadian
crude is used in refineries in ON and QC, as well as a portion of Irving refineries feedstock, the
remaining refineries and feedstock demands are satisfied with eastern Canadian oil production.
This scenario is often categorized by a nationalist or protectionist stance, and is either highlighted
by security of supply or keeping the macroeconomic benefits within Canada, particularly for a
country which is a major producer of oil.
International Social Concerns assumes that crude oil will be transported to eastern markets via
the existing pipeline infrastructure and rail. This scenario, however, assumes that domestically-
sourced crude oil will substitute for foreign crude oil coming from countries that have generated
concern by international organizations for their treatment of their citizens or their environment.
CERI reviewed several indices by internationally recognized organizations including those
produced by the World Bank (various), the United Nations (Human Development Index) and the
Freedom House, as well as other organizations. The indices range from ranking the democratic
process to human rights to quality-of-life. For this study, however, CERI utilized the widely-cited
Economist Intelligence Unit’s Democracy Index 2016. Often cited in peer-reviewed journals, the
Democracy Index includes five diverse elements to determine a nation’s classification: electoral
process/pluralism, functioning of government, political participation, political culture, and civil
liberties. While it is not perfect, it provides a proxy for reflecting social concerns. Nations fit into
four categories: full democracy, flawed democracy, hybrid regime, and authoritarian (The
Economist Intelligence Unit 2017). Canada, Norway, Denmark, the United Kingdom, Colombia,
and the US are classified as either full or flawed democracies. Except for Nigeria (hybrid regime),
the rest of the countries that supply Canada’s imported oil are classified as authoritarian,
according to the index. As such, this scenario substitutes all foreign oil that are not classified as
either full or flawed democracies. This is a policy-based approach to substituting foreign crude
oil in central and eastern Canadian refineries. It is important to note that more expensive oil
from democratic states is kept in the crude slate. This approach allows CERI to assess the direct
impact on costs and emissions tied to substitution of oil from states that have caused
international concern for the treatment of their citizens or environment.
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Eastern Canadian Crude Oil Imports
The four scenarios are highlighted by two critical uncertainties, based on the level of
infrastructure available to transport crude to central and eastern refineries (y-axis) and the
general approach of decision-making (x-axis), whether a market- or policy-based approach
(Figure 3.1). CERI identifies and quantifies the costs to refiners and effects on emissions in four
very different scenarios, guided by two critical uncertainties. Each of which contain several
unique assumptions.
This affects the Made in Canada and Expanded Access scenarios. In these two cases of an
expanded infrastructure, CERI assumes a new pipeline extending from Hardisty, AB to Saint John,
NB via Montréal and Lévis, QC. To simplify matters, CERI assumes that the route of the pipeline,
its capacity and toll structure are the same as the now-cancelled Energy East pipeline, proposed
by TransCanada Pipeline (TCPL). Energy East was cancelled on October 5, 2017.
Second, CERI also examines whether partially or completely substituting foreign crude oil is
fueled by a market-based approach (or economic pull) or policy-based approach (or social push
or government policy). The general approach of decision-making and whether a market- or
policy-based approach, the research question of partially or completely substituting foreign
crude oil is fueled by various arguments. While each has their own motives, they are typically
driven by economic (a market-based approach) or social rationale (a policy-based approach).
The International Social Concerns scenario is reflective of a policy fueled by social “push”
stemming from an increasing awareness in elements of society asking, “where do the products
we consume originate?” or “what are the labour and environmental standards for manufacturing
in those countries we buy from?” This trend has ramifications not only for the energy sector but
other goods and services that Canada trades.
CERI is not promoting policy or evaluating its relevance but exploring examples of policy
initiatives that could possibly affect the substitution of foreign crude oil and thus the central and
eastern Canadian refineries. As such, CERI does not discuss the type of policy instruments to
implement such programs, or their effect on costs and emissions on the refinery-level.
This CERI study will show market- and socially-pushed scenario outcomes, via existing and
expanded transportation infrastructure, which could serve as a good indication for Canadians on
how beneficial or costly such substitution could be. This research is a first of its kind comparison
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that has not been done by any organization. However, in allowing CERI to make a comparison
across the four scenarios,
CERI uses its proprietary Crude Flow Model and its Costs of Feedstock Model, as well as utilizing
a life-cycle assessment (LCA) of greenhouse gas (GHG) emissions of individual crude oils used in
the study. Recall, CERI is substituting like for like crude oils, substituting crude oil from all over
the world with the like Canadian equivalent. The objective of the emissions modelling is to
establish an emission intensity profile for each crude oil used in the central and eastern Canadian
refinery market. The latter is done through utilizing the publicly available GHG estimation
models: OPGEE (upstream emissions) and PRELIM (midstream emissions).
Figure 3.2 illustrates the four different modelling approaches and calculations and the
relationship between them. There are several major components, or elements, to this study.
Using the established crude flows for each of the scenarios, the following are, in a sense, the
“inputs” into the costs of feedstock model and the emissions model. Costs of feedstock and
emissions are influenced by the flow of crude in the four scenarios. Modelling the different
scenarios, their effects are in turn compared to the Base Case – a snap shot of crude flows in
2016.
Crude Flows
Model
Costs of
Emissions/
Feedstock
LCA Model
Model
The crude flows from western and eastern Canada that displace foreign oil by the various
scenarios is a critical component, impacting the other models. Costs of feedstock model and the
emissions modelling determine the various costs and emissions of the four scenarios.
Each of these models and their assumptions are discussed in greater detail in the following
section.
It is, however, important to mention that, despite the complexity of the various approaches, one
of the most challenging elements of this study is the lack of data, particularly on the refinery
level. One of the early core research questions was whether partial or entire substitution of
imported crude in the central and eastern refineries will be of benefit or cost to Canada. This
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Eastern Canadian Crude Oil Imports
was initially answered by utilizing the cost-benefit analysis (CBA) from the unique perspective of
the eastern Canadian refiner. Providing a robust method for evaluating the costs and benefits,
including economic and non-economic impacts, this method is ideal for comparing a policy
change, projects, or a mode of action in today’s dollars to a society. And while the CBA is far from
perfect, the CBA provides a framework that identifies, quantifies, and compares the costs and
benefits of a proposed policy or mode of action. The CBA approach was, unfortunately,
significantly limited by the data available, and was subsequently altered to the approach instead.
This section is divided into three parts: establishing a Base Case, calculating the stock of Canadian
crude oil available for substitution purposes and discussing the assumptions used in modelling
the scenario’s crude flows.
The data for this study was obtained from several sources as mentioned in Chapter 2. If the data
was suppressed, missing, or conflicted, CERI reconciled using multiple sources to infer quality and
certainty in data.
Refining capacity in eastern Canada is represented by eight refineries with a total capacity of
1,228 Mbpd. Four refineries reside in ON, two in QC, and one each in NB and NL & Labrador. All
eight refineries, their capacities, utilization rates, crude intakes and mode of supply are illustrated
in Table 3.1.
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Table 3.1: Crude Intake by Eastern Canadian Refineries, by Oil Type (Mbpd)
Province Refinery Capacity Capacity Utilization Total Light SCO Heavy Bitumen Available
by Rate Intake Mode of
Province (%) Transport
ON Imperial,
121 86% 104.1 51.4 21.5 6.0 25.2 Pipeline
Sarnia
Shell Canada,
75 88% 65.9 37.5 13.6 14.8 - Pipeline
Corunna
Suncor 393
Energy, 85 92% 77.8 47.0 16.1 14.8 - Pipeline
Sarnia
Imperial, Pipeline,
112 86% 96.3 61.7 19.9 14.8 -
Nanticoke Rail
Suncor
Energy, 137 92% 125.4 109.0 - - 16.4 Pipeline,
Montreal 402 Tanker,
QC Rail
Valero, Lévis 265 88% 232.8 131.9 81.2 8.1 11.6
NB Irving Oil, Tanker,
318 318 87% 277.8 250.6 11.9 15.3 -
Saint John Rail
NL North
Atlantic
Refining, 115 155 81% 93.1 93.1 - - - Tanker
Come by
Chance
Total 1,228 1,228 1,073 758.8 180.1 80.9 53.1
Percent 73% 15% 7% 5%
Note that for this study, the intake for QC was altered from the factual data of 2016. In 2016, QC
refinery utilization rates did not seem to be representative across the refining industry in Canada
(an average 78 percent for two refineries based on CERI calculations of Statistics Canada data)
(Statistics Canada 2017c, 2017d). For the purposes of modelling, an adjusted utilization rate of
88 percent was assumed for Valero, and 92 percent for the Suncor Energy refinery. Suncor
Energy’s estimate was taken from the company Annual Report (Suncor Energy Inc. 2017a). For
reference, the factual 2016 import volume in QC was 214.1 Mbpd. However, due to an increase
in utilization rates, the modelled 2016 import volume for QC is 9.8 percent higher than factual –
235 Mbpd (Government of Canada 2017). Hence, eastern offshore and western supply were also
increased by the same rate. Modelled and factual imports are presented in Appendix A.
Light oil prevails in the supply slate for the four provinces comprising 73 percent, followed by
synthetic crude (SCO) with 15 percent in the crude slate; heavy and bitumen both comprise
12 percent of the crude intake. This is illustrated in Figure 3.3.
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Eastern Canadian Crude Oil Imports
Fifty-six percent of oil into the eastern region is imported, while 39 percent comes from western
Canada and five percent is supplied from Canadian eastern offshore assets (offshore NL &
Labrador as well as 0.6 Mbpd from ON). Among eastern Canadian refineries, ON receives the
highest amount of western crude (almost 83 percent), followed by QC (33 percent) and NB
(4 percent). NL & Labrador does not receive oil from western provinces.
The largest exporters to Canada are the US, Saudi Arabia, Algeria, Nigeria and Norway
(Government of Canada 2017; NEB 2017f; Statistics Canada 2017a). Detailed information on the
sources of oil for eastern refiners is provided in Table 3.2 (imports per country in the last column
are rounded; detailed information can be found in Appendix B). Based on the import data, up to
601 Mbpd could be substituted by Canadian crude oil.
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The following describes the flows of crude to the eastern refinery market in the Base Case. To
obtain this, CERI used many sources as previously mentioned in Chapter 2. Statistics Canada
information presented a detailed view of ON and QC intake of oil from western and eastern
provinces, as well as intake by province by type of crude – bitumen, heavy, light, and SCO.
Statistics Canada trade information showed volumes and source of foreign oil per province
(Statistics Canada 2017a). In ON, North Dakota was the foreign exporter. Its volume was
distributed proportionally to all four refineries, as well as SCO. Bitumen was allocated to Imperial
Oil’s refinery as it is the refinery in ON equipped with the coker technology.
In the case of QC, the volume of western, eastern and foreign oil was taken from Statistics Canada
data on the provincial level. Clipper Data on tanker movements was used for apportioning
specific volumes to a particular refinery as well as identifying transportation routes to refineries
(ClipperData LLC 2017). The crude tanker shipments from Montreal to Valero data helped to
allocate total volume of western oil between the two refineries. Likewise, shipment data to
Portland, Maine (the origin of the Portland-Montreal pipeline), Quebec City, and Montreal ports
and combining this information with Statistics Canada trade data, allowed CERI to allocate foreign
oil volumes between the two refineries, as well as determine Canadian eastern offshore volumes.
Utilizing Clipper Data, particular brands of imported oil were identified, which helped to assign
light and heavy imported oil between refineries more accurately. This data was useful in
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Eastern Canadian Crude Oil Imports
reconciling the difference with Statistics Canada data as the latter showed a large volume of SCO
which was not consistent with total volume of western crude (ClipperData LLC 2017; Statistics
Canada 2017a). Thus, part of what Statistics Canada marked as SCO was marked as light crude oil
in the study Base Case. Heavy and bitumen volumes were also adjusted slightly between these
categories to reconcile refinery intake information, oil shipments data, and Statistics Canada
data.
NB’s Irving oil feedstock was more easily established than QC’s, as the refinery stands on water,
and the bulk of their intake arrive in tankers. Statistics Canada trade data (Statistics Canada
2017a) as well as Clipper Data (ClipperData LLC 2017) were sufficient to arrive at volumes of
foreign and eastern Canadian crude and type of oil. Western crude was derived as the difference
between the total intake and the amount delivered by tankers. NL’s North Atlantic Refining’s
intake was also more easily established at it also stands on water allowing for using both Statistics
Canada trade data and Clipper Data to get a full picture of feedstock supply.
Transportation routes were identified for all the refineries using multiple sources. As each
refinery enjoys specific transportation options, combining a number of sources allowed CERI to
establish a full picture of supply routes. Statistics Canada provided information that ON was fully
supplied via pipelines (Line 5 and 78 enters ON). QC’s crude oil supply was established via solving
for volumes from tanker shipments for Valero and Portland-Montreal pipeline intake; the
remaining portion was delivered via Line 9.
Rail usage in the east was identified as follows. As 2016 data was limited, the year 2015 was
studied in more detail to understand shipment volumes and routes. Data from 2015 showed
domestic rail movements total volume of 53 Mbpd (NEB 2017e). Rail movements in 2015 for fuel
oil and crude petroleum followed routes such as a) from AB to QC, ON and NB, b) from SK and
MB to QC and ON, and c) from the US to QC (Canadian Pacific 2016; CAPP 2017a, 2017b; Statistics
Canada 2017b). Domestic rail usage in the east was identified as limited to a relatively small
number in 2016 – 11.9 Mbpd (CERI estimate). The number comes as a difference between
movements of oil from west in 2016 in the amount of 100 mbpd (CAPP 2016), and export by rail
data for 2016 (NEB 2017h).
To simplify the modelling, all 11.9 Mbpd in 2016 were assigned to NB’s refinery, rather than being
distributed between the two refineries in QC and Irving Oil. For reference, railway offloading
capacity is estimated at 255 Mbpd for all the central and eastern refineries (namely 20 Mbpd for
Nanticoke, ON, 60 Mbpd for Lévis, QC, 30 Mbpd for Montreal, QC, and 145 Mbpd for Saint John,
NB) (CAPP 2017b).
Finally, to identify which western province supplied which province in the east, Statistics Canada
data (Statistics Canada 2016) was used for 2015 as a proxy which showed that MB and SK’s
volumes of oil went to ON (as was assigned as such in the Base Case). Thus, ON’s demand for
feedstock was first “satisfied” predominantly from these provinces; the rest came from AB. AB
oil, on the other hand, was assigned to all provinces except for NL. Bitumen, heavy oil and SCO
was assigned exclusively to AB in the Base Case. In addition, as rail movements in 2015 (for export
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44 Canadian Energy Research Institute
and domestically) predominantly originate from AB and Atlantic Canada’s supply in that year was
also from AB, the above-mentioned volume – 11.9 Mbpd – was also allocated to this province.
Below is a description of crude flows in the Base Case, based on assumptions and data sources.
The single foreign exporter to ON’s four refineries was the US (58 Mbpd). Light oil comes from
North Dakota and is modelled in this study to be transported through Enbridge Line 81 to
Clearbrook, MN and further through the Enbridge Mainline system (Line 5 entering Sarnia).
Canadian light, heavy, and bitumen crude from three provinces – AB, SK, and MB – flow through
various lines of the Enbridge Mainline and enter ON via Line 5 and 78. AB supplies 206 Mbpd,
followed by SK’s 72.6 Mbpd and MB’s 6.4 Mbpd.
Suncor’s Montreal refinery imports light oil from four countries – US (92.7 Mbpd), Azerbaijan
(4.5 Mbpd), UK (4.1 Mbpd) and Norway (1.9 Mbpd). For crude that comes from the US,
62.1 Mbpd comes from North Dakota and Michigan through the Enbridge Mainline and Line 9
(going from Sarnia to Montreal). All other crude, including 30.6 Mbpd from Texas, is transported
by tankers from loading ports to Portland, Maine and then transported via the Portland-Montreal
pipeline to the refinery. Canadian supplies include 16.4 Mbpd of bitumen and 5.8 Mbpd of light
crude that comes from eastern offshore assets. Bitumen comes through the Enbridge Mainline
and Line 9, while the eastern crude follows the path of international oil via Portland.
With Line 9 reversal and the purchase of two Panamax tankers by Valero, with the goal to move
50-60% (or 130-160 Mbpd) from Montreal to Lévis (Van Praet 2014), the crude intake slate in the
Valero refinery has changed dramatically. In 2016, it used 101 Mbpd of western Canadian crude,
which includes synthetic, bitumen and heavy. The imported light oil came from four countries:
Algeria (92.1 Mbpd), Kazakhstan (21.1 Mbpd), Nigeria (11.5 Mbpd), and US (Texas) (7.2 Mbpd).
All foreign oil comes to Valero by tanker.
Irving Oil’s refinery in NB relies more heavily on imported oil and eastern offshore supply.
Western Canada supplied 11.9 Mbpd of SCO via rail, 47.7 Mbpd of light crude came by tankers
from Hibernia and other eastern offshore projects, and 218.2 Mbpd came by tankers from
predominantly four countries. Except for 15.3 Mbpd of heavy oil coming from Colombia and the
Ivory Coast, the remaining imported oil was light. The largest supplier of imported feedstock is
Saudi Arabia (86.7 Mbpd), followed by Nigeria (45 Mbpd), United States (34 Mbpd), Norway
(24 Mbpd), Ivory Coast (12.6 Mbpd), Colombia (5.3 Mbpd), Azerbaijan (2.8 Mbpd) and Congo
(2.7 Mbpd).
Lastly, NL’s North Atlantic Refinery was supplied almost entirely by foreign crude via tankers.
Eastern offshore light oil accounted for 3.3 Mbpd out of a modelled 93.7 Mbpd intake for the
refinery. Imported oil comes from the US (49 Mbpd), Nigeria (18.3 Mbpd), Norway (13.7 Mbpd),
UK (6.2 Mbpd) and Denmark (1.7 Mbpd).
Figure 3.4 shows the transportation routes of Canadian crude in the Base Case.
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An Economic and Environmental Assessment of 45
Eastern Canadian Crude Oil Imports
Figure 3.4: Canadian Oil Supply Routes to Central and Eastern Refineries – Base Case (Mbpd)
Data Sources: (CAPP 2017b; Enbridge Inc. n.d.; NEB 2017c). Figure by CERI, based on cartography from (Enbridge Inc. n.d.).
Note: L5 – Line 5 pipeline; L78 – Line 78 pipeline, L9 – Line 9 pipeline, P-M - Portland–Montréal Pipeline. Sarnia (3) illustrates
the number of refineries located in the Sarnia region.
There are two interesting key findings. First, in 2016 the reversed Line 9 was used at the level of
117 Mbpd out of its throughput capacity 285 Mbpd (assumed 95 percent of its total capacity).
The lower than expected level may potentially be explained by the Fort McMurray wild fires in
2016 or other factors. Second, eastern offshore oil has limited use in central and eastern
refineries due to some infrastructure restrictions. The largest user is Irving Oil with 47.7 Mbpd,
followed by Suncor Energy in Montreal with 5.8 Mbpd, and NL & Labrador’s refinery with
3.3 Mbpd. According to the National Energy Board (NEB 2017c), the rest of NL Offshore Light
production in 2015 went to US PADD I (116 Mbpd), Asia and Europe (20 Mbpd) and the US Gulf
Coast (4 Mbpd).
The availability and usage of crude and transportation infrastructure by central and eastern
refineries in the Base Case is illustrated in Figure 3.5. The top portion of the figure lists the various
Canadian types of crude, ranging from AB Light and NL Offshore Light to AB Bitumen, in terms of
availability and the amount used. The bottom portion of the figure, on the other hand, illustrates
the various transportation modes potentially used in Canada, in terms of available infrastructure
and their usage. In short, this figure provides a snap shot in time (2016) of the current crude
flows from western and eastern Canada to the eastern Canadian refineries. Canada has enough
light oil to be used in the eastern and western refinery markets.
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46 Canadian Energy Research Institute
AB Light 522.0
59.8
SK Light 149.8
72.6
AB SCO 896.8
Crude
164.1
AB Heavy 125.6
57.2
SK Heavy 225.5
0.0
AB Bitumen 1423.3
53.2
Portland-Montreal PL 270.8
41.1
Line 9 PL 285.0
179.4
Rail 255.0
12.5
Note: The volumes shown for Mainline (Line 78 and Line 5) represent Canadian crudes for Canadian refineries. The graph does
not show movements in the Mainline of Canadian or US crudes destined for US refineries.
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An Economic and Environmental Assessment of 47
Eastern Canadian Crude Oil Imports
It should be noted that the new pipeline infrastructure does not currently exist; it impacts the
Made in Canada and Expanded Access scenarios, discussed in Chapter 4.
The important input into the study’s models is the availability of western Canadian crude supply
for substitution. For this study, CERI considers oil produced in AB, SK, and MB, leaving BC
production out of scope as it is assumed to be used in local refineries and not likely to be used in
central and eastern refineries.
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
The model assumes there are eight Canadian oil types modelled that represent the spectrum of
the current crude intake (as of 2016) by refineries in eastern Canada. Four of them are based on
existing crudes or blends – AB Bitumen as a proxy for Western Canadian Select, AB Heavy as a
proxy for Western Canadian Blend, AB SCO as a proxy for Synthetic Sweet Blend, and NL Offshore
Light as a proxy for Hibernia. The other four Canadian crudes that include AB Light, SK Light, MB
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48 Canadian Energy Research Institute
Light and ON Light are assumed to be blends of either two or three existing crude oil blends
selected from Mixed Sweet Blend, Mixed Sour Blend, Light Sour Blend or Midale in various ratios
based on (COLC 2016) data. These crudes are highlighted in blue in Appendix C, please refer to
Table C.1. The ratios are also detailed in the same table.
To establish available stock for substitution purposes, the demand from western refineries is
subtracted from the production forecast.
The crude utilization in western Canadian refineries is shown in Table 3.3. Utilization rates are
taken from the refineries’ annual reports or websites where available (the average of 2017/2016
or 2016/2015 was taken when information was available). For Chevron, Shell Canada, North
West Refining, and Fed Co-op, 90 percent utilization was assumed due to lack of data. The
demand for light, SCO, heavy and bitumen crude per refinery was determined based on (Statistics
Canada 2017d) demand province-wide, and then adjusted using corporate websites and annual
reports of refineries. Specifically, for AB and BC, the shares of each type of oil were calculated for
each province for 2016 and are provided in Table 3.3.
These ratios for the above table were applied to both BC refineries and in AB, unless more
detailed information was available. For instance, in AB, the Suncor Refinery and North West
Refining are assumed to receive bitumen. Oil demand by type for the Fed Co-op refinery in SK
was available on the refinery website (Federated Co-operatives Limited 2015). The resulting
Table 3.4 shows modelled crude oil demand by western Canadian refineries.
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Eastern Canadian Crude Oil Imports
The resulting available oil stock for central and eastern refineries after subtracting western
refineries demand is depicted in Table 3.5. This is the total amount available for transporting to
central and eastern refineries by type of crude and province.
Table 3.5: Available Oil Stock for Central and Eastern Refineries, 2017-2027 (Mbpd)
Type of Crude 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
and Province
AB Heavy 126 119 115 111 107 106 103 102 102 101 102
AB Bitumen 1,423 1,565 1,661 1,717 1,758 1,817 1,910 2,027 2,130 2,310 2,415
AB Light 522 498 482 468 450 446 435 434 431 430 431
AB SCO 897 949 978 1,008 1,047 1,058 1,019 981 950 930 970
SK Light 150 149 149 150 151 152 155 157 159 161 164
SK Heavy 226 224 224 225 227 230 234 238 241 246 251
MB Light 36 35 35 35 35 35 36 36 36 37 37
NL Offshore
Light 234 284 308 304 304 268 278 248 244 236 220
Sub-total Light 943 966 974 956 939 902 903 874 871 864 852
Sub-total Heavy 351 343 339 336 334 335 337 340 343 347 352
Sub-total SCO 897 949 978 1,008 1,047 1,058 1,019 981 950 930 970
Sub-total
1,423 1,565 1,661 1,717 1,758 1,817 1,910 2,027 2,130 2,310 2,415
Bitumen
Total 3,614 3,823 3,952 4,018 4,078 4,113 4,168 4,222 4,294 4,452 4,589
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Figure 3.7 illustrates the available crude oil for eastern Canadian refineries, as well as the demand
by the refineries by crude type. The figure also shows that supply of light oil (conventional light
+ SCO) is enough to satisfy all the demand for light crude in the east. In fact, if all foreign oil was
substituted in year 2027, there would still be 94 Mbpd of light oil left (852 Mbpd of available
supply minus 758 Mbpd of refinery demand). Based on the availability of crude and demand by
refineries, it is also clear that there is enough heavy, SCO and bitumen to supply central and
eastern refineries’ needs.
Figure 3.7: Available Western Canadian Crude for Central and Eastern Refineries and
Demand by Central and Eastern Refineries by Crude Type (Mbpd)
800
300
600
200
400
200 100
-
-
2017 2019 2021 2023 2025 2027 2017 2019 2021 2023 2025 2027
Available West and East Available West
East Refinery Demand East Refinery Demand
Difference Difference
1,000 2,500
800 2,000
600 1,500
400 1,000
200 500
- -
2017 2019 2021 2023 2025 2027 2017 2019 2021 2023 2025 2027
Source: CERI
Note: Western Canadian crude supply available for central and eastern refineries was calculated as western Canadian crude
production minus demand by western refineries.
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1. Foreign oil was always displaced with the same oil type (light oil was substituted with
light, heavy with heavy). This approach ensured that a) refineries can process crude of
the same quality without a need for retrofit and/or expansion of their technologies, and
b) that refinery yields will remain the same. The above-mentioned are important
assumptions to modelling as CERI aims to account and measure effects of substitution of
imported oil and isolate the modelling from other effects (e.g., modelling different yields
leading to different downstream sales compared to the Base Case 2016 situation).
2. Availability of certain crude provided a “stacking order” in the substitution. If the required
Canadian oil was not available in the volume needed from a source, the next available
source of the required oil was used.
3. Western Canadian crude was used more in substitution in ON and QC, while eastern
offshore Canadian crude was used in substitution in NL and NB. However, eastern oil was
also modelled as far as Montreal’s refinery, and western oil as far as NB.
5. For all the scenarios, pipeline delivery would take precedence over rail in the modelling.
If pipeline capacity was full, but the scenario required further substitution, rail was used
to compensate for lack of pipeline availability. At the same time, in the existing
infrastructure scenarios, rail shipment of 11.9 Mbpd to NB’s Irving Oil was kept intact. In
the Expanded Infrastructure scenarios, this shipment was switched to pipeline.
6. For the market-based scenarios – Current Reality and Expanded Access – more expensive
foreign crude oil was substituted.
7. For the policy-driven International Social Concerns scenario, cost of feedstock was not
considered as a factor. All oil from undemocratic states was substituted even if it was
cheaper. At the same time, in this scenario, oil from democratic countries was kept fully
intact even if there was cheaper Canadian crude.
8. For the policy-driven Made in Canada scenario, all foreign crude was substituted guided
by point #3, irrespective if Canadian crude was more expensive than foreign.
The following section delves into some details of modelling crude flows for the four scenarios.
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52 Canadian Energy Research Institute
For the Made in Canada scenario, the crude flows modelling approach was as follows. All foreign
oil was substituted with western and eastern Canadian crude (details of substitution are
discussed further in Chapter 3). SK Light was used for ON refineries and in limited volume in QC
(Suncor Energy refinery) until the availability of SK Light was used. AB Light and AB Heavy were
used in QC and NB to substitute foreign crude. NL Offshore Light oil was used to displace all
imported crude in North Atlantic Refining, the rest of available oil was modelled to be used in
NB’s Irving Oil until the availability of NL Offshore Light was fully used. Valero’s and Irving Oil’s
refineries used the new pipeline capacity available in the scenario, while Montreal’s Suncor
Energy refinery proceeded to use the existing Mainline and Line 9. No rail deliveries were
modelled.
For the Current Reality scenario, existing supply from western and eastern Canada to central and
eastern refineries remains intact or unchanged. ON’s foreign oil was not substituted as foreign
oil was found to be cheaper. In QC, AB Light was used until it was more expensive than foreign
oil; then SK Light was used until it ran out of availability; then NL Offshore Light was used until it
ran out of availability (because this oil was also used in Atlantic Canada). In all cases, more
expensive oil was substituted. In NB, AB Light was used until it was more expensive than foreign
crude. After that, NL Offshore was used for displacement, until it also was more expensive than
foreign crude. NL Offshore was used to displace more expensive imports.
For the Expanded Access scenario, the difference with Current Reality became the availability of
the expanded transportation infrastructure (it was used by Irving Oil and Valero). ON’s US foreign
oil remained unsubstituted. QC’s refineries were modelled to use AB Light for more expensive
foreign crude; Irving Oil’s was modelled to use AB Light via the new pipeline until it could not
compete with cheaper foreign oil; then NL Offshore Light was used until it could not compete
either. NL Offshore was used to displace more expensive imports – the same volume levels as in
Current Reality.
Lastly, in the International Social Concerns scenario, SK Light was used in QC until it ran out of
availability; NL Offshore Light was modelled to be used in NB, NL, and Valero’s refinery until it
also ran out of availability; the rest was substituted with AB Light. This approach ensured that
while pursuing a policy scenario, the cheapest oil was used for substitution purposes (as it is seen
in section below, NL Offshore Light is cheaper in all provinces (QC, NB, and NL) than AB Light, but
it is more expensive than SK Light in QC). In this scenario, additional rail movements were
modelled as tanker’s capacity to Valero was not sufficient.
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Table 3.6 shows the crude oils and their prices used in the study. The table includes the oil type
(light, heavy, SCO and bitumen), the crude brand, proxy crude (or the formula used to determine
the price, and the weighted price ($CAD) in 2016. Recall, there are over 150 different types of
crude and even more brands of crude (CFA 2013). Listed are the crude oils used in this study.
The presented prices are shown at location where they are sold, not at refinery gate. These were
identified as crudes that are imported into Canada. Crude oil brands for foreign oil were taken
from Clipper Data (ClipperData LLC 2017). In some cases, however, when a crude brand is not
explicitly specified, CERI used a proxy crude from the location. Proxy crude oils are illustrated in
the third column, where necessary. In four cases, crude prices were available, and the differential
was not easily established. In these cases, CERI used Statistics Canada trade data to get an
average price for a crude in 2016 (Government of Canada 2017; Statistics Canada 2017a). This
was necessary with Denmark DUC, Equatorial Guinea Crude, and the two crude oils from Ivory
Coast (Baobab and Espoir).
It is also interesting to note that 21 out of 24 imported brands of crude oil are more expensive
than AB Light. The exceptions are US North Dakota, Louisiana Thunderhorse, and US Eagle Ford.
Also illustrated is that 10 out of 24 are more expensive than NL Offshore Light.
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Table 3.6: Crude Oil Brands Used in the Study and Their Prices
Oil Type Crude Category/ Proxy Crude or Formula Used to Name Used in the Weighted
Brand Determine Price Study Price in
2016
($CAD)
Light Canada Hibernia Brent Canada Hibernia 57.9
Canada NL
Light Brent NL Offshore Light 57.9
Offshore Light
Light Canada AB Light Edmonton Light AB Light 51.9
Edmonton Light multiplied by
factor of 1.084 (average factor
SCO Canada AB SCO AB SCO 56.3
between AB SCO and Edmonton
Light for Jun-Aug 2017)
Heavy Canada AB Heavy Western Canadian Select (WCS) AB Heavy 39.0
Bitumen Canada AB Dilbit Western Canadian Select (WCS) AB Bitumen 39.0
Canada SK Light,
Light Edmonton Light SK Light, MB Light 51.9
MB Light
Light Canada ON Light Edmonton Light ON Light 51.9
Algeria Saharan
Light No proxy needed Algeria Saharan Blend 58.6
Blend
Azerbaijan Azeri
Light No proxy needed Azerbaijan Azeri Light 60.7
Light
Colombia Castilla Colombia Castilla
Heavy Brent minus $9.5 45.3
Blend Blend
Light Congo Djeno Blend Brent minus $2.5 Congo Djeno Blend 54.6
Average price paid in 2016 by
Light Denmark DUC Canadian refineries (Statistics Denmark DUC 56.8
Canada trade data)
Equatorial Guinea New Zafiro
Blend,
Equatorial Guinea Equatorial Guinea
Light Average price paid in 2016 by 62.6
Crude New Zafiro Blend
Canadian refineries (Statistics
Canada trade data)
Heavy Ivory Coast Baobab Average price paid in 2016 by Ivory Coast Baobab 52.0
Canadian refineries (Statistics
Light Ivory Coast Espoir Canada trade data) Ivory Coast Espoir 52.0
Kazakhstan CPC
Light Brent minus $0.15 Kazakhstan CPC Blend 57.7
Blend
Michigan Sweet Michigan Sweet
Light No proxy needed 57.0
Crude Oil Crude Oil
Light Nigeria AKPO Blend No proxy needed Nigeria AKPO Blend 58.4
Light Nigeria Bonga No proxy needed Nigeria Bonga 58.8
Light Nigeria Bonny Light No proxy needed Nigeria Bonny Light 58.3
Light Nigeria Brass River No proxy needed Nigeria Brass River 59.4
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Oil Type Crude Category/ Proxy Crude or Formula Used to Name Used in the Weighted
Brand Determine Price Study Price in
2016
($CAD)
Light Nigeria Qua Iboe Brent plus $0.5 Nigeria Qua Iboe 58.8
Light Nigeria Usan No proxy needed Nigeria Usan 55.5
Light Norway Ekofisk No proxy needed Norway Ekofisk 58.3
Origin: Norway Oseberg; Price:
Light Norwegian Crude Norwegian Crude 58.3
Norway Ekofisk
Source: Saudi Ghawar; Price:
Light Saudi Crude Saudi Arabia Light 54.2
Saudi Arabia Light
Light UK Brent No proxy needed UK Brent 57.9
Light UK North Sea UK Brent UK North Sea 57.9
Light US Louisiana LLS No proxy needed US Louisiana LLS 53.0
US Louisiana Source: Louisiana Thunderhorse, US Louisiana
Light 47.8
Thunderhorse Price: West Texas Sour Thunderhorse
Light US North Dakota No proxy needed US North Dakota 48.7
Source: Texas Eagle Ford; Price:
Light US Texas Eagle Ford US Texas Eagle Ford 46.2
Gulf Coast Sweet
Light US WTI No proxy needed US WTI 57.3
Data Sources: (Government of Canada 2017; IEA 2016; NRCan 2017a; Oil & Gas Journal 2016c; OPEC 2017; Statistics Canada
2017a), African countries websites. Table by CERI.
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56 Canadian Energy Research Institute
Figure 3.8 illustrates selected volume of imported crudes per refinery and prices in comparison
with AB Light and NL Offshore Light. Volumes of more than 10 Mbpd are shown.
Figure 3.8: Selected Foreign Crude Oil Brands Import Volumes and Prices
61.0 100
90
59.0
80
57.0
70
55.0
Crude Price, CAD
60
Volume, mbpd
53.0 50
40
51.0
30
49.0
20
47.0
10
45.0 0
US North US North US WTI US Algeria Kazakhstan US WTI US Saudi Nigeria Nigeria Norway US WTI US Nigeria
Dakota Dakota Michigan Lousiana Arabia Bonga Usan Lousiana Bonny
LLS LLS Light
Ontario Montreal-Suncor Quebec-Valero NB-Irving Oil NL-North Atlantic
refineries
Volume Foregin Crude Price, CAD AB/SK Light Price NL Offshore Light Price
Data Sources: (Government of Canada 2017; IEA 2016; NRCan 2017a; Oil & Gas Journal 2016c; OPEC 2017; Statistics Canada
2017a), African countries websites. Figure by CERI.
At least three foreign crudes deserve attention based on their import volumes. First, the US
North Dakota price beats the prices for both AB Light and NL Offshore Light. Second, Algerian oil
is more expensive than both western and eastern Canadian crudes and thus has a good potential
to be displaced cost-effectively. Third, Saudi Arabian oil is less expensive than NL Offshore Light
but more expensive than AB Light; difference in cost for transportation will play a role in
determining if substitution is cost-effective by both Canadian crudes.
The following section describes the methodology used to determine transportation costs.
For certain pipelines – Enbridge Mainline, Line 9, Portland-Montreal, ‘New Pipeline’, Enbridge
pipelines in North Dakota – existing and projected tolls were used. In several cases where tolls
were not available (i.e., transporting crude oil from Cushing, Oklahoma to the Gulf Coast or
transporting Michigan oil to Sarnia, ON), a formula was used based on the cost per kilometer.
The formula was originally established based on tolls of certain Canadian low, medium, and long-
range pipelines. In all cases where committed tolls were available from the tariffs, those were
used for the study.
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Data Sources: (Enbridge Pipelines Inc. 2017a, 2017b, 2017c; FERC 2017; Montreal Pipe Line Limited 2015; TransCanada 2016),
CERI estimates. Table by CERI.
Notes: *CERI estimates based on tariffs for other pipelines of similar lengths; ** a toll from Hardisty to Montreal via new
Pipeline is illustrated for comparison; it is not used in the study as Montreal keeps using Line 9 in all scenarios for western oil
intake.
Tanker costs were established using both Clipper Data and Oil & Gas Journal data (ClipperData
LLC 2017; Oil & Gas Journal 2016a). Clipper Data oil shipments provided information on
shipments volume, type of tanker and days in transition from a country to a particular port
(Montreal, Portland, QC, etc.). The following tanker charter daily rates were used: Panamax
(23 thousand US dollars per day), Aframax (40 thousand US dollars per day), Suezmax
(48 thousand US dollars per day), VLCC (60 thousand US dollars per day) (Oil & Gas Journal
2016a). Daily rates are determined by the size of the tanker.
Using this information, a cost per barrel per shipment was established, and then averaged for the
country. A spill tax, tug fee and other fees of $0.36 USD was added for shipments. Other specific
destinations needed for the study, for instance, Montreal to Saint John or Whiffen Head Terminal,
NL & Labrador to QC, were estimated based on obtained costs for international and domestic
tanker costs per barrel. Detailed transportation costs are provided in Appendix D. It is important
to note that different costs for the same country and destination port are provided for different
crude brands originating in that country. The difference in shipment costs is explained by
different ports of origin within a state/country and/or different type of tanker.
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To put tanker costs in comparison with pipeline costs for western crude, the lowest tanker cost
is $0.91/bbl from Algeria to the North Atlantic refinery in NL & Labrador while the highest tanker
cost is $2.12/bbl from Colombia to Irving Oil. Half of the shipments are under $1.45/bbl. At the
same time, to move AB Light to Montreal, QC, and Saint John (the latter two by the New Pipeline)
would cost $7.44/bbl, $7.02/bbl, and $8.60/bbl, respectively. NL Offshore Light oil can reach the
same refineries by tanker for $0.80/bbl, $0.60/bbl and $0.70/bbl. For more details on tanker
transport costs, refer to Appendix D.
Rail transportation is used once in the modelled Base Case, transporting 12 Mbpd from AB to NB.
This mode of transport is not projected to be used more intensively in scenarios with expanded
pipeline infrastructure than in the Base Case, but may be needed to fulfill targets for existing
infrastructure scenarios.
Rail costs for light oil/SCO ($/bbl) were calculated using the following metric – $/barrel per km.
The metric is estimated for each route using the formula derived from (Olateju and Kumar 2016):
y = 0.0034x + 0.2,
where y is cost ($/bbl), and x is distance, kilometers1
The most likely rail routes, which might be employed for crude flows modelling, are AB/SK to
refineries in QC and NB. Heavy oil is not expected to be additionally moved by rail in the
modelling. If a small amount of foreign heavy oil is to be displaced according to a scenario
rationale, it will be transported by pipelines from the western provinces.
To obtain cost of feedstock per refinery per route (from the specific origin by the specific mode),
all the above-mentioned data was combined. Coupled with changes in crude flows per scenario,
these costs of feedstock at a refinery gate will drive the cost results of oil substitution for each
refinery.
Table 3.8 illustrates the cost of feedstock per refinery per route. Along the top of the table there
is the list of the eight refineries in eastern Canada, as well as the mode of transportation used to
deliver the crude oil to each refinery gate. The grey cells denote rail shipments. Columns on the
left of the table illustrate the name of the producing country as well as the crude brands that are
used in this study.
1The formula was estimated by CERI from a graph “Comparative Transportation Cost: Rail vs Pipeline – Impact on
Distance” in (Olateju and Kumar 2016), where costs were a linear function of distance.
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From a Canadian perspective, it is interesting to note that prices of crude oils increase at the
refinery gate the further east that western Canadian oil is transported. This is particularly true
when rail and tankers are used to transport western crude, adding other layers of cost.
The comparison of prices of selected foreign and Canadian crudes, at place of initial sale and at
the refinery gate (cost of feedstock with transportation costs), are provided in Appendix H.
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Table 3.8: Price of Crude Oil Brands at Refinery Gate of Eastern Canadian Refineries
ON QC Atlantic Canada
Country of Crude Imperial Shell Suncor Imperial
Crude Oil Brand Suncor Energy Valero Irving Oil North Atlantic Refining
Oil Origin Oil Canada Energy Oil
Mainline/ Mainline/ New Tanker/Portland Mainline/ New Tanker/ Mainline/ New Tanker/ Mainline/ New
Mainline Mainline Mainline Tanker Tanker
Rail Line 9 Pipeline Pipeline Line 9/Tanker Pipeline Rail Line 9/Tanker Pipeline Rail Line 9/Tanker Pipeline/Tanker
AB Light 57.9 57.9 57.9 58.4 60.0 58.6 60.7 59.0 65.9 60.9 60.6 61.0 61.5
AB SCO 61.6 61.6 61.6 62.1 64.4 63.3 64.9 72.9
AB Heavy 45.3 45.3 45.3 46.0 48.5 46.0 48.5 47.6
AB Bitumen 45.3 47.8 48.5 46.0
Canada
SK/MB Light 55.8 55.8 55.8 56.3 57.7 58.5
SK Heavy
ON Light 55.2
NL Offshore Light 59.0 59.6 58.7 58.8 58.7
North Dakota 54.2 54.2 54.2 54.7 56.7
WTI 63.9 64.5 63.5 63.4
Eagle Ford 48.0 47.9
US Louisiana, LLS 55.5 55.5
Louisiana,
50.0
Thunderhorse
Michigan 62.0
Algeria Saharan Blend 60.8 60.2 59.8
Azerbaijan Azeri Light 63.6 62.8
Colombia Castilla Blend 48.1
Congo Djeno Blend 56.5
Denmark DUC 58.2
Equatorial Guinea New Zafiro Blend 64.9
Ivory Coast Espoir 54.8
Ivory Coast Baobab 54.4
Ekofisk 60.7
Norway
Norwegian Crude 60.0
UK Brent 60.8 59.8
Kazakhstan CPC Blend 59.8
AKPO 60.9
Bonny Light 60.1
Qua Iboe 60.3
Nigeria
Brass River 61.0
Bonga 61.5
Usan 57.6
Saudi Arabia Saudi Arabia Light 56.5
Data Sources: CERI estimates based on: (ClipperData LLC 2017; Oil & Gas Journal 2016a); (Government of Canada 2017; IEA 2016; NRCan 2017a; Oil & Gas Journal 2016c; OPEC 2017; Statistics Canada 2017a); African countries websites; (Enbridge Pipelines Inc. 2017a, 2017b, 2017c; FERC 2017;
Montreal Pipe Line Limited 2015; TransCanada 2016). Figure by CERI.
Note: Grey cells denote rail shipments
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Emissions/LCA Model
The objective of the emissions modelling is to establish an emissions profile for each crude oil in
terms of CO2 equivalent per refinery. The specific methodology to obtain upstream,
transportation and refinery emissions is stipulated below in greater detail.
Life cycle assessment of GHG emissions of individual crude oils used in the study was used to
inform environmental costs for each of the refineries. Analysis of available peer-reviewed
literature, reports and documents from government, research institutions and international
organizations shows that a number of approaches to model lifecycle GHG emissions of crude oils
currently exists (Argonne National Laboratory 2017; J. Bergerson and MacLean n.d., 2016; Cai et
al. 2015; El-Houjeiri and Brandt 2017; IHS Energy 2014; Jacobs Consultancy 2009, 2012; Lattanzio
2014; Moorhouse, Droitsch, and Woynillowicz 2011; Nimana, Canter, and Kumar 2015; Nimana
et al. 2017; Pacheco et al. 2016; Tarnoczi 2013; TIAX LLC and MathPro Inc. 2009; Vafi and Brandt
2014).
After detailed review of the above documents, the Oil Production Greenhouse Gas Emissions
Estimator (OPGEE) developed at Stanford University was selected as a tool to assess GHG
emissions from exploration, production, surface processing, and transport of crude oil to the
refinery inlet (El-Houjeiri and Brandt 2017), and the Petroleum Refinery Life-Cycle Inventory
Model (PRELIM) developed at the University of Calgary was selected to estimate GHG emissions
related to crude oil processing in different types of refineries that combine different processing
units (J. A. Bergerson et al. 2016). The approach used by CERI was a partial life cycle assessment,
since downstream GHG emissions after the refinery outlet (resulting from the transport and end
use of refined petroleum products) were out of the scope of this research.
The reasons behind selecting these specific two models for GHG emissions calculations for the
purposes of our study included the following:
• Both OPGEE and PRELIM models have been run on a wide range of individual crude oils
with extensive geography (approximately 300 global crudes for OPGEE model, and more
than 110 global crudes for PRELIM model) (J. A. Bergerson et al. 2016; CARB 2015b; Vafi
and Brandt 2013; Wang et al. 2016). That represents more upstream and midstream
crude runs than other modelling efforts, in particular, those presented in (IHS Energy
2014; Jacobs Consultancy 2009, 2012; TIAX LLC and MathPro Inc. 2009);
• OPGEE and PRELIM are built as engineering-based models that use public datasets
where possible, open academic sources, technical reports, and industry references, with
documenting sources for all equations, parameters, and assumptions. This approach
allows more flexible and accurate estimations of upstream and midstream GHG
emissions from various emissions sources in comparison with some other publicly
available models. It also provides more transparency and accessibility in methods and
data compared to private models that use proprietary datasets (J. Bergerson and
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62 Canadian Energy Research Institute
MacLean 2016; J. A. Bergerson et al. 2016; El-Houjeiri et al. 2017; Vafi and Brandt 2013,
2014);
• It was important to select tools where input data were available to model both
upstream and midstream GHG emissions for many individual crude oils (Canadian and
international) used in the study, with outputs that could be easily converted to the same
functional units (kg of CO2 equivalent per barrel of crude oil).
OPGEE model requires up to 50 data inputs, however, it can function sufficiently with limited key
parameters entered and built-in defaults that can fill in data gaps. According to the model, the
most important characteristics depend on extraction method specifications and activity per unit
of production, and include steam-to-oil and water-to-oil ratios, flaring and venting rates, and
crude density (measured as API gravity). Other important inputs also include gas-to-oil ratios, oil
production rates, location (onshore, offshore) and depth of the oil field (El-Houjeiri et al. 2017;
El-Houjeiri and Brandt 2017). The model uses the following classification of crude oils by their API
gravity: extra-heavy (≤12 API), heavy (12–20 API), medium (20–30 API), light (30–40 API), ultra-
light (≥40 API) and condensate (El-Houjeiri et al. 2017). By sulfur content, oil is classified as sweet
(<0.5% sulfur) or sour (>0.5% sulfur). It should be noted that for synthetic crude oils, the sulfur
content is reported after the bitumen is upgraded. OPGEE generates final upstream GHG
emissions outputs in kg CO2 eq/megajoule (MJ) which can be converted into kg CO2 eq/barrel
(bbl) of crude oil by multiplying them by the lower heating value of each oil (in MJ/bbl; this factor
depends on API gravity of oil) (El-Houjeiri and Brandt 2017; El-Houjeiri et al. 2017).
The most important upstream GHG emission drivers identified by OPGEE include flaring, land use
(that impacts the land’s carbon storage capacity), steam, venting and fugitive emissions,
pumping, and upgrading (Brandt et al. 2015; El-Houjeiri and Brandt 2017; El-Houjeiri et al. 2017).
OPGEE also includes GHG emissions from the transportation of oil to the refinery inlet that
depend on the mode of transportation (can include ocean tankers, pipeline, railway, or tanker
trucks), transport fuel used, the distance traveled and mass of crude oil. While publicly available
input datasets for OPGEE obtained from California ARB and Stanford University assume that all
oil is transported by default to the refinery hub in Houston, TX, or Los Angeles, CA, as default
destinations, CERI used the actual average distances traveled by crude oils from their
countries/places of origin to a refinery in eastern Canada. Emissions of imported oil, including
upstream activities and transportation of the oil, were accounted for, even if they are produced
outside of Canadian territory. Volume of crude oil transported was converted to mass (from
barrels to tonnes) using reported product densities, and the vehicle and fuel emissions factors as
suggested in the OPGEE model (with references made in this model to other relevant sources)
were applied (El-Houjeiri and Brandt 2017; Argonne National Laboratory 2017; US EPA 2015).
Based on the above sources, transporting GHG emissions (kg of CO2eq) per tonne of fuel shipped
for 1 km (kg CO2eq/tonne-km) are as follows:
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For marine tankers (ocean crude carriers), transportation emissions factors also depend on an
ocean tanker size (tonnes). GHG emissions for various ocean tanker sizes referred to in the study
were provided in the OPGEE model in g/MMBtu-mi fuel transported (El-Houjeiri and Brandt
2017). They were further converted to kg CO2eq/tonne-km and are as follows:
The PRELIM model for refinery GHG emissions calculations requires comprehensive crude oil
assays as inputs; each parameter at the assay must be specified at the specific temperature cut,
with consistent temperature cut ranges for each assay. According to the model, the most
important parameters for oil assays include API gravity, sulfur, hydrogen and nitrogen content,
density, volume/mass flow, micro-carbon residue or Conradson carbon residue, and viscosity for
vacuum residuum (Abella et al. 2016a; J. A. Bergerson et al. 2016; J. Bergerson and MacLean
2016). Ideally, they should be reported for nine temperature cuts with corresponding products;
however, the above parameters for at least four temperature cuts could also be entered into the
model, but in this case, it will create uncertainty and could possibly affect GHG emissions outputs
(Abella et al. 2016a). For the purposes of midstream GHG emissions estimates, in addition to the
crude oil assays presented in the PRELIM assay inventory, CERI used other open-source crude
assays consistent in a format with the PRELIM requirements, as discussed below.
PRELIM uses ten different combinations of processing units within three different types of
refinery (hydroskimming, medium conversion, or deep conversion). A default refinery
configuration is assigned in the model as the most suitable for each crude oil, based on the oil
assay parameters and using API gravity and sulfur content as the criteria. The default
configurations are as follows (Abella et al. 2016a; J. Bergerson and MacLean 2016):
• medium conversion (with fluid catalytic cracking and gas-oil hydrocracking units [FCC &
GO-HC]) – for medium sweet and sour crudes, and light sour crudes;
• deep conversion (with fluid catalytic cracking and gas-oil hydrocracking units [FCC & GO-
HC]) – for heavy sweet and sour crudes. Deep conversion can further include either a
coking or hydrocracking refinery configuration.
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64 Canadian Energy Research Institute
However, the user can override these default selections if necessary. It is worth noting that for
the upgraded extra-heavy oils, the model uses API gravity for their synthetic crude oil (instead of
their initial gravity) to determine the default refinery configuration; for the bitumen that was
simply diluted without being upgraded, the API gravity of the oil sand is used to determine the
default refinery configuration (Abella et al. 2016b; J. A. Bergerson et al. 2016). The most
important midstream GHG emission drivers identified by PRELIM include refinery heat and
refinery hydrogen (which is produced for adding to carbon-heavy oils) (Abella et al. 2016a).
While both models have numerous advantages discussed above which make them particularly
useful for the current study, it is critical to remember their limitations. For both OPGEE and
PRELIM, quality of input data is paramount. The accuracy of modelling results is fundamentally
related to data inputs available; it is especially true for the OPGEE model. Key parameters that
determine data quality are their consistency, completeness, representativeness, accuracy, and
comparability. With proper assumptions and good quality detailed data, more accurate
emissions estimates can be generated and the individual models can be tuned to match real
world results. The main obstacles for obtaining quality input data for these models include lack
of publicly available and transparent crude oil information, as well as data inconsistency and
discrepancy. Input data for a crude oil are difficult to find and validate, and alternate
interpretations may result in varying GHG estimates. OPGEE GHG calculations are the primary
source of variation in GHG emissions estimates, whereas PRELIM provides little additional
uncertainty (Abella et al. 2016a; El-Houjeiri et al. 2017; Vafi and Brandt 2013, 2014).
The objective of the work on GHG emissions/LCA modelling was to collect information on
upstream, transportation and midstream emissions for all the crude oils (Canadian and
international) that are being imported and that will be used for substitution in eight eastern
Canadian refineries. One of the potential limitations of the study was lack of information on what
type of crude oil or crude oil brand is imported from specific countries, as well as which particular
brands of light, heavy, SCO and bitumen are supplied to refineries.
Therefore, selection of crude oils for the purposes of GHG emissions modelling was based on:
• data availability for both upstream and midstream GHG modelling (operations
specifications, publicly available assays, input data in the models);
• oil blend composition and characteristics (API gravity, sulfur content, etc.) that allowed
to assume which individual crude brand or blend can represent each crude flow taken by
the refineries;
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• if the detailed information on an imported crude oil brand was absent, CERI used the most
abundant crude oil brand from the import country per refinery when modelling baseline
flows.
More information on individual crude oils and blends selected for the purposes of crude flows
and/or GHG emissions modelling, as well as assumptions on proxy crudes selection for GHG
emissions modelling, is presented in Table C.1 (Appendix C). In Table C.1, there are 32 individual
crude brands or blends selected for the purposes of GHG emissions modelling, including eight
Canadian and 24 foreign crude oils (25 percent and 75 percent of total amount, respectively).
The spectrum of crude types includes bitumen (one Canadian blend), three heavy oils (one of
which is a Canadian blend), five medium crude oils (one of which is a Canadian blend), SCO (one
Canadian blend), 18 light oils (four of which are Canadian blends) and four ultra-light oils (all
foreign blends).
For the foreign crude flows, 22 were actual crude oil brands or blends imported to Canada in
2016 (Statistics Canada, NRCan, CFA, Clipper Data), and for 20 of the 22 crudes, sufficient data
for upstream and midstream GHG emissions modelling were available. In the absence of publicly
available data for the remaining two crude flows, Denmark DUC and Kazakhstan CPC Blend, proxy
crude oil blends (Denmark Dansk Blend and Kazakhstan Tengiz) were used for the purposes of
GHG emissions modelling for these flows (see the Assumptions column). Data available for the
other four crude flows (Norwegian Crude, Saudi Arabia Light, UK North Sea, and US Michigan
Light) were not specific in terms of actual crude oil brands imported to Canada, so for each of
them an individual proxy brand or blend (Norway Oseberg, Saudi Arabia Ghawar, UK Brent or US
Bakken) was selected based on the criteria described above. Please note that UK Brent and US
Bakken were used as proxies twice (see Table C.1 for details), this explains the difference
between the number of foreign crude flows (26) and the number of individual foreign crude
brands or blends (24) used for GHG emissions modelling.
Table C.2, also in Appendix C, presents the results of upstream and midstream GHG emissions
modelling for eight Canadian and 24 foreign crude oil brands and blends (referred to earlier in
Table C.1 as individual brands and blends selected as proxies for crude flows modelling).
Table C.2 also provides detailed information on models applied, sources of input data and
assumptions behind the GHG emissions modelling. All upstream GHG emissions for the crude
oils used in the study were calculated using the OPGEE v2.0a model which was the most current
version of OPGEE as of September 2017.23 To run the model, CERI has collected input data for
the 32 crude oils of interest from a variety of sources, mostly California ARB (CARB 2015a, 2015b)
and Stanford University (Wang et al. 2016), but also from (Crude Quality Inc. 2017; Kable
Intelligence Ltd. 2017; Wiki.dot 2015) and crude oil producing companies’ websites. All upstream
GHG emissions calculated using the OPGEE model exclude transportation emissions. GHG
emissions resulting from crude oil transport to the refinery inlet in Los Angeles, California, or
Houston, Texas, as default destinations according to (CARB 2015b; Wang et al. 2016) were
2
The latest version of the model, OPGEE v2.0b, was released in July 2017, however, it was not available for
download until November 2017.
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deducted from the total upstream GHG emissions outputs for each modelled oil (see Notes to
Table C.2).
For several crude oils, a few sources of input data for upstream GHG emissions calculations were
available, with comparable output results. However, for some crudes the resulting emissions
based on input data from different sources varied substantially. For example, GHG emissions for
Canada Synthetic Sweet Blend based on (CARB 2015b) data were estimated to be 129.4 kg
CO2eq/bbl crude. The same emissions based on (Wang et al. 2016) were calculated as a weighted
average of upstream GHG emissions for Suncor A and Syncrude Sweet Premium that constitute
Synthetic Sweet Blend (see the Assumptions column in Table C.2) and were estimated to be
177.5 kg CO2eq/bbl crude.
The result based on California ARB (2015) data was selected, since it aligns with upstream GHG
emissions results for Canadian SCOs provided in other sources (Jacobs Consultancy 2009; CERI
2017). For Nigeria Brass River, upstream GHG emissions calculations based on input data
provided by six producing companies (SPDC, Chevron, NAOC Phillips, Addax, AENR/AGIP, others)
disclosed an almost ten-fold difference between the lowest and the highest emissions values
(CARB 2015b). Upstream GHG emissions outputs based on Chevron data were selected for the
purposes of this study to reflect the fact that Chevron has one of the highest oil production
volumes and the biggest number of producing wells within this field (see also Notes to Table C.2).
In the case of Nigeria Bonny Light, where input data from four producing companies (SPDC,
Chevron, Total E&P, and others) resulted in a 2.5 times difference between the lowest and the
highest upstream GHG emissions values obtained in OPGEE model (CARB 2015b), the outputs
based on Chevron data were selected for the same reason.
As it can be seen from Table C.2, all midstream GHG emissions for the crude oils used in the study
were calculated using the PRELIM v1.1 model (J. A. Bergerson et al. 2016). For 21 crude oil brands
or blends, input data based on numerous crude assays (CrudeMonitor, BP, ExxonMobil, Chevron,
Statoil, Stratiev, Platt, etc.) were available from the assay inventory spreadsheet (PRELIM v1.1).
For the other 11 crude oil blends, publicly available crude assays obtained by CERI from
CrudeMonitor.ca, EcoPetrol, ExxonMobil, Maersk Oil, TOTAL and Tullow Oil websites had to be
converted to the PRELIM format first and then run through the PRELIM v1.1 model.3 4
It should be noted that different results for midstream GHG emissions could be obtained
depending on different crude assay data available from various companies for some crude oils.
A few examples include Azerbaijan Azeri Light where different PRELIM outputs were obtained
based on Chevron, ExxonMobil, and Statoil assays; Norway Ekofisk (BP, Statoil, and Chevron
assays), UK Brent (BP, Chevron, ExxonMobil); Canada Hibernia (ExxonMobil, Statoil, and
Chevron), etc. To decide which crude assay (if there are multiple assays available) should be
selected to run in the PRELIM model, CERI checked the availability of oil producing companies’
3
The authors would like to personally thank John Guo, MSc., and Dr. Joule Bergerson at the University of Calgary
(PRELIM project team) for their help with converting publicly available assays for the selected crude oils into the
PRELIM format.
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input data for upstream GHG modelling. If a company’s data were available for both upstream
and midstream GHG modelling, this dataset (including crude oil assay) was used for the purposes
of the study, for the sake of consistency.
The results of GHG emissions modelling presented in Table C.2 demonstrate that upstream GHG
emissions vary significantly among the individual crude brand/blends used for the study, ranging
from 129.4 to 7.7 kg CO2eq/bbl crude. Midstream GHG emissions for the same crude
brand/blends vary less significantly (ranging from 92.7 to 12.5 kg CO2 eq/bbl crude), based on
the assumption that heavy crudes undergo the deep conversion refining process with the
hydrocracking unit. Table C.2 also provides numbers for the midstream GHG emissions from
heavy crudes that undergo the deep conversion refining process with the coking unit. In this
case, there will be approximately six times difference in midstream GHG emissions for the studied
crude oils, ranging from 77.6 to 12.5 kg CO2eq/bbl crude.
Upstream and midstream GHG emissions for selected Canadian and foreign crude oils used in the
study are also shown on Figure 3.9. Crude oil brands/blends previously discussed in Table C.2,
are split by crude categories – heavy, medium, light (including SCO) and ultra-light crude oils.
This provides visualization for the purposes of total, upstream and midstream GHG emissions
comparison both between the categories, and between Canadian and foreign crude oils within
each crude category.
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Figure 3.9: Upstream and Midstream GHG Emissions for Selected Canadian and
Foreign Crude Oils Used in the Study (by Crude Categories)
Data Sources: (PRELIM v1.1 (J. A. Bergerson et al. 2016); OPGEE v2.0a (El-Houjeiri and Brandt 2017); CARB 2015b; Wang et al.
2016), CERI calculations. Figure by CERI.
Notes: Stacked columns with borders represent Canadian crude oils, stacked columns without borders represent foreign crude
oils. Upstream and midstream GHG emissions for Canada WCS dilbit are presented per barrel of diluted bitumen, not per barrel
of crude oil produced. For midstream GHG emissions from heavy crude oils, the deep conversion refinery configuration with
hydrocracking is assumed.
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Please note that midstream GHG emissions from heavy crude oils are shown on Figure 3.9 for the
deep conversion refinery with the hydrocracking unit only. Total GHG emissions differ
approximately 7.6 times between the highest numbers (196.3 kg CO2eq/bbl, Canadian WCS
Dilbit) and the lowest ones (25.7 kg CO2eq/bbl, US Bakken No Flare) for the studied crudes. If
comparing total GHG emissions within each crude category for the studied crudes as presented
on Figure 2.10, there was approximately 1.6 times difference for four heavy crudes (from 196.3
to 126.2 kg CO2eq/bbl), approximately 3.3 times difference for five medium crudes (from 151.5
to 45.3 kg CO2eq/bbl), approximately 5.6 times difference for 19 light crudes including one SCO
(from 144.1 to 25.7 kg CO2eq/bbl) and approximately 2.4 times difference for four ultra-light
crudes (from 94.4 to 39.9 kg CO2eq/bbl).
While the highest total GHG emissions were observed for Canadian WCS Dilbit, it should be noted
that the Canadian oil sands industry is working diligently to reduce its bitumen production
footprint, in terms of reducing natural gas use, fresh water use, steam management, well pad
design, and so on. The technologies that are being tested, commercialized, and implemented
are at various stages of adoption by industry players. The viability of some of these technologies
on how they can help to reduce the environmental footprint was discussed in CERI Study 164,
“Economic Potential and Efficiencies of Oil Sands Operations: Processes and Technologies” (CERI
2017).
Figure 3.10 provides a graphic summary of the results of emissions modelling presented earlier
in Table C.2 and on Figure 3.9, showing ranges of total GHG emissions separately for Canadian
and foreign crude oils split by crude categories.
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Figure 3.10: GHG Emissions Ranges for Crude Oils Used in the Study (by Crude Categories)
Data Sources: (PRELIM v1.1 (J. A. Bergerson et al. 2016); OPGEE v2.0a (El-Houjeiri and Brandt 2017); CARB 2015b; Wang et al.
2016), CERI calculations. Figure by CERI.
Notes: Average GHG emissions for crude oils in each category are represented by “X”. GHG emissions for Canadian dilbit are
presented per barrel of diluted bitumen, not per barrel of crude oil produced.
As it can be seen from Figure 3.10, Canadian Dilbit (i.e., Canada WCS Dilbit) shows the highest
total GHG emissions, however, they are presented per barrel of diluted bitumen, not per barrel
of crude oil produced.45 Canadian Heavy (i.e., Canada WCB Heavy) is higher in total GHG
emissions (150.9 kg CO2eq/bbl) than Foreign Heavy (average 128.0 kg CO2eq/bbl), but Canadian
Medium (i.e., Midale) has lower GHG emissions (83.6 kg CO2eq/bbl) than average total GHG
emissions (100.3 kg CO2eq/bbl) for Foreign Medium crude. This is also the case for Canadian
Light: the average total GHG emissions (58.8 kg CO2eq/bbl) for this crude category are lower than
average total emissions for Foreign Light (68.7 kg CO2eq/bbl) and Foreign Ultra-Light (67.8 kg
CO2eq/bbl) crude categories. In contrast to conventional Canadian light oils, Canadian SCO (i.e.,
Canada Synthetic Sweet Blend) shows high total GHG emissions (144.1 kg CO2eq/bbl). However,
it is still comparable in emissions with some conventional, not upgraded light foreign oils, for
example, US Louisiana Light Sweet (143.2 kg CO2eq/bbl).
4
For Canadian WCS it is assumed that a barrel of oil produced from bitumen is 70% bitumen blended with 30%
diluent (CARB 2015b). Upstream GHG emissions from producing the diluent for dilbit are also considered in OPGEE
(El-Houjeiri et al. 2015).
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Figure 3.11 graphically represents information provided in Tables C.1 and C.2 for upstream and
midstream GHG emissions from individual Canadian crude oil blends used as proxies, as well as
the resulting GHG emissions for Canadian crude flows modelled by CERI based on these proxy
blends.
Figure 3.11: Upstream and Midstream GHG Emissions for Canadian Proxy and
Modelled Crude Flows
Data Sources: (PRELIM v1.1 (J. A. Bergerson et al. 2016); OPGEE v2.0a (El-Houjeiri and Brandt 2017); CARB 2015b; Wang et al.
2016), CERI calculations. Figure by CERI.
Stacked columns representing GHG emissions in Figure 3.11 have either solid fill (for individual
proxy crudes), or diagonal stripes pattern fill (for crudes modelled by CERI). Columns
representing each modelled crude flow along with columns representing individual crude
brand(s) or blend(s) used to create the particular crude flow are surrounded with rectangles to
visually separate flows from each other. As it can be seen from Figure 3.11, if the modelled crude
flow is deemed to consist of one proxy crude brand/blend, GHG emissions for the flow are
understandingly the same as the emissions for its proxy crude (e.g., Western Canadian Blend and
AB Heavy, or Hibernia and NL Light Offshore, etc.). However, if the modelled crude flow consists
of two or three individual proxy blends, the resulting upstream and midstream GHG emissions
for the flow were calculated as a weighted average of OPGEE and PRELIM outputs for individual
proxy blends (see, for example, AB Light, or SK Light, etc.). Recall, since AB Light and ON Light (as
well as SK Light and MB Light) are assumed, for the purposes of modelling, to be blends of the
same proxy crudes with the same proportions (see Table C.1 for assumptions), their resulting
GHG emissions per barrel of modelled crude oil will be the same. Again, upstream, and
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midstream GHG emissions for Western Canadian Select and AB Bitumen are presented per barrel
of diluted bitumen, not per barrel of crude oil produced.
Figures 3.12 and 3.13 provide detailed information on OPGEE GHG emissions results for Canadian
and foreign crude oils used for the study, either showing the total for upstream emissions
(Figure 3.12) or splitting them by the main upstream emissions drivers (Figure 3.13). Both figures
are at the same scale, and are organized in the same order, with crude oils ranked by the total
upstream emissions (highest to lowest) for the convenience of comparing. As it can be seen,
Figure 3.13 looks different from Figure 3.12, even if total upstream emissions for each individual
crude depicted on both figures are the same. This is related to the fact that the OPGEE model
considers GHG emissions from a lifecycle perspective, therefore, upstream GHG emissions
associated with electricity generated on-site or natural gas produced that is gathered, sold, and
not flared (i.e., off-site emissions) are credited back or deducted from total upstream GHG
emissions (Brandt et al. 2015; Argonne National Laboratory 2017; El-Houjeiri et al. 2017; El-
Houjeiri and Brandt 2017). For some crudes (e.g., UK Brent, Nigeria Usan or Nigeria Akpo Blend),
the off-site emissions credited towards total GHG emissions compensate their otherwise high
upstream emissions.
For many crude oils presented on Figure 3.13, the main driver for upstream emissions is venting,
flaring or fugitive emissions (VFF). For some crude oils with a high gas-to-oil ratio (especially light
and ultra-light oils), gas can be vented during processing even if the flaring rate is low, whereas
for other crude oils their relatively high GHG emissions can be attributed to flaring of associated
gas if it is not very well managed (El-Houjeiri and Brandt 2017; El-Houjeiri et al. 2017). However,
some crude oils with a high gas-to-oil ratio where their associated natural gas is responsibly
managed and can be gathered and exported (e.g., US Bakken (No Flare), US Eagle Ford, US WTI
or Norway Ekofisk,) generate negative off-site GHG emissions that can lower total upstream
emissions (El-Houjeiri and Brandt 2017; Wang et al. 2016). For some crude oils, the main emission
driver will be production and extraction, specifically for conventional oils from depleted fields
(e.g., US Louisiana Light Sweet) as they use energy-intensive pumping techniques (Masnadi and
Brandt 2017), or for bitumen (e.g., Canada WCS Dilbit), which requires substantial amounts of
energy to be produced. For SCOs (e.g., Canada Synthetic Sweet Blend), upgrading operations are
the main driver behind upstream GHG emissions.
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Figure 3.12: Total Upstream GHG Emissions for Canadian and Foreign Crude Oils
Used for the Study
Figure 3.13: Upstream GHG Emissions for Canadian and Foreign Crude Oils Used for the Study
(Split by Main Emissions Drivers)
Data Sources: (CARB 2015b; OPGEE v2.0a (El-Houjeiri and Brandt 2017); Wang et al. 2016), CERI calculations. Figure by CERI.
Notes: Stacked columns with borders represent Canadian crude oils, stacked columns without borders represent foreign crude
oils. Upstream GHG emissions for Canada WCS Dilbit are presented per barrel of diluted bitumen, not per barrel of produced
crude oil. Off-site emissions can be either added to (positive) or deducted from (negative) total upstream GHG emissions.
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74 Canadian Energy Research Institute
Figure 3.14 provides detailed information on PRELIM GHG emissions results for Canadian and
foreign crude oils used for the study, with crude oils ranked by the total midstream emissions
(highest to lowest). Please note that the studied crude oils on Figure 3.14 are ranked differently
from those on Figure 3.12 (though in the order of decreasing emissions on both figures), since
there is no direct correlation between upstream and midstream GHG emissions for these crudes.
Figure 3.14: Midstream GHG Emissions Results for Canadian and Foreign Crude Oils
Used for the Study
Data Sources: (PRELIM v1.1 (J. A. Bergerson et al. 2016); Abella et al. 2016b), CERI calculations. Figure by CERI.
Notes: Stacked columns with borders represent Canadian crude oils, stacked columns without borders represent foreign crude
oils. Midstream GHG emissions for Canada WCS Dilbit are presented per barrel of diluted bitumen, not per barrel of produced
crude oil. Medium and deep conversion refineries use fluid catalytic cracking (FCC) and gas-oil hydrocracking (GO-HC).
It can be seen from the figure that the main difference in midstream GHG emissions from the
selected crudes is related to the default refinery configuration (deep conversion, medium
conversion or hydroskimming). The studied crude oils undergoing the refining process in a
hydroskimming refinery have the lowest GHG emissions ranging from 26.4 to 12.5 kg CO2eq/bbl
crude. Crude oils depicted on Figure 3.14 that undergo the refining process in a medium
conversion refinery have their emissions in a range from 47.1 to 21.0 kg CO2eq/bbl crude.
Midstream GHG emissions from heavy crude oils on Figure 3.14 are assumed to be from the
refining process in a deep conversion refinery with the hydrocracking unit, and they range from
92.7 to 78.5 kg CO2eq/bbl crude. Canadian crudes are present on both ends of the emissions
spectrum, both for upstream GHG emissions (Figure 3.12) and midstream GHG emissions
(Figure 3.14).
As discussed above, all upstream GHG emissions calculated using the OPGEE model exclude
transportation GHG emissions. They were calculated separately in accordance with the
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methodology described at the beginning of this section. The results for transportation GHG
emissions for Canadian and foreign crude oils used in the Base Case are graphically presented on
Figures 3.15 and 3.16.
As it can be seen from Figure 3.15, the main transportation mode for all crudes shipped to ON
refineries in the Base Case is by pipeline (gathering and main pipelines), except for ON Light that
is shipped to Imperial refinery in Nanticoke by gathering pipeline and rail. Transportation GHG
emissions in this case range from 5.59 kg CO2eq/bbl crude (AB Heavy to Imperial refinery in
Nanticoke) to 0.26 kg CO2eq/bbl crude (ON Light, Imperial refinery in Nanticoke).
All refineries shown on Figure 3.16 use transportation by tanker (either combined with
transportation by pipeline, or without pipeline, if tanker was offloaded offshore). Despite the
large distances associated with marine transportation, GHG emissions for this mode are low
related to the lower transportation emissions factors for tankers – 0.003 to 0.006
kg CO2eq/tonne-km depending on tanker size (tonnes). Recall, the factor for pipeline
transportation is 0.01 kg CO2eq/tonne-km, and for railway it is 0.02 kg CO2eq/tonne-km. This
means an ocean tanker moving a tonne of crude oil one kilometer will emit 3.3 times less GHG
emissions than a pipeline moving a tonne of crude oil one kilometer, or 6.6 times less than moving
a tonne of crude the same distance by rail. Transportation GHG emissions in the case of a tanker
range from 6.01 kg CO2eq/bbl crude (Saudi Arabia Light to Irving Oil refinery, NB) to 0.32 kg
CO2eq/bbl crude (NL Light Offshore to North Atlantic Refining, NL). The highest transportation
emissions (13.20 kg CO2eq/bbl crude) for all studied crude oils were obtained for AB SCO shipped
by rail to the NB refinery.
Table 3.9 provides a detailed summary of transportation GHG emissions for Canadian and foreign
crude oils used in the Base Case and the four modelled scenarios introduced in Chapter 2, split
by eight refineries in four provinces (ON, QC, NB, and NL & Labrador). Unlike upstream and
midstream GHG emissions, transportation emissions in Table 3.9 (as well as on Figures 3.15 and
3.16) are attributed to the modelled crude flows (see Table C.1, Appendix C) based on proxy
crude oil brands/blends. Transportation emissions are low; for the crude oils used in the study,
they do not exceed 30 percent of total upstream GHG emissions (except for Azerbaijan Azeri
Light, US Bakken, Kazakhstan CPC Blend, and Saudi Arabia Light), and are lower for many of the
selected crudes. The lowest ratio for transportation emissions was 0.6 percent of upstream GHG
emissions for ON Light transported to the Imperial refinery in Nanticoke due to a short
transportation distance (100 km by railway). For Azerbaijan Azeri Light, this ratio is almost
52 percent and can be explained with very low upstream GHG emissions for the crude oil and the
distance (approximately 1,770 km by pipeline and 9,600 km by tanker) Azerbaijan Azeri Light
travels to the Suncor Energy refinery in QC. The same (low upstream GHG emissions combined
with long distances the crude travels by pipeline and tanker) is true for Kazakhstan CPC Blend
whose transportation to upstream GHG emissions ratio is 34.1 percent (shipping to the Valero
refinery in QC) and Saudi Arabia Light (31.6 percent ratio, shipping to the Irving Oil refinery in
NB). The high transportation to upstream GHG emissions ratio for US Bakken is also related to
its very low upstream GHG emissions (in terms of kg CO2eq/bbl, the lowest ones among all crude
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oils used for the study) and long traveling distances (approximately 2,800 km by pipeline to
Suncor Energy refinery in QC).
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Figure 3.15: Transportation GHG Emissions (kg CO2 eq/bbl crude) for Canadian and Foreign Crude Oils Used in the Base Case
Refineries Located in ON
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Figure 3.16: Transportation GHG Emissions (kg CO2 eq/bbl crude) for Canadian and Foreign Crude Oils Used in the Base Case
Refineries Located in QC, NB and NL
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Table 3.9: Transportation GHG Emissions (kg CO2 eq/bbl crude) for Canadian and Foreign Crude Oils Used in the Base Case and the Four Modelled Scenarios (Split by Refinery)
Base Case 'Made in Canada' Scenario 'Expanded Access' Scenario 'Current Reality' Scenario 'International Social Concerns' Scenario
Imperial, Nanticoke,
Imperial, Nanticoke,
Imperial, Nanticoke,
Imperial, Nanticoke,
Imperial, Nanticoke,
Imperial, Sarnia, ON
Imperial, Sarnia, ON
Imperial, Sarnia, ON
Imperial, Sarnia, ON
Imperial, Sarnia, ON
Suncor Energy, ON
Suncor Energy, ON
Suncor Energy, ON
Suncor Energy, ON
Suncor Energy, ON
Suncor Energy, QC
Suncor Energy, QC
Suncor Energy, QC
Suncor Energy, QC
Suncor Energy, QC
Shell Canada, ON
Shell Canada, ON
Shell Canada, ON
Shell Canada, ON
Shell Canada, ON
Crude Oil Flow Name
North Atlantic
North Atlantic
North Atlantic
North Atlantic
North Atlantic
Irving Oil, NB
Irving Oil, NB
Irving Oil, NB
Irving Oil, NB
Irving Oil, NB
Refining, NL
Refining, NL
Refining, NL
Refining, NL
Refining, NL
Valero, QC
Valero, QC
Valero, QC
Valero, QC
Valero, QC
ON
ON
ON
ON
ON
5.40/
AB Light 4.11 4.11 4.11 4.49 -- -- -- -- 4.11 4.11 4.11 4.49 5.21 5.68 6.25 -- 4.11 4.11 4.11 4.49 5.21 5.68 6.25 -- 4.11 4.11 4.11 4.49 5.21 5.40 6.83 -- 4.11 4.11 4.11 4.49 5.21 10.74 7.01 --
Canadian Crude Oils
AB SCO 4.34 4.34 4.34 4.73 -- 5.67 13.94 -- 4.34 4.34 4.34 4.73 -- 5.88 6.60 -- 4.34 4.34 4.34 4.73 -- 5.88 6.60 -- 4.34 4.34 4.34 4.73 -- 5.67 13.94 -- 4.34 4.34 4.34 4.73 -- 5.67 13.94 --
AB Heavy 5.17 5.17 5.17 5.59 -- 6.61 -- -- 5.17 5.17 5.17 5.59 -- 6.12 7.11 -- 5.17 5.17 5.17 5.59 -- 6.12 7.11 -- 5.17 5.17 5.17 5.59 -- 6.61 -- -- 5.17 5.17 5.17 5.59 -- 6.61 7.96 --
AB Bitumen 5.25 -- -- -- 6.48 6.69 -- -- 5.25 -- -- -- 6.48 6.20 -- -- 5.25 -- -- -- 6.48 6.20 -- -- 5.25 -- -- -- 6.48 6.69 -- -- 5.25 -- -- -- 6.48 6.69 -- --
MB Light 2.51 -- -- -- -- -- -- -- 2.51 -- -- -- -- -- -- -- 2.51 -- -- -- -- -- -- -- 2.51 -- -- -- -- -- -- -- 2.51 -- -- -- -- -- -- --
SK Light 2.62 2.62 2.62 3.01 -- -- -- -- 2.62 2.62 2.62 3.01 3.74 -- -- -- 2.62 2.62 2.62 3.01 -- -- -- -- 2.62 2.62 2.62 3.01 -- 4.35 -- -- 2.62 2.62 2.62 3.01 -- 3.93 -- --
ON Light -- -- -- 0.26 -- -- -- -- -- -- -- 0.26 -- -- -- -- -- -- -- 0.26 -- -- -- -- -- -- -- 0.26 -- -- -- -- -- -- -- 0.26 -- -- -- --
NL Hibernia -- -- -- -- -- -- 0.98 -- -- -- -- -- -- -- 0.98 -- -- -- -- -- -- -- 0.98 -- -- -- -- -- -- -- 0.98 -- -- -- -- -- -- -- 0.98 --
NL Light Offshore -- -- -- -- 2.08 -- 1.30 0.32 -- -- -- -- 1.57 -- 1.30 0.32 -- -- -- -- 1.57 -- 1.30 0.32 -- -- -- -- 1.57 1.41 1.30 0.32 -- -- -- -- 1.57 1.41 1.30 0.32
Algeria Saharan Blend -- -- -- -- -- 4.00 -- 3.89 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 3.89 -- -- -- -- -- -- -- --
Azerbaijan Azeri Light -- -- -- -- 7.70 -- 7.3 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
Colombia Castilla Blend -- -- -- -- -- -- 3.86 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 3.86 -- -- -- -- -- -- -- 3.86 -- -- -- -- -- -- -- 3.86 --
Congo Djeno -- -- -- -- -- -- 5.38 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 5.38 -- -- -- -- -- -- -- 5.38 -- -- -- -- -- -- -- 5.38 --
Denmark DUC -- -- -- -- -- -- -- 3.03 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 3.03 -- -- -- -- -- -- -- 3.03 -- -- -- -- -- -- -- 3.03
Equatorial Guinea Zafiro -- -- -- -- -- -- 4.99 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
Ivory Coast Baobab -- -- -- -- -- -- 4.43 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 4.43 -- -- -- -- -- -- -- -- --
Ivory Coast Espoir -- -- -- -- -- -- 4.19 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 4.19 -- -- -- -- -- -- -- 4.19 -- -- -- -- -- -- -- -- --
Kazakhstan CPC Blend -- -- -- -- -- 6.45 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
Nigeria Akpo Blend -- -- -- -- -- 4.74 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
Foreign Crude Oils
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A review of transportation GHG emissions for the Base Case and the four modelled scenarios
resulted in the following conclusions and observations:
• transportation GHG emissions intensity in terms of kg CO2eq/bbl crude for all Canadian
crude oils shipped to the four refineries in ON has not changed in any of the four
scenarios, in comparison with the Base Case;
• transportation GHG emissions for Canadian crude oils shipped to the refineries in ON
range from 5.59 kg CO2eq/bbl (AB Heavy, by pipeline, to Imperial refinery in Nanticoke)
to 0.26 kg CO2eq/bbl (ON Light, by gathering pipeline and rail, to Imperial refinery in
Nanticoke) in the Base Case and all four scenarios;
• transportation emissions (kg CO2eq/bbl crude) for the foreign crude, US Bakken,
imported to the ON refineries, have not changed in three scenarios in comparison with
the Base Case (US Bakken has been fully substituted in the Made in Canada scenario);
• two US crude oils (Bakken and Michigan Light) are transported to Suncor Energy refinery
in QC by pipeline, whereas all other foreign crudes imported to this refinery in the Base
Case and the International Social Concerns scenario come by tankers (with
gathering/international pipelines involved for the portion or the route);
• all foreign crude oils imported to the remaining three refineries (Valero in QC, Irving Oil
in NB and North Atlantic Refining in NL & Labrador) are transported by tankers, or by
international pipelines for the portion of route and tankers, in the Base Case and three
scenarios (excluding the Made in Canada scenario, where all foreign crudes have been
substituted);
• seven foreign crudes (Azerbaijan Azeri Light, Equatorial Guinea Zafiro, Kazakhstan CPC
Blend, Nigeria Akpo Blend, Nigeria Bonga, Nigeria Brass River and Nigeria Qua Iboe) have
been substituted in all four scenarios and have not been used except in the Base Case;
• the largest variety of crude flows is taken by the Irving Oil refinery in NB (the Base Case).
There are three Canadian crudes (transportation GHG emissions range from 13.94 to 0.98
kg CO2eq/bbl crude) and 14 foreign crudes (transportation emissions range from 7.30 to
2.82 kg CO2eq/bbl);
• transportation emissions for Canadian crudes in the Base Case (all refineries) range from
13.94 CO2eq/bbl crude (AB SCO, by gathering pipeline and rail, to Irving Oil refinery, NB)
to 0.26 CO2eq/bbl crude (ON Light, by gathering pipeline and rail, to Imperial refinery in
Nanticoke);
• transportation GHG emissions for foreign crudes in the Base Case (all refineries) range
from 7.70 CO2eq/bbl crude (Azerbaijan Azeri Light, by tanker and pipeline, to Suncor
Energy refinery in QC) to 1.51 CO2eq/bbl crude (US Michigan Light, by pipeline, to Suncor
Energy refinery in QC);
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• while GHG emissions for the same mode of crude oil transportation will expectedly
increase with distance, this increase was the most noticeable for NL & Labrador Light
Offshore (0.32 CO2eq/bbl when transported by tanker to North Atlantic refinery vs.
1.57 CO2eq/bbl when transported by tanker to Suncor Energy refinery, QC). Similarly, for
AB Light supplied to seven out of eight refineries in all four scenarios, transportation
emissions have increased from 4.11 CO2eq/bbl (by pipeline to Imperial refinery, Sarnia)
to 6.25 CO2eq/bbl (by pipeline to Irving Oil refinery, NB).
Based on the results of GHG emissions modelling for each individual crude oil and crude flow,
calculation of upstream, transportation and midstream emissions per crude stream, per refinery
and per scenario was undertaken. Refer to Chapter 4 for additional details.
However, CERI does not discuss emission costs in terms of carbon pricing. It should be clear that
for impact of carbon pricing, the focus should be on emissions reported by refineries and
associated with their respective production process, since this is the focus of current carbon
pricing policies (either through provincial cap-and-trade/carbon tax) or federal output-based
allocation systems for large final emitters. It is interesting to note that under QC and ON cap-
and-trade systems, most of the emissions from oil refineries are covered by free allowances, as
they are considered trade-exposed emitters.
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Crude Flows
Figure 4.1 illustrates the crude intakes for all the refineries in the Made in Canada scenario. As
previously mentioned, the existing transportation infrastructure is augmented by the new
pipeline, allowing the substitution of all foreign crude, 601 Mbpd. This includes an additional
423.7 Mbpd of light and heavy crude from western Canada (408.4 Mbpd of light and 15.3 Mbpd
of heavy), as well as 177.3 Mbpd of light oil from eastern Canadian offshore assets. The scenario
assumes the usage of almost all available oil from the eastern offshore (234.2 Mbpd) and all of
SK (149.7 Mbpd). It is important to note that for AB, 130.9 Mbpd of light oil remains available in
the west for domestic refining after supplying 391.1 Mbpd to the central and eastern refineries.
In total, scenario modelling results in 838.2 Mbpd of crude supply from Canadian western
provinces, 234.8 Mbpd from Canadian eastern offshore assets, and no imports.
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Figure 4.1: Total Crude Intake for Central and Eastern Refineries – Made in Canada (Mbpd)
Oil Refining
Irving Atlantic
Scenario 93.1
North
NL
Scenario 77.8
Base 64.6 13.1
ON
Scenario 65.9
Base 54.8 11.1
Scenario 104.1
Oil
A detailed review of crude substitution per refinery is illustrated in Table E.1 in Appendix E. While
it is not realistic to review all the transactions, it is prudent to discuss the highlights.
In ON, all of North Dakota’s Bakken oil (58.1 Mbpd) is displaced with light oil from SK via
Enbridge’s Mainline. This occurs in all four of ON’s refineries.
In QC, the dynamics are more complex. Suncor Energy’s refinery in Montreal is modelled to
proceed using Enbridge Mainline and Line 9 to satisfy its crude intake. Feedstock is
predominantly from AB, as well as SK. Although for reference, the cost of feedstock at the
refinery gate for AB light oil is $1.38 per bbl cheaper using a new pipeline than using the Mainline
and Line 9, based on projected tolls and current Enbridge tolls. Total replaced volume for the
Suncor refinery is 103.2 Mbpd. Valero’s refinery in Lévis, on the other hand, is modelled to use
a new pipeline, substituting all its foreign crude in the volume of 131.9 Mbpd. In this scenario,
Valero stops using Line 9 as well as its two tankers currently transporting crude oil between
Montreal and Quebec City. Recall, supplying crude oil to Valero fully on new infrastructure
pipeline versus utilizing the existing Line 9 and two tankers is an assumption of the study.
However, during the modelling process, this assumption is underpinned by economics, as the
costs of AB oil through Line 9 plus the usage of tankers is $1.66 per bbl more expensive for AB
Light, $1.13 per bbl more expensive for AB SCO, and $2.52 per bbl more expensive for AB Heavy
and bitumen.
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Irving Oil’s refinery in NB is modelled to use both western oil as well as eastern oil to substitute
its vast foreign crude slate. Western crude oil comes through new infrastructure pipelines, while
eastern crude is delivered by tankers from offshore NL. NL & Labrador’s North Atlantic Refining’s
foreign crude slate was fully substituted with nearby Canadian offshore production.
The crude flows in the Made in Canada scenario are illustrated in Figure 4.2.
Figure 4.2: Canadian Crude Supply to Central and Eastern Refineries – Made in Canada
(Mbpd)
The capacity of the expanded infrastructure scenario and the availability of light oil in western
Canada would allow a full western Canadian crude substitution in NB. However, eastern
Canadian crude costs $1.8 per bbl less then western crude at the gate of this refinery, hence, a
significant portion of eastern crude supply is modelled – the amount of additional eastern oil
which was used for NB – 119.2 Mbpd makes up the remaining available eastern oil after satisfying
demand of North Atlantic Refining of 93.1 Mbpd and delivering 5.8 Mbpd to Montreal’s Suncor
Energy.
The availability and usage of crude and transportation infrastructure by central and eastern
refineries is illustrated in Figure 4.3. Canada has enough light oil to be used in the eastern and
western refinery markets. As mentioned above, after all foreign oil has been substituted, there
is still 130.9 Mbpd of light oil available in the western part of the country. The amount of SCO
and Bitumen used by the eastern refinery market is small.
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Figure 4.3: Availability and Usage of Crude and Infrastructure – Made in Canada (Mbpd)
Mbpd
AB Light 522.0
391.1
SK Light 149.8
149.7
896.8
Crude
AB SCO 164.1
AB Heavy 125.6
72.5
SK Heavy 225.5
0.0
AB Bitumen 1423.3
53.2
Portland-Montreal PL 270.75
0.0
Line 9 PL 285
119.6
Rail 255
0.0
Note: The volumes shown for Mainline (Line 78 and Line 5) represent Canadian crudes for Canadian refineries. The figure does
not show movements in the Mainline of Canadian or US crudes destined for US refineries.
In terms of infrastructure, several conclusions stand out. First, with new pipeline infrastructure
being in place and used by Valero, Line 9 becomes underused. Simultaneously, there is zero
usage of rail from west to east, and the Portland-Montreal pipeline becomes obsolete in its
current flow direction. If Valero’s refinery is modelled to use a mix of Line 9 (to its capacity),
tankers (to their planned capacity) as well as the new infrastructure pipeline, the new
infrastructure pipeline usage would drop from 375.2 Mbpd to 216.3 Mbpd. Rail and the
Portland-Montreal Pipeline would not be needed. This is due to rail being more expensive than
pipeline delivery. In addition, eastern offshore oil production in the Montreal refinery via the
Portland-Montreal Pipeline is $0.48 per bbl more expensive than AB Light via the Mainline and
Line 9, and $1.87 per bbl more expensive via the new infrastructure pipeline.
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Cost of Feedstock
Feedstock costs varied across all examined refineries. This is illustrated in Table 4.1.
In ON, under the Made in Canada scenario, if all foreign oil (US Bakken) is substituted, all four
refineries end up having more expensive feedstock. The results are driven by the difference in
costs of US Bakken oil versus SK light oil – $1.59 per bbl – at the gates of the ON refineries
(difference versus AB Light would be $3.69). The increase constitutes a 0.5 percent increase in
the refineries annual costs and is due to the fact that oil from the Bakken is more cost competitive
than its Canadian counterpart.
On the other hand, if all foreign crude was substituted, the two QC refineries could save on
feedstock costs – approximately $103 million per year. For Suncor Energy, the difference in costs
is driven by using AB Light ($59.97 per bbl) and SK Light ($57.75 per bbl) instead of oil from US
WTI ($63.87 per bbl), Michigan ($61.96 per bbl), and Azerbaijan ($63.59 per bbl). In fact, AB Light
and SK Light are cheaper than any other foreign light oil supplied to Suncor Energy’s refinery in
2016, except for oil from the US Bakken. The difference between AB Light and North Dakota is
$3.31 per bbl. This illustrates the competitiveness of Enbridge Mainline tariffs coupled with
western crude prices. It also supports the economics of the Line 9 reversal project. Recall,
transportation costs are included in these estimated costs.
The Valero refinery in Lévis is the largest benefactor in this scenario, with potential savings of
$80.8 million per year. The largest driver for such a decrease is the cost difference of oil from AB
($59.03 per bbl), via the new infrastructure pipeline, and from Algeria ($60.17 per bbl) and
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Kazakhstan ($59.77 per bbl). Recall that these two countries represent 86 percent of foreign
intake for this refinery. Overall, AB Light is cheaper than any foreign light oil at Valero’s gate,
except for US Texas Eagle Ford ($47.98 per bbl).
North Atlantic refinery’s cost of feedstock would decrease by almost $7 million annually if foreign
crude was substituted entirely with eastern offshore crude, as domestic offshore crude ($58.73
per bbl) is cheaper than any 2016 foreign crude in the Base Case except for US Louisiana LLS
($55.46 per bbl) and Denmark DUC ($58.19 per bbl).
The Irving Oil Refinery, on the other hand, will face higher feedstock costs in the amount of $51.1
million per year. This represents an increase in cost of around 1 percent. The reason for this
increase is the refineries low-priced crude oil slate in the Base Case. For heavy oil, Irving Oil could
benefit as AB Heavy costs $47.57 per bbl (transported via the new infrastructure pipeline route)
and has lower tolls than heavy oils from the Ivory Coast ($54.41 per bbl) and Colombia ($48.13
per bbl). For light oil, AB Light ($60.62 per bbl) and Eastern Offshore Light ($58.83 per bbl) are
more expensive than 7 of 13 imported crude brands, especially versus Saudi Arabia oil ($56.46
per bbl). The latter comprises nearly 40 percent of total imports of this refinery. Canadian crude
is still less expensive than many imported crudes used for this refinery. The feedstock cost would
be less if Irving Oil could use 100 percent of domestic NL offshore oil for substitution purposes.
However, per the crude flows modelling, there is not enough light oil in eastern Canada to meet
the two Atlantic Canada refineries full capacity.
Emissions
Based on the results of the emissions/LCA modelling, total upstream, transportation and refining
emissions decrease if all imports are substituted with Canadian crude supply, 6.2 percent less
than the Base Case or 2.2 million tones CO2eq (MTCO2eq). In absolute terms, it is a decrease
from 35.87 MTCO2eq to 33.65 MTCO2eq. This difference represents how much emissions would
increase/decrease globally if substitution was to happen. It is important to note that this
decrease represents a global emissions decrease, as these emissions reductions are not all
realized within Canadian borders.
The major driver for the emissions decrease is overall lower upstream emissions of Canadian light
oil versus the imported slate (-2.24 MTCO2eq). Midstream emissions increase by 0.14 MTCO2eq,
while transportation emissions decrease in the Made in Canada scenario by 0.12 MTCO2eq. The
detailed information can be found in Appendix F in Table F.1.
Figure 4.4 illustrates the difference between the Base Case and Made in Canada scenarios, by
refinery. Emissions are also divided by upstream, refining (midstream) and transport.
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Figure 4.4: Made in Canada and Base Case Emissions (tonnes CO2eq per year)
10,000,000
9,000,000 Global-wide Total Emissions:
8,000,000
-2,222,442 tones CO2eq Annually
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-
Base
Base
Base
Base
Base
Base
Base
Base
Scenario
Scenario
Scenario
Scenario
Scenario
Scenario
Scenario
Scenario
Imperial Oil Shell Canada Suncor Imperial Oil Suncor Valero Irving Oil North
Energy Energy Atlantic
Refining
ON QC NB NL
In all ON refineries, as well as Suncor Energy in Montreal, total emissions increase modestly
because of full substitution. ON’s result is driven by the fact that North Dakota’s light oil emission
intensity of 28.31 kg CO2eq/bbl is lower than SK Light which is used for substitution (emission
intensity of 74.46 kg CO2eq/bbl). For reference, AB Light average at ON refineries is 63.99 kg
CO2eq/bbl. For Suncor Energy’s refinery in Montreal, the increase in emissions is linked to
upstream activities, and less so, to midstream and transportation. The average of foreign oil total
emissions is 54.76 kg CO2eq/bbl in the Base Case, while the emissions intensities from AB Light
is 64.99 kg CO2eq/bbl and SK Light is 75.58 kg CO2eq/bbl at the gate of this refinery.
For Valero’s refinery, full substitution of foreign oil decreases total emissions by 9.9 percent, on
the upstream side. The average foreign crude emissions are 77.48 kg CO2eq/bbl, while AB Light
is 65.47 kg CO2eq/bbl. Regarding the latter, the difference between the emissions intensity in
AB Light for Valero and the refineries in ON is due to transportation. For reference, Algeria’s
Saharan Blend, which at 91.1 Mbpd, is the largest foreign intake for Valero, has total emissions
of 92.9 kg CO2eq/bbl at refinery gate.
Irving Oil’s emissions profile decreases significantly, by 14.9 percent. Most of the decrease occurs
in upstream and midstream activities, while transportation related emissions also decrease.
Average foreign crude emissions are 86.07 kg CO2eq/bbl, while AB Light via the new pipeline is
66.04 kg CO2eq/bbl and the eastern offshore average is 37.7 kg CO2eq/bbl. Western Canadian
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90 Canadian Energy Research Institute
crude emissions profile was lower than 7 of 14 foreign crudes which were imported in the Base
Case. Eastern offshore crude had lower emissions from any other crude oil in the Base Case,
except for Azeri Light.
The largest decrease of emissions stemmed from the North Atlantic Refinery, with a significant
64 percent reduction in total emissions, the majority of which is derived from upstream (75
percent drop) and transportation activities. Midstream activities, on the other hand, experience
an increase in emissions. Total transportation emissions for the refinery decrease by 92 percent
compared to the Base Case. This is due in part to the proximity of the upstream offshore activities
to the refinery. Average foreign crude total emissions are 83.96 kg CO2eq/bbl, while Eastern
offshore crude at this refinery gate is 36.72 kg CO2eq/bbl.
The difference in the weighted average kg CO2eq per barrel per refinery is illustrated in
Figure 4.5. As different refineries increase or decrease their total intensity (upstream,
transportation and midstream), the average decrease at the national level is 5.7 kg CO2/bbl. To
obtain each refinery’s weighted average increase or decrease of emissions (kg/bbl), each
refinery’s absolute increase or decrease of emissions (kg/bbl) was multiplied by share of intake
of the refinery in total central and eastern refineries crude intake.
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Crude Flows
Figure 4.6 illustrates the crude intakes for all the refineries in the Expanded Access scenario. As
previously mentioned, the existing transportation infrastructure is augmented by a new pipeline,
allowing additional substitution of foreign crude, 344.1 Mbpd. This includes an additional
248 Mbpd of light and heavy crude from western Canada (232.7 and 15.3 Mbpd, respectively),
as well 96.1 Mbpd of light oil from eastern Canadian offshore assets. The modelling results in the
usage of 65 percent of available light oil from the eastern offshore (153 Mbpd), 87 percent of SK
light (130.7 Mbpd) and 56 percent of AB light (292.5 Mbpd). The remaining 42.8 percent is
foreign crude that is cheaper than Canadian supply options. In total, scenario modelling results
in 662.5 Mbpd of crude supply from Canadian western provinces, 153.6 Mbpd from Canadian
eastern offshore assets, and 256.9 Mbpd from foreign sources.
It is important to note that 248.6 Mbpd of light oil remains available in western Canada after
supplying the above-mentioned volumes to central and eastern refineries; 81.5 Mbpd of light oil
remains available in eastern Canada.
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Figure 4.6: Total Crude Intake for Central and Eastern Refineries – Expanded Access (Mbpd)
Irving Oil Refining
Atlantic
Scenario
Canada
54.8 11.1
Shell
A detailed review of crude substitution per refinery is illustrated in Table E.2 in Appendix E. While
it is not realistic to review all the transactions, it is prudent to discuss the highlights. If foreign oil
is mentioned as not substituted, then it is less expensive than any of the available Canadian
supply under consideration.
In ON, North Dakota’s Bakken oil (58.1 Mbpd) is not displaced as it is cheaper than AB Light or SK
Light by $1.59 and 3.69 per bbl, respectively.
In QC, the dynamics are a little more complex. Suncor Energy’s refinery in Montreal is modelled
to proceed using Enbridge Mainline and Line 9 to satisfy its crude intake. North Dakota’s Bakken
(48 Mbpd) remains unchanged, while a mix of crude in the total volume of 55.1 Mbpd from US
Michigan, US WTI, Azerbaijan, Norway, and UK are displaced with AB Light brought via the
Enbridge Mainline and Line 9. For reference, the cost of feedstock at the refinery gate for AB
light oil is $1.38 per bbl cheaper using the new pipeline, based on projected tolls and current
Enbridge tolls.
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The Valero refinery in Lévis, on the other hand, is modelled to use the new pipeline. The
competitive price of AB Light at this refinery gate allows to substitute almost all its foreign crude
in the volume of 125.6 Mbpd, except for 6.3 Mbpd Texas Eagle Ford imported from US Texas in
the Base Case. In this scenario, Valero stops using Line 9 as well as its two tankers currently
transporting crude oil between Montreal and Quebec City. Recall, supplying crude oil to Valero
fully on the new infrastructure pipeline versus utilizing the existing Line 9 and two tankers is an
assumption of the study. However, during the modelling process, this assumption appeared to
be underpinned by economics, as the cost of AB oil through Line 9 plus usage of tankers is $1.66
per bbl more expensive for AB Light, $1.13 per bbl more expensive for AB SCO, and $2.52 per bbl
more expensive for AB Heavy and Bitumen.
For the Irving Oil refinery in NB, 50 percent of foreign feedstock is substituted with cheaper
western or eastern Canadian oil. The remaining 50 percent of foreign intake is from the US
(16.7 Mbpd), Congo (2.7 Mbpd), Ivory Cost (2.6 Mbpd) and Saudi Arabia (86.7 Mbpd), and is less
expensive for the refinery than any Canadian option. The difference between AB Light via new
pipeline and Saudi Arabia light is $4.16 per bbl.
NL’s North Atlantic Refining’s foreign crude slate was substituted by 60 percent with nearby
Canadian offshore production. US Louisiana LLS and oil from Denmark are not substituted as the
former is $3.27 per bbl cheaper than Canadian offshore and the latter is cheaper by $0.55 per
bbl.
The crude flows in the Expanded Access scenario are illustrated in Figure 4.7.
Figure 4.7: Canadian Supply to Central and Eastern Refineries – Expanded Access (Mbpd)
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The availability and usage of crude and transportation infrastructure by central and eastern
refineries is illustrated in Figure 4.8. Canada has enough light oil to be used in the eastern and
western refinery markets. As mentioned above, after all foreign oil being substituted, there is
still 330 Mbpd of light oil available in the western and eastern parts of the country. The amount
of SCO and Bitumen used by the eastern refinery market is small.
Figure 4.8: Availability and Usage of Crude and Infrastructure – Expanded Access (Mbpd)
Mbpd
0 200 400 600 800 1000 1200 1400
AB Light 522.0
292.5
SK Light 149.8
130.7
AB SCO 896.8
164.1
Crude
AB Heavy 125.6
72.5
SK Heavy 225.5
0.0
AB Bitumen 1423.3
53.2
Portland-Montreal PL 270.8
0.0
Line 9 PL 285.0
119.6
Rail 255.0
0.0
Note: The volumes shown for Mainline (Line 78 and Line 5) represent Canadian crudes for Canadian refineries. The figure does
not show movements in the Mainline of Canadian or US crudes destined for US refineries.
In terms of infrastructure, several conclusions stand out. First, with new pipeline infrastructure
being in place and used by Valero, Line 9 becomes underused. Simultaneously, there is zero
usage of rail from west to east and the Portland-Montreal pipeline. If Valero’s refinery is
modelled to use a mix of Line 9 (to its capacity), tankers (to their planned capacity) as well as the
new infrastructure pipeline, the new infrastructure pipeline usage would drop from 305.6 Mbpd
to 156.6 Mbpd. Rail and the Portland-Montreal Pipeline would not be needed. This is due to rail
being more expensive than pipeline delivery. In addition, eastern offshore oil production in the
Montreal refinery via the Portland-Montreal Pipeline is $0.48 per bbl more expensive than AB
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Light via the Mainline and Line 9, and $1.87 per bbl more expensive via the new infrastructure
pipeline.
Cost of Feedstock
The feedstock costs varied across all examined refineries. This is illustrated in Table 4.2.
In ON, under the Expanded Access scenario, as no oil is displaced, there is no difference to the
Base Case.
For the other three provinces, the partial substitution of more expensive foreign oil would save
$317.4 million on feedstock annually.
For Suncor Energy, the difference in costs is driven by using AB Light ($59.97 per bbl) and SK Light
($57.75 per bbl) instead of oil from US WTI ($63.87 per bbl), Michigan ($61.96 per bbl), and
Azerbaijan ($63.59 per bbl). In fact, AB Light and SK Light are cheaper than any other foreign light
oil supplied to Suncor Energy’s refinery in the Base Case, except oil from the Bakken. The
difference between AB Light and North Dakota is $3.31 per bbl.
The Valero refinery in Lévis is the largest benefactor in this scenario, with potential savings of
$106 million per year (or 2.1 percent). The largest driver for the decrease is the cost difference
of oil from AB ($59.03 per bbl), via new infrastructure pipeline, and crude from Algeria ($60.17
per bbl) and Kazakhstan ($59.77 per bbl). Recall that these two countries represent 86 percent
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of foreign intake for this refinery. Overall, AB Light is cheaper than any foreign light oil at Valero’s
gate, except for US Texas Eagle Ford ($47.98 per bbl).
NB and the Irving Oil Refinery is the second-largest benefactor as its feedstock cost decreases by
$100.4 million per year. This represents a decrease in cost of 1.7 percent. On the heavy oil side,
Irving Oil could benefit as AB Heavy costs $47.57 per bbl (transported via the new infrastructure
pipeline route) versus heavy oils from the Ivory Coast ($54.41 per bbl) and Colombia ($48.13 per
bbl). On the light oil side, AB Light ($60.62 per bbl) and Eastern Offshore Light ($58.83 per bbl)
are less expensive than 6 of the 13 imported crude brands – US WTI ($63.54 per bbl), Nigeria
Bonga ($61.53), and Azerbaijan ($62.77), to name a few. Saudi Arabia oil, which accounts for
40 percent in imports, is very competitive in price at the refinery gate to be substituted ($56.46
per bbl).
North Atlantic refinery’s cost of feedstock would decrease by almost $48.15 million annually if
foreign crude was substituted entirely with eastern offshore crude, as domestic offshore crude
($58.73 per bbl) is cheaper than any 2016 foreign crude in the Base Case except for US Louisiana
LLS ($55.46 per bbl) and Denmark DUC ($58.19 per bbl).
Emissions
Based on the results of the modelling, total upstream, transportation and refining emissions
decrease in this scenario and will equal 2.1 million tones CO2eq (MTCO2eq) or 5.1 percent from
the Base Case. In absolute terms, it is a decrease from 35.87 MTCO2eq to 33.83 MTCO2eq. This
difference represents how much emissions would increase/decrease globally if substitution was
to happen. It is important to note that this decrease represents a global emission decrease, as
these emissions reductions are not all realized within Canadian borders.
The major driver for the emissions decrease is overall lower upstream emissions of Canadian light
oil versus the imported slate (by 1.96 MTCO2eq). However, emissions in both refining and
transportation are also lower in this scenario compared to the Base Case, by a total of 0.084
MTCO2eq (0.068 MTCO2eq for midstream, and 0.016 MTCO2eq for transportation). The detailed
information can be found in Appendix F in Table F.2.
Figure 4.9 illustrates the difference between the Base Case and Expanded Access scenario, by
refinery. Emissions are also divided by upstream, refining (midstream) and transport.
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Figure 4.9: Expanded Access and Base Case Emissions (tones CO2eq per year)
10,000,000
9,000,000 Global-wide Total Emissions:
8,000,000
-2,048,275 tones CO2eq Annually
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-
Base
Base
Base
Base
Base
Base
Base
Base
Scenario
Scenario
Scenario
Scenario
Scenario
Scenario
Scenario
Scenario
Imperial Oil Shell Canada Suncor Imperial Oil Suncor Valero Irving Oil North
Energy Energy Atlantic
Refining
ON QC NB NL
For Suncor Energy’s refinery in Montreal, the increase in emissions is linked to predominantly
upstream activities, and less so, to midstream and transportation. The average of foreign oil total
emissions intensity is 54.76 kg CO2eq/bbl in the Base Case, while AB Light is 64.99 kg CO2eq/bbl
at the gate of this refinery.
For Valero’s refinery, full substitution of foreign oil decreases total emissions by 10.4 percent,
driven by lower emissions on the upstream side. The average foreign crude emissions intensity
is 77.48 kg CO2eq/bbl, while AB Light is 65.47 kg CO2eq/bbl. For reference, Algeria’s Saharan
Blend, which at 91.1 Mbpd is the largest foreign intake for Valero, has total emissions intensity
of 92.9 kg CO2eq/bbl at refinery outlet gate.
Irving Oil’s emissions profile decreases by 7.6 percent. The decrease occurs in all the three
components – upstream, midstream and transportation. Recall, that in this scenario all
substituted oil comes from the west by new infrastructure pipeline. Average foreign crude
emissions intensity average is 86.07 kg CO2eq/bbl, while AB Light via the new pipeline is 66.04
kg CO2eq/bbl and the Eastern offshore average is 37.7 kg CO2eq/bbl. The western Canadian
crude emissions profile was lower than 7 of 14 foreign crudes which were imported in the Base
Case. Eastern offshore crude had lower emissions from any other crude oil in the Base Case,
except for Azeri Light.
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The largest decrease of emissions stemmed from the North Atlantic Refinery, with a significant
24 percent reduction in total emissions, all of which is derived from upstream (31% drop) and
transportation activities; midstream activities, on the other hand, experience an increase in
emissions. Total transportation emissions for the refinery decrease by 56 percent compared to
the Base Case. This is due in part to the proximity of the upstream offshore activities to the
refinery. Average foreign crude total emissions are 83.96 kg CO2eq/bbl, while Eastern offshore
crude at this refinery gate is 36.72 kg CO2eq/bbl.
The difference in the weighted average kg CO2eq per barrel per refinery is illustrated in
Figure 4.10. As different refineries increase or decrease their total intensity (upstream,
transportation and midstream), the total decrease on the Canadian level is 5.2 kg CO2/bbl. To
obtain each refinery’s weighted average increase or decrease of emissions (kg/bbl), each
refinery’s absolute increase or decrease of emissions (kg/bbl) was multiplied by share of intake
of the refinery in total central and eastern refineries crude intake.
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Crude Flows
Figure 4.11 illustrates the crude intakes for all the refineries in the Current Reality scenario. As
previously mentioned, the existing transportation infrastructure allows substitution of foreign
crude in the volume of 279.8 Mbpd (47 percent). This includes an additional 119.7 Mbpd of light
crude from western Canada, as well as 160 Mbpd of light oil from eastern Canadian offshore
assets. The modelling results in the usage of 93 percent of available light oil from the eastern
offshore (216.9 Mbpd), 100 percent of SK Light (149.7 Mbpd) and 31 percent of AB Light
(160.5 Mbpd). The remaining 53 percent of foreign crude is cheaper than Canadian supply
options. In total, scenario modelling results in 534.2 Mbpd of crude supply from Canadian
western provinces, 217.6 Mbpd from Canadian eastern offshore assets, and 321.3 Mbpd from
foreign sources.
It is important to note that 361.6 Mbpd of light oil remains available in western Canada after
supplying the above-mentioned volumes to central and eastern refineries and 17.5 Mbpd of light
oil remains available in eastern Canada.
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Figure 4.11: Total Crude Intake for Central and Eastern Refineries – Current Reality (Mbpd)
Refining
Atlantic Scenario 57.2 35.9
North
NL
A detailed review of crude substitution per refinery is illustrated in Table E.3 in Appendix E. While
it is not realistic to review all the transactions, it is prudent to discuss the highlights. If foreign oil
is not substituted, the reason is it was cheaper than any of the available Canadian supply under
consideration (western and eastern) unless stated otherwise.
In ON, none of North Dakota’s Bakken oil (58.1 Mbpd) is displaced as it is cheaper than AB Light
or SK Light by $1.59-$3.69 per bbl.
In QC, the dynamics are a little more complex. Suncor Energy’s refinery in Montreal is modelled
to proceed using Enbridge Mainline and Line 9 to satisfy its crude intake. North Dakota’s Bakken
(48 Mbpd) is also not substituted, while the mix of crude in the total volume of 55.1 Mbpd from
US Michigan, US WTI, Azerbaijan, Norway, and UK are displaced with AB Light brought via
Mainline and Line 9. For reference, the cost of feedstock at the refinery gate for AB Light oil is
$1.38 per bbl cheaper using a new pipeline, based on projected tolls and current Enbridge tolls.
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The Valero refinery in Lévis is modelled to use the Enbridge Mainline, Line 9 and tankers from
Montreal. The competitive price of AB Light and NL Offshore Light at this refinery gate allows,
from a price standpoint, to substitute all its foreign crude, except US Texas Eagle Ford. However,
as offshore oil is also used in the Maritimes, the modelling showed not enough available oil from
eastern assets. Thus, in addition to US Texas Eagle Ford, not all Algerian Saharan Blend oil was
substituted (64 percent out of 92.1 Mbpd). In total, 66.6 Mbpd is displaced using AB Light, SK
Light, and NL Offshore Light.
For the Irving Oil refinery in NB, 36 percent of foreign feedstock could be substituted with
cheaper western or eastern oil. The remaining part of the foreign intake, which comes in the
Base Case from several countries, including the US (all by WTI), Saudi Arabia, Ivory Coast, Congo
and others, is kept in the slate as more cost-effective for the refinery. Of the 78.3 Mbpd of
Canadian crude used for substitution, more than half, 45.1 Mbpd, is supplied from eastern
offshore production. The remaining western crude comes by rail and via Mainline, Line 9 and
tanker from Montreal to Saint John.
Colombia heavy crude, US (except for WTI) light, Congo light, Ivory Coast light, Saudi Arabian
light, and Nigeria Usan brands are not displaced as they are cheaper than Canadian alternatives.
The Ivory Coast’s heavy oil volume of 10 Mbpd, though more expensive than AB Heavy, is not
substituted as Line 9 capacity is reached.
NL & Labrador’s North Atlantic Refining’s foreign crude slate was substituted by 60 percent with
nearby Canadian offshore production. US Louisiana LLS and oil from Denmark could not be
substituted as the former is $3.27 per bbl cheaper than Canadian offshore, and the latter is
cheaper by $0.55 per bbl.
The crude flows in the Current Reality scenario are illustrated in Figure 4.12.
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Figure 4.12: Canadian Supply to Central and Eastern Refineries – Current Reality (Mbpd)
The availability and usage of crude and transportation infrastructure by central and eastern
refineries is illustrated in Figure 4.13. Canada has enough light oil to be used in the eastern and
western refinery market. As mentioned above, after all foreign oil being substituted, there is still
379.1 Mbpd of light oil available in the western and eastern parts of the country. The amount of
SCO and bitumen used by the eastern refinery market is small.
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Figure 4.13: Availability and Usage of Crude and Infrastructure – Current Reality (Mbpd)
Mbpd
AB Light 522.0
160.5
SK Light 149.8
149.7
Crude
AB SCO 896.8
164.1
AB Heavy 125.6
57.2
SK Heavy 225.5
0.0
AB Bitumen 1423.3
53.2
Portland-Montreal PL 270.8
0.0
Transportation
Line 9 PL 285.0
285.0
Rail 255.0
12.5
Note: The volumes shown for Mainline (Line 78 and Line 5) represent Canadian crudes for Canadian refineries. The figure does
not show movements in the Mainline of Canadian or US crudes destined for US refineries.
In terms of infrastructure, several conclusions stand out. First, Valero’s tanker fleet and Line 9
becomes used to full capacity. Second, there is zero usage of the Portland-Montreal pipeline.
Third, Line 9 capacity becomes a bottleneck on the path of western crude to NB; however, this is
not a significant bottleneck as 10 Mbpd of heavy oil could not be delivered.
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Cost of Feedstock
Feedstock costs varied across all examined refineries. This is illustrated in Table 4.3.
In ON, under the Current Reality scenario, as no oil is displaced, there is no difference to the Base
Case.
For all other provinces, the partial substitution of more expensive foreign oil drives a total
$209.89 million of savings on feedstock.
For Suncor Energy, cost savings is the same as the Expanded Access scenario (for additional detail
and drivers please see previous scenario).
Valero refinery’s savings on feedstock reach $44.5 million per year or 0.9 percent. The savings
come from using AB Light ($60.68 per bbl) versus Nigeria AKPO ($60.93 per bbl) and Nigeria Brass
River ($61.02 per bbl); SK Light ($58.46 per bbl) versus Kazakhstan ($59.77 per bbl); NL Offshore
Light ($58.68 per bbl) versus Algeria ($60.17 per bbl).
The Irving Oil Refinery is the second-largest benefactor as its feedstock cost decreases by $54.4
million per year. The decrease of costs of feedstock come from using AB Light ($60.94 per bbl)
and Eastern Offshore Light ($58.83 per bbl) instead of US WTI ($63.54 per bbl), Nigeria Bonga
($61.53), Azerbaijan ($62.77), and Norway ($60.02) to name a few. Saudi Arabia oil, which
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accounts for 40 percent of imports, is very competitive in price at the refinery gate to be
substituted ($56.46 per bbl).
The North Atlantic refinery’s cost of feedstock would decrease by $48.2 million annually if foreign
crude was substituted entirely with eastern offshore crude. Cost savings are the same as for the
Expanded Access scenario (for additional detail and drivers please see previous scenario).
Emissions
Based on the results of the modelling, total upstream, transportation and refining emissions
decrease in this scenario by 2.0 million tones CO2eq (MTCO2eq) or 5.7 percent from the Base
Case. In absolute terms, it is a decrease from 35.87 MTCO2eq to 33.84 MTCO2eq. This difference
represents how much emissions would decrease globally if substitution was to happen. It is
important to note that this decrease represents a global emission decrease, as these emissions
reductions are not all realized within Canadian borders.
The major driver for the emissions decrease is overall lower upstream emissions of Canadian light
oil versus the imported slate (by 2.23 MTCO2eq). Transportation emissions are also lower in the
Current Reality scenario by a total of 0.14 MTCO2eq, however, midstream emissions grew by 0.33
MTCO2eq. Detailed information can be found in Appendix F in Table F.3.
Figure 4.14 illustrates the difference between the Base Case and Current Reality scenarios, by
refinery. Emissions are also divided by upstream, refining (midstream) and transport.
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Figure 4.14: Current Reality and Base Case Emissions (tones CO2eq per year)
10,000,000
9,000,000
8,000,000
Global-wide Total Emissions:
7,000,000
6,000,000
-2,035,632 tones CO2eq Annually
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
Base
Base
Base
Base
Base
Base
Base
Base
Scenario
Scenario
Scenario
Scenario
Scenario
Scenario
Scenario
Scenario
Imperial Oil Shell Canada Suncor Imperial Oil Suncor Valero Irving Oil North
Energy Energy Atlantic
Refining
ON QC NB NL
In all ON refineries, emissions stay the same as no substitution of oil is happening. For Suncor
Energy’s refinery in Montreal, the increase in emissions is identical to the Expanded Access
scenario (as the same substitution happens).
For Valero’s refinery, substitution of foreign oil deceases total emissions by 13 percent, on the
upstream side and on the transportation side. The average foreign crude emissions intensity is
77.48 kg CO2eq/bbl, while AB Light is 65.18 kg CO2eq/bbl. For reference, Algeria’s Saharan
Blend, which at 91.1 Mbpd is the largest foreign intake for Valero, has total emissions intensity
of 92.9 kg CO2eq/bbl at refinery gate.
Irving Oil’s emissions profile decreases by 4.5 percent. The decreases occur in the upstream and
transportation emissions, with increases in midstream. The average foreign crude emissions
intensity average is 86.07 kg CO2eq/bbl, while AB Light via Mainline, Line 9 and tanker is 66.62
kg CO2eq/bbl and the Eastern offshore average is 37.7 kg CO2eq/bbl. The western Canadian
crude emissions profile was lower than 7 of 14 foreign crudes which were imported in the Base
Case. Eastern offshore crude had lower emissions from any other crude oil in the Base Case,
except for Azeri Light.
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The largest decrease of emissions stemmed from the North Atlantic Refinery, with a significant
24 percent reduction in total emissions. The emissions decreases are identical to the Expanded
Access scenario.
The difference in the weighted average kg CO2eq per barrel per refinery is illustrated in
Figure 4.15. As different refineries increase or decrease their total intensity (upstream,
transportation and midstream), the total decrease on the national level is 5.2 kg CO2/bbl. To
obtain each refinery’s weighted average increase or decrease of emissions (kg/bbl), each
refinery’s absolute increase or decrease of emissions (kg/bbl) was multiplied by share of intake
of the refinery in total central and eastern refineries crude intake.
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including full democracy, flawed democracy, hybrid regime, and authoritarian (The Economist
Intelligence Unit 2017).
This is a policy-based approach to substituting foreign crude oil in eastern Canadian refineries
meaning that crudes from those states is displaced; it is important to note that more expensive
oil from democratic states are kept in the crude slate of eastern Canadian refineries. This
approach allows CERI to assess the direct impact on costs and emissions tied to substitution of
oil from states that cause international social concerns regarding the treatment of their citizens
or the environment.
Crude Flows
Figure 4.16 illustrates the crude intakes for all the refineries in the International Social Concerns
scenario. As previously mentioned, the existing transportation infrastructure is used to substitute
for foreign crude, 300.4 Mbpd (50 percent). This includes an additional 123 Mbpd of light crude
from western Canada, as well as 177.4 Mbpd of light oil from eastern Canadian offshore assets.
The modelling results in the usage of 100 percent of available light oil from the eastern offshore
(234.5 Mbpd), 100 percent of SK Light (149.7 Mbpd) and 22 percent of AB Light (115.9 Mbpd).
The remaining crude comes from other foreign states. In total, scenario modelling results in
537.5 Mbpd of crude supply from Canadian western provinces, 234.9 Mbpd from Canadian
eastern offshore assets, and 300.7 Mbpd from foreign sources.
It is important to note that 406.1 Mbpd of light oil remains available in western Canada after
supplying the above-mentioned volumes to central and eastern refineries.
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Figure 4.16: Total Crude Intake for Central and Eastern Refineries – International Social
Concerns (Mbpd)
A detailed review of crude substitution per refinery is illustrated in Table E.4 in Appendix E. While
it is not realistic to review all the transactions, it is prudent to discuss the highlights. If foreign oil
is mentioned as not substituted, then it is less expensive than any of the available Canadian
supply under consideration (western and eastern), unless stated otherwise.
In ON, North Dakota’s Bakken oil (58.1 Mbpd) is not displaced, as it comes from the US.
In QC, 4.5 Mbpd from Azerbaijan is displaced with AB Light in Suncor Energy’s refinery in
Montreal. The remaining 98.7 Mbpd originate in democratic countries including the US, the UK
and Norway. The substitution share in Valero is higher than in Montreal; out of 132 Mbpd,
7.2 Mbpd is kept intact as it is supplied from the US. The bulk of imported crude is from Algeria,
Kazakhstan, and Nigeria. This crude slate is substituted with a mix of AB Light, SK Light, and NL
Offshore Light. Western Canadian crude oil is delivered via Enbridge Mainline, Line 9 and tankers,
as well as rail. The rail shipment comprises 50 percent of Valero’s rail offloading capacity
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(29 Mbpd). This is because tankers (between Montreal and Lévis) were used to the full capacity
of 159 Mbpd.
For Irving Oil’s refinery in NB, crude oil from the Ivory Coast, Azerbaijan, Congo, Equatorial
Guinea, Saudi Arabia, and Nigeria, totaling a volume of 152.1 Mbpd, is displaced. The remaining
imported crude originates from the US, Colombia, and Norway. Instead of the displaced foreign
oil, 23 Mbpd are modelled to originate from AB and 129.3 Mbpd from Canadian eastern offshore
assets. Recall, this is not total crude intake but refers to additional volumes.
NL & Labrador’s North Atlantic Refining’s foreign crude slate from Algeria and Nigeria is also
substituted. This amounts to 19.1 Mbpd or 21 percent being substituted with nearby Canadian
offshore production. Foreign oil from the US, Denmark, the UK, and Norway remains in the crude
intake.
The crude flows in the International Social Concerns scenario are illustrated in Figure 4.17.
The availability and usage of crude and transportation infrastructure by central and eastern
refineries is illustrated in Figure 4.18. Canada has enough light oil to be used in the eastern and
western refinery market. As mentioned above, after all foreign oil being substituted, there is still
406.1 Mbpd of light oil available in the western and eastern parts of the country. The amount of
SCO and bitumen used by the eastern refinery market is small.
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Figure 4.18: Availability and Usage of Crude and Infrastructure – International Social
Concerns (Mbpd)
Mbpd
0 200 400 600 800 1000 1200 1400 1600
AB Light 522.0
115.9
SK Light 149.8
149.7
AB SCO 896.8
164.1
AB Heavy 125.6
Crude
57.2
SK Heavy 225.5
0.0
AB Bitumen 1423.3
53.2
Portland-Montreal PL 36.6
Line 9 PL 285.0
264.4
Rail 255.0
50.5
Note: The volumes shown for Mainline (Line 78 and Line 5) represent Canadian crudes for Canadian refineries. The figure does
not show movements in the Mainline of Canadian or US crudes destined for US refineries.
In terms of infrastructure, several conclusions stand out. First, Valero’s tanker fleet is used to full
capacity and becomes a constraint to further substitution of western oil to Valero, while Line 9 is
used to its fullest. Second, rail usage is higher than in the Base Case and grows to 50.5 Mbpd, to
2016 levels of 53 Mbpd – the highest domestic oil traffic during 2014-2016.
Cost of Feedstock
The feedstock costs varied across all examined refineries. This is illustrated in Table 4.4.
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In the course of substitution under the International Social Concerns scenario, two refineries’
feedstock cost decreases while for two others, it increases. In this scenario, refinery cost of
feedstock has an increase of $78.84 million for all central and eastern refineries.
In ON, under the International Social Concerns scenario, there is no difference to the Base Case
as no oil is displaced.
For Suncor Energy’s Montreal refinery, the cost of feedstock decreased by $7.3 million per year
or 0.3%. This is due to the difference in costs between AB Light ($59.97 per bbl) and Azerbaijan
oil ($63.59 per bbl), as well as saving $0.65 per barrel for eastern offshore oil as it is modelled to
be delivered directly to the refinery, bypassing the Portland-Montreal pipeline.
The Valero refinery in Lévis has the highest impact as its annual costs increase by $58.6 million
per year. The increase comes from using AB Light (39 Mbpd @ $60.68 per bbl) via pipeline and
AB Light (38 Mbpd @ $65.88) via rail versus Kazakhstan ($59.77 per bbl) and Algeria ($60.17 per
bbl). SK Light ($58.46 per bbl) and NL Offshore Light ($58.68 per bbl), which are cheaper than
foreign crude, are also used for displacement, but their share in the slate is not enough to
outweigh the cost effects caused by more expensive AB Light.
NB and the Irving Oil Refinery also experience more expensive feedstock costs under the
International Social Concerns scenario – $39.4 million annually. The increase of costs of feedstock
come from using AB Light ($60.94 per bbl) and Eastern Offshore Light ($58.83 per bbl) instead of
the cheaper Saudi Arabia oil ($56.46 per bbl), Nigeria Bonga ($61.53 per bbl) and several others.
Canadian oil is cheaper than some substituted crudes, i.e., Azerbaijan or Equatorial Guinea, but
the sheer volume of Saudi Arabia crude imports in the Base Case drives the negative result for
the refinery.
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North Atlantic refinery’s cost of feedstock would decrease by $11.18 million annually in this
scenario as well. The result comes from the difference of NL Offshore Light ($58.73 per bbl) and
Nigerian oil brands (between $60.15 and $60.31 per barrel).
Emissions
Based on the results of the emissions modelling, total upstream, transportation and refining
emissions intensity decrease in this scenario by 2.8 million tones CO2eq (MTCO2eq) or
7.9 percent from the Base Case. In absolute terms, it is a decrease from 35.87 MTCO2eq to 33.05
MTCO2eq. This difference represents how much emissions would increase/decrease globally if
substitution was to happen. It is important to note that this decrease represents a global
emission decrease, as these emissions reductions are not all realized within Canadian borders.
The major driver for the emissions intensity decrease is overall lower upstream emissions of
Canadian light oil versus the imported slate (by 2.5 MTCO2eq). Transportation and midstream
emissions are also lower in the International Social Concerns scenario by a total of 0.33 MTCO2eq
(midstream by 0.14 MTCO2eq, transportation by 0.19 MTCO2eq). The detailed information can
be found in Appendix F in Table F.4.
Figure 4.19 illustrates the difference between the Base Case and International Social Concerns
scenarios, by refinery. Emissions are also split into upstream, refining (midstream) and transport.
Figure 4.19: International Social Concerns and Base Case Emissions (tones CO2eq per year)
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For Suncor Energy’s refinery in Montreal, the increase in emissions intensity is 1.7 percent in two
components (upstream and midstream) as Azerbaijan oil (35.90 kg CO2eq/bbl) is displaced with
AB Light (64.99 kg CO2eq/bbl). For Valero’s refinery, substitution of foreign oil decreases total
emissions intensity by 12.1 percent due to significant decreases on the upstream side. The
average foreign crude emissions intensity for substituted oil is 93.05 kg CO2eq/bbl, while AB Light
is 65.18 kg CO2eq/bbl and NL Offshore Light is 37.97 kg CO2eq.
Irving Oil’s emissions profile decreases by 16.4 percent. The decrease occurs in all three
components – upstream, transportation and midstream. Average foreign crude emissions
intensity for substituted oil is 92.96 kg CO2eq/bbl, while AB Light via Mainline, Line 9 and tanker
is 66.62 kg CO2eq/bbl and the Eastern offshore average is 37.7 kg CO2eq/bbl. Recall, the latter is
heavily used for substitution in this scenario. The western Canadian crude emissions profile was
lower than 7 of 14 foreign crudes which were imported in the Base Case. Eastern offshore crude
has lower emissions from any other crude oil in the Base Case, except for Azeri Light.
Foreign oil substitution for the North Atlantic Refinery resulted in 13.9 percent reduction in total
emissions. This is due in part to the difference in emissions of eastern Canadian crude oil (36.7
kg CO2eq/bbl) and Nigerian crude oil (116.6 and 90 kg CO2eq/bbl).
The difference in total kg CO2eq per barrel per refinery is illustrated in Figure 4.20. As different
refineries increase or decrease their total intensity (upstream, transportation and midstream),
the total decrease on the Canadian level is 7.2 kg CO2eq/bbl.
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Conclusions by Scenario
Table 5.1 illustrates key conclusions under the four scenarios. Crude flows results include the
additional volumes of western and eastern Canadian supply, as well as the total additional
Canadian crude used and percentage of substituted foreign oil.
Cost of Feedstock
-23 -317 -210 +79
($million)
Emissions (tones CO2eq
Emissions
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Made in Canada
Under the Made in Canada scenario, 100 percent of foreign crude oil is substituted. As such, a
total of 601 Mbpd was used, or an additional 424 Mbpd from western Canada and 177 Mbpd
from eastern Canada.
In terms of costs of feedstock and emissions, overall Canadian refineries save $23 million per
year, as well as reduce emissions by 2.2 MTCO2eq. Of the four scenarios, this scenario ranked
third with regards to cost savings; second with regards to emissions reductions. Not only is NL’s
offshore crude light by type, it is also near refineries utilizing it as feedstock as both the Come By
Chance and Irving Oil refineries are located in Atlantic Canada. It is also 75 percent less intensive
in emissions on the upstream side. Substituting light crude, in general, is cleaner overall than
Base Case foreign crude intake, resulting in a decrease in total emissions of 6.2 percent. Recall,
as CERI is substituting foreign oil by type of crude, if the crude was not substituted by offshore
NL but by SCO from western Canada, the emissions would be higher due to the nature of the
crude oil (additional processing is necessary to produce SCO) and the crude must be delivered
over a longer distance, also resulting in higher emissions.
While western Canadian crude is used in refineries in ON and QC, as well as a portion in NB
feedstock, the remaining refineries and feedstock demands are satisfied with eastern Canadian
oil production. While an expanded infrastructure is required to transport oil in the Made in
Canada scenario, not all existing pipelines and rail would benefit. Some of the infrastructure may
be underused (Line 9) or not used at all. Rail and the Portland-Montreal Pipeline (in its current
flow direction), for example, face uncertain futures. The same is true for the two tankers
currently used by Valero to supply their facility with domestically-sourced crude oil from
Montreal; the expanded pipeline infrastructure would make them redundant under this scenario.
Recall, the expanded infrastructure, transporting oil from Hardisty, AB to Saint John, NB, via
Montréal and Lévis, is operating in conjunction with the existing pipeline infrastructure (Enbridge
Mainline and Line 9). For the refineries which will use new pipeline infrastructure (QC’s Valero
and Irving Oil), transportation emissions for the Base Case are 927.5 thousand tonnes, while in
the Made in Canada scenario, transportation emissions are 862.7 thousand tonnes, a decrease
of 9.3 percent.
QC, on the other hand, would benefit from the Made in Canada scenario, at over $1 billion over
the span of a decade. While many focus on Saint John as a major export point of a new pipeline,
the proposed pipeline passes through Montréal and Lévis, QC. The latter could also benefit as
an export facility.
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With policies such as the Made in Canada scenario, where the solution to the problem is
homemade, excluding other countries and their product, there can often be unintended trade
implications. Table 5.2 illustrates the level of trade between Canada and the nations that Canada
imports foreign oil from. Data is collected from Statistics Canada’s Canadian International
Merchandise trade database (Statistics Canada 2017a) and is categorized by the 6-digit
harmonized system, on the customs basis, in 2016.
From the perspective of the foreign nation, crude oil exports dominate the total merchandise
trade exports from several countries. For example, crude oil exports from Algeria, Azerbaijan,
Equatorial Guinea, Nigeria, and Saudi Arabia make up between 94 and 100 percent of the
countries’ total merchandise exports to Canada. However, from Canada’s perspective, Canada’s
total value of merchandise exports to the countries exceeds $374.8 billion in 2016, with the US
and the UK accounting for $353.9 billion and $16.3 billion, respectively. That being said, not
utilizing a product, particularly with obvious cost advantages, could possibly lead to trade
implications in other goods and services that Canada exports to the listed nations. For example,
while Canada imports crude oil valued at $1.6 billion from Saudi Arabia, it also exports a total
merchandise value of $1.2 billion in other goods and services.
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Expanded Access
Under the Expanded Access scenario, 57 percent of foreign crude oil is substituted economically.
As such, an additional total of 344 Mbpd was used, or an additional 248 Mbpd from western
Canada and 96 Mbpd from eastern Canada. As this is a market-based approach, this suggests
that the remaining 43 percent of the crude slate is more cost competitive than its Canadian
counterparts. Thus, if Canadian oil is more expensive at the refinery gate compared to foreign
oil, in this market-driven scenario, a refinery will prefer cheaper feedstock.
A new pipeline infrastructure would allow the transport of an additional 128.3 Mbpd to central
and eastern refineries from western Canada. This amounts to a 40 percent increase in crude oil
from western Canada compared to the Base Case, this is second to the Made in Canada scenario.
Similar to the Made in Canada scenario, not all transportation modes benefit; existing pipelines
and rail would not benefit. The future is uncertain for rail and the Portland-Montreal pipeline (in
its current flow direction). Line 9, on the other hand, is half used under this scenario.
In terms of costs of feedstock and emissions, overall Canadian refineries save $317 million per
year, as well as reduce emissions by 2.1 MTCO2eq. In terms of cost savings for refineries, this
scenario is the best of all four plausible outcomes, while in terms of emissions it is the third-best
scenario. All component emissions, upstream, midstream and transport, are lower than the Base
Case, showing that Canadian oil and transport infrastructure is, on average, “cleaner” than its
foreign counterpart.
The Expanded Access scenario is the most cost-effective scenario for refineries ($3.2 billion
savings on cost of feedstock over a ten-year period). This translates into higher margins for the
refinery, as well as an increase in provincial and federal corporate taxes (with sales assumed the
same as in the Base Case).
Current Reality
Of the four scenarios, Current Reality represents the closest to status quo, simply a more optimal
solution regarding costs of feedstock. Similar to the Expanded Access scenario, proponents
include transportation and refineries. Both focus on transporting and substituting economic
barrels, adopting a market-based approach. The difference in this case is it uses the existing
transportation infrastructure. This scenario identifies the throughput capacity of existing
pipelines and rail system to provide additional oil from the west to central and eastern refineries.
The remainder is supplied by foreign crude oil from the sources which supplied central and
eastern refineries in 2016.
As such, an additional total of 280 Mbpd was used, or an additional 120 Mbpd from western
Canada and 160 Mbpd from eastern Canada. It allows for the economic substitution of 47
percent of foreign oil.
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No more oil from the west could be transported in this scenario, as Line 9 becomes a constraint.
However, if Line 9 were larger, an additional 10 Mbpd could be sourced economically.
Transporting 120 Mbpd from western Canada is the lowest volume in the four scenarios.
Following a market-based approach, if more western Canadian crude is to be used as feedstock
in central and eastern refineries, additional infrastructure is likely required. Within this scenario,
the future is uncertain for the Portland-Montreal pipeline in its current directional flow and rail
is not required.
In terms of cost of feedstock and emissions, overall Canadian refineries save $210 million per
year, as well as reduce emissions by 2.0 MTCO2eq. In terms of cost savings for refineries, this
scenario is the second-best of all four outcomes, behind Expanded Access. In terms of decreasing
emissions, it ranked last of the four scenarios, however very close to Expanded Access. Emission
intensity decreases on upstream and transport, showing that Canadian oil and infrastructure on
average produces lower emissions than imported oil. Midstream emissions increase in Canada.
As such, an additional 300 Mbpd (above the Base Case) of Canadian crude was used, 123 Mbpd
from western Canada and 177 Mbpd from eastern Canada representing 50 percent of all imports
to central and eastern Canada. While substituting 50 percent of foreign crude, this scenario leads
to a net cost for refineries in the amount of $79 million per year. This is in part due to substituting
large, cheap volumes from nations such as Nigeria and Saudi Arabia, with more expensive crude
oils. Overall emissions are reduced by 2.8 MTCO2eq, putting the scenario in first place in
emissions reduction. Interestingly, this equates to $28/T CO2 eq, below the federal 2022 target
of $50.
Similar to the Made in Canada scenario, there could possibly be trade implications from not
importing crude oil from countries with international social concerns. Table 5.3 illustrates the
level of trade between Canada and those nations.
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Conclusions by Province
This section presents results from a provincial perspective. This is important as the regional
dynamics in ON, QC and Atlantic Canada differ in their foreign intake, transportation modes used
to deliver crude, capacities and other factors.
All four of ON’s refineries have access to Enbridge’s Mainline, and thus, to western Canadian oil.
While they lack access to rail or supply by water, they still have an opportunity to increase their
Canadian share of crude intake. It is interesting to note, however, in three of the four scenarios,
this does not happen. In both market-based scenarios (Expanded Access and Current Reality),
regardless of the level of infrastructure, western Canadian crude cannot beat North Dakota’s
Bakken in price. The price differential with SK Light and AB Light is $1.6 and $3.7 per bbl,
respectively. In International Social Concerns, US Bakken crude is not displaced. When crude is
substituted in the Made in Canada scenario, the results, on a refinery level, are negative as cost
of feedstock increases for all four refineries by $33.7 million dollars. Emissions increase by 0.98
MTCO2eq annually. For greater details regarding the cost of feedstock versus GHG emissions,
refer to Appendix G (Figure G.1).
QC is more complex, particularly due the fact that the dynamics in both refineries in Montreal
and Lévis are different. While both refineries can receive western Canadian crude, Suncor’s
refinery is accessible by pipeline. Valero, on the other hand, is accessible by rail and barge, both
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from Montreal, resulting in higher transportation costs. QC refineries certainly have a more
intricate dynamic, as its two refineries are positioned to substitute large volumes of foreign crude
cost-effectively. Western and eastern Canadian oil, however, are competitively priced at both
refineries’ gates compared to number of foreign crudes.
Suncor Energy’s Montreal refinery was found to always benefit on the refinery level in course of
substitution, irrespective of a scenario. In the market-based scenarios, it gains $62.1 million
dollars of savings annually from the costs of feedstock, followed by full substitution (Made in
Canada) at $20.2 million in savings, and by partially-displaced (International Social Concerns) at
$7.3 million in savings. The mix of western and eastern crude yields results in lower costs than
just using western oil for displacement. The cost of AB Light is close to NL Offshore Light –
approximately $1 per bbl higher – while SK Light is $1.24 per bbl cheaper than NL Offshore Light.
The Suncor refinery has full access to Line 9, whose capacity is much higher than the capacity of
the refinery. The cost of western Canadian crude, as well as eastern Canadian crude, is lower
than all foreign oil, except North Dakota’s Bakken. Suncor Energy’s refinery is set to substitute
all 55 Mbpd of foreign oil, except for 48 Mbpd from North Dakota. In all four scenarios,
substitution brings increases in emissions from as low as 0.05 to as high as 1 MTCO2eq annually.
Valero’s refinery enjoys different transportation options of oil supply from Canada. It has access
to at least half of Line 9’s capacity, rail offloading capacity of 60 Mbpd, as well as access to eastern
offshore supply by water. The refinery benefits in all scenarios except International Social
Concerns. Costs of feedstock savings range from $44.5 to $106 million dollars per year. Costs of
feedstock, however, increase in the International Social Concerns scenario ($58 million dollars)
driven by high costs of rail, which had to be modelled as Valero’s tanker capacity had been
exhausted, while Line 9 capacity was remaining. If the tanker’s capacity was expanded, the
International Social Concerns scenario would also yield positive cost-of-feedstock results. NL
Offshore Light is more competitive than AB Light by $2 per bbl via Mainline and tanker, and by
$0.34 per bbl via new pipeline and tanker. SK Light is cheaper than NL Offshore Light via Mainline
by $0.22 per bbl. For greater details regarding the cost of feedstock versus GHG emissions, refer
to Appendix G (Figures G.2 and G.3).
A large portion of foreign crude oil is displaced in all four scenarios for this refinery. In market-
driven cases, 6.3 Mbpd (Expanded Access) to 39.4 Mbpd (Current Reality) of foreign crude
remains in the intake crude slate, underlining the competitiveness of Canadian crude in the
region. In International Social Concerns, 7.2 Mbpd of imported oil remains in the intake. In all
cases, emissions decrease for this refinery and vary from 0.98 to 1.3 MTCO2eq annually. In terms
of a QC aggregate, this effect negates the increase in Suncor Energy’s refinery in three of four
scenarios and leads to a decrease in emissions province-wide.
NB’s Irving Oil saves on costs of feedstock in both market-driven scenarios ($54.4 million in the
Current Reality scenario to $100.4 million in the Expanded Access scenario) while its feedstock
costs increase in both policy-driven scenarios (by $40 million in the International Social Concerns
scenario and $51.1 million in the Made in Canada scenario). NL Offshore Light gains an advantage
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over AB Light at this refinery. The latter is transported farther, adding $2.11 per bbl via Mainline,
Line 9 and tanker, or $1.79 per bbl via a new pipeline, compared to what NL Offshore Light costs
to Irving Oil. However, Line 9 is a bottleneck. After satisfying QC’s refineries, 33.2 Mbpd is
transported to Irving Oil. The AB Light advantage also decreases compared to foreign crudes, it
is cost-competitive compared to four foreign crude oils. SK Light is cheaper than AB Light and
more competitive, but its volume is limited as was modelled to be used primarily in ON. More
detail regarding the cost of feedstock versus GHG emissions can be found in Appendix G (Figure
G.4).
In the Current Reality scenario, 140 Mbpd of foreign crude remains in the refineries crude slate,
while 108 Mbpd of foreign crude are used under the Expanded Access scenario. This is in part
because Irving Oil’s crude slate in the Base Case is cheap and, thus, costlier to substitute. Saudi
Arabia’s crude, making up most of the facilities’ diverse crude slate, is cost competitive at the
refinery gate, even compared to adjacent supply from NL. It is interesting to note that in two
scenarios, more western crude is purchased by the refinery due to competitive tolls of a new
pipeline.
In all four cases, emissions decrease, varying from 0.3 to 1.18 MTCO2eq annually.
In terms of volumes displacing foreign crude oil, the market-based approaches allow to displace
53.8 Mbpd of foreign crude out of 89.9 Mbpd. In the International Social Concerns scenario,
19.1 Mbpd of oil is substituted.
Inter-scenario Comparisons
The main objective of the modelling exercise in this study was to compare the four scenarios to
the Base Case. The two inter-scenario comparisons that really stand out are 1) Expanded Access
and Current Reality and 2) Expanded Access and Made in Canada. Both share a critical
uncertainty, allowing for an interesting comparison between different scenarios. For example,
while Expanded Access assumes an expanded infrastructure and Current Reality assumes existing
infrastructure, both also assume a market-based approach or economic pull. Within the market-
based approach, how many additional economic barrels of oil can be transported from western
and eastern Canada with the expanded infrastructure? Regarding the other comparison,
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Expanded Access and Made in Canada share the same expanded infrastructure, but differ as the
former is a market-based approach while the latter is a policy-based approach. This comparison
looks at the implications if refineries had more transport infrastructure and society/policy push
for Canadian barrels beyond what the market suggests.
• In terms of crude flows, costs of feedstock and emissions, the Expanded Access scenario
yields results for refineries, as well as for Canada.
• The new pipeline infrastructure allows an additional 128.3 Mbpd of Canadian crude to
be substituted economically to central and eastern refineries from the west. This is in
addition to the movement of crude oil along the existing infrastructure. This is both due
to expanded transportation capacity and more competitive tolls of new pipeline versus
existing Enbridge Mainline and Line 9.
• In total, 64.4 Mbpd more Canadian oil could be sourced in the Expanded Access
compared to the Current Reality scenario, transporting via a more limited existing
infrastructure.
• Cost of feedstock for all refineries is $107.5 million lower in the Expanded Access
scenario than in Current Reality. The scenarios emissions are almost identical.
• In terms of crude flows and emissions, the Expanded Access scenario yields positive
results for refineries, as well as for Canada. In terms of cost of feedstock savings,
Expanded Access is more than 10 times better than Made in Canada, with 3 of 8 better
off economically.
• The Made in Canada scenario results in 257 Mbpd more Canadian crude used than in
the market decision-making behavior of refineries would suggest in the Expanded
Access scenario.
• The total savings of refineries is $23 million in Made in Canada versus $317 million in
Expanded Access. It is important to note that while in Expanded Access, all the
refineries save on feedstock costs, 3 refineries do so in the Made in Canada (Valero,
Suncor Energy in Montreal and North Atlantic for total of $108 million); the other five
refineries’ costs increase by $85 million.
• Emissions decrease is 0.17 MTCO2eq per year larger under the Made in Canada scenario
than under the Expanded Access scenario.
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In North America, Western Canadian heavy crude prices are attached to the price of benchmark
Western Canadian Select (WCS).1 WCS has grown to become a benchmark crude due to its tightly
controlled stream with stringent specifications, supervised by its producers (Suncor, Cenovus,
Canadian Natural Resources, and the former Talisman Energy). This assures refiners receive a
stable, reliable, and consistent heavy crude oil stream with minimal variability; important crude
oil characteristics for refinery operations. WCS is a sour heavy crude oil with an API between
20.5 and 21.5 and sulfur content of approximately 3.5% w/w. However, it’s important to note
that not all bitumen supply is sold at WCS prices.
Since lighter crude is easier to process and yields more desirable light products than heavy crude,
WCS has traditionally been priced at a discount to US light, sweet benchmark West Texas
Intermediate (WTI) at Cushing, Oklahoma. This difference between WTI and WCS is called the
light-heavy differential and historically has varied from $10 to $40 per barrel. The widening of
the heavy oil discount beyond crude quality discount (~$10/bbl) was in the past caused by
infrastructure bottlenecks and refinery demand.
Given that most of the WCS supply is destined for the US Midwest or PADD 2, the main price for
Western Canadian heavy crude oil is then dictated by the refiner’s value of the crude in the US
Midwest. This is in turn dictated by a series of factors including the crude gross product worth,
indicative of the value of refined products in the yield of the total barrel of crude, as well as the
processing costs, transportation costs, refinery margins, and the availability and price of
competing crudes (Hart Energy 2012). Since most of heavy crude oil processed in the US Midwest
is Canadian heavy crude, the price of Canadian heavy crudes is therefore dictated by the
availability of required refining capacity in the area for such crudes.
In recent years, Canadian heavy crude volumes have exhausted the refining capacity in this
market. According to the EIA, US Midwest refineries ran at 94% capacity in 2015, and have
become saturated, as evidenced by the high level of inventories from growing domestic
production (US tight oil) and imports of heavy crude oil from Western Canada (US EIA 2015). If
1
A mix of about 20 heavy conventional and bitumen crudes all sourced from Western Canada. These different
crude oils are blended at the Husky terminal in Hardisty, AB and then diluted with sweet synthetic crude oil
(upgraded bitumen) and gas condensates or naphtha in order to reduce viscosity and facilitate transport.
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this persists, Canadian heavy crudes will need to be sold at steeper discounts to remain
competitive in the US Midwest market. Potential Canadian heavy crude discounts due to
saturation supports the debate of opening new markets. This was partially materialized in recent
years, as Canadian bitumen started to be exported to the US Gulf Coast, rising to near
400,000 bpd.
As US tight oil supply grew in recent years, the US Midwest was the most affected. From 2011,
light crude has oversupplied the US Midwest, resulting in regional oil price discounts. The price
of crude in the US Midwest, as measured by West Texas Intermediate (WTI), has averaged $17
below comparable crude oils on the US Gulf Coast in 2012. Over the last few years, however,
planned pipeline projects2 between the US Midwest and the US Gulf Coast have become
operational, thus alleviating excess crude supply, boosting prices for WTI and other inland crudes
and realigning them to be more comparable with US Gulf Coast and global prices.
Eventually though, strong supply growth for light crude combined with limited outlets led to
lower oil prices for both inland and US Gulf Coast crudes in the range of $3 or more per barrel
against a global benchmark Brent. This led to changes in the US policy prohibiting the export of
its domestic crude oil offshore, and in 2015 the US government lifted the 40-year ban on crude
oil exports. Given the regional interdependency of WCS and other Canadian crudes to WTI, a
situation that once was thought to provide Canadian producers and transportation providers a
financial incentive to reach new markets – ones that reflect global crude prices instead of
discounted ones – no longer applies. But the situation does highlight the risk of a lack of market
diversity and the need for options, providing a strong case for infrastructure projects that will
provide global access for Canadian crudes.
Short-term fluctuations and even potential short-term gains in prices for Canadian crudes
through accessing other global markets might be enough incentive to a producer. But a long-
term gain of strategically placing Canada as a global supplier of crude oil is more important.
Recent empirical research suggests that there is significant symmetric dependence between
different global crude oil prices of different qualities, suggesting that oil prices are linked with
the same intensity both during bull runs (price spikes) and bear markets (price declines) thus
supporting the hypothesis that the oil market is one great pool as opposed to being regionalized
in nature (Reboredo 2011).
Other studies of crude oil price differentials have found that price differentials between crude
oils follow a stationary process3 even for pairs of crudes with very different qualities. This
2
These include the Seaway pipeline expansion and twinning (increasing from 150,000 bpd to 400,000 bpd in 2013
and 800,000 bpd in 2014) and the Gulf Coast Pipeline Project (700,000 bpd in 2013). Other projects that are
important for western Canadian producers as well as producers in North Dakota and Montana include the
Flanagan South expansion (160,000 bpd in 2014) and greater rail capacity.
3
This refers to a situation where the random movement in the main variable in question has a probability
distribution that does not change when shifted in time or at different points in time. Therefore, mean and variance
remain constant over time while there might be variation in the variable, in this case the price differential.
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conclusion once again suggests that markets for oil are global in nature as mentioned above.
However, it is also found that price differentials between various prices of crude follow different
dynamics depending on certain features such as the types of crude oil, and whether crude is
connected to a futures market such as NYMEX for WTI and ICE for North Sea Dated Brent. In the
case of crude oils with different qualities, different price adjustments occur compared with those
for similar quality crudes. Crude oils of different qualities are shown to have a threshold such
that the price adjustment process to the long-term equilibrium follows a non-linear process.
Thus, the differentials return to long-run equilibrium after the price differentials rise above a
certain threshold. This can reflect on refiners’ willingness to take heavy/sour crude types at a
large enough discount so that it compensates refiners for running their facilities on less
suitable crudes. However, this threshold is not present across different crude types that have
established futures markets (think Dubai medium sour crude and WTI), which indicates that
crude oils with highly tradable contracts reduce transaction costs and facilitate arbitrage. It is
also noted in this study that bottlenecks such as in Cushing, Oklahoma can lead to decoupling in
prices on a global basis as well as a sharp narrowing of light-heavy differentials. Finally, these
dislocations are found to be short-lived and the market returns to equilibrium (Fattouh 2010).
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
-
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
MB Light SK Light AB Light NL Offshore light
AB SCO SK Heavy AB Heavy AB Bitumen
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Eastern Canadian Crude Oil Imports
Overall, the forecasted light oil supply is expected to decrease from 943 Mbpd in 2017 to
852 Mbpd in 2020. SK Light is stable over time and increases from 159 Mbpd to 173 Mbpd over
the same period. AB Light, however, is projected to diminish in volume from 522 Mbpd to
431 Mbpd. NL Offshore Light grows in the next several years, primarily due to Hebron project
supply. It is subsequently projected to decrease from 234 Mbpd in 2017 to 220 Mbpd in 2027.
Table 5.4 illustrates the total usage for crude oil used for substitution – AB Light, SK Light, and NL
Offshore Light – by scenario. In all years, except 2027 for NL Offshore Light, there is always
enough Canadian oil for any scenario. This suggests that conclusions made in the study are valid
not just for 2016 (if substitution was to happen), but for at least 10 years in the future. The
validity of these conclusions relies on the ceteris parabis concept.
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Table 5.4: Comparison of Availability of Light Oil (after subtraction of demand in the west)
with Demand by the Central and Eastern Refineries, by Scenario
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
AB Light
Availability 522 498 482 468 450 446 435 434 431 430 431
Made in Canada 391 391 391 391 391 391 391 391 391 391 391
International Social
116 116 116 116 116 116 116 116 116 116 116
Concerns
Expanded Access 293 293 293 293 293 293 293 293 293 293 293
Current Reality 161 161 161 161 161 161 161 161 161 161 161
SK Light
Availability 150 150 150 150 151 152 155 157 159 161 164
Made in Canada 150 150 150 150 150 150 150 150 150 150 150
International Social
150 150 150 150 150 150 150 150 150 150 150
Concerns
Expanded Access 131 131 131 131 131 131 131 131 131 131 131
Current Reality 150 150 150 150 150 150 150 150 150 150 150
NL Offshore Light
Availability 234 284 308 304 304 268 278 248 244 236 220
Made in Canada 234 234 234 234 234 234 234 234 234 234 234
International Social
234 234 234 234 234 234 234 234 234 234 234
Concerns
Expanded Access 153 153 153 153 153 153 153 153 153 153 153
Current Reality 217 217 217 217 217 217 217 217 217 217 217
Final Remarks
The ability of CERI to conduct this analysis is based on the availability of data. For refineries in
Canada, this is particularly challenging as there is a widespread desire to keep detailed
information confidential. Governments and stakeholders struggle with making evidence-based
decisions due to the challenge of finding data in Canada. For now, the concerted efforts of CERI
have developed a comprehensive dataset that can be used to answer different questions about
this market.
Canada is also debating the best approaches to addressing climate change by reducing carbon
dioxide emissions. This study provides information that suggests decisions that create higher
emissions in Canada can contribute to lower global emissions. Is this solution something to be
considered by Canadian governments?
Finally, the idea of substituting domestic products for imports has always been debated. Where
do the benefits occur within the Canadian federation and at what cost? In this case, changing
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the trade balance to create an increased trade surplus may be of net benefit to the country but
it is a complicated question that is best answered through additional analysis.
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An Economic and Environmental Assessment of 133
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An Economic and Environmental Assessment of 137
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An Economic and Environmental Assessment of 139
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January 2018
140 Canadian Energy Research Institute
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An Economic and Environmental Assessment of 141
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Eastern Canadian Crude Oil Imports
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January 2018
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Eastern Canadian Crude Oil Imports
January 2018
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January 2018
An Economic and Environmental Assessment of 147
Eastern Canadian Crude Oil Imports
January 2018
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Crude oil Is this Is this an Individual crude oil Crude Assumptions/reasons for selecting individual crude oil brand/blend as a
brand/blend name used existing brand/blend category proxy for GHG emissions modelling
name as used for crude crude oil selected as proxy
in the report flows blend? for GHG emissions
modelling? modelling
NL Light Yes Modelled Hibernia Light Sour Represents Eastern Canadian light offshore oils.
Offshore by CERI
ON Light Yes Modelled Mixed Sweet Blend Light In the absence of data that specifies which fields constitute ON Light crude
by CERI and Mixed Sour oil blend, AB Light (consisting of Mixed Sweet Blend and Mixed Sour
Blend Blend) was used as a proxy for the purposes of modelling.
AB SCO Yes Modelled Synthetic Sweet Light Sweet Represents a typical AB SCO - extra-heavy and high-sulfur bitumen mined
by CERI Blend SCO from the Athabasca oil sands (AB) that is upgraded to a light sweet
synthetic crude oil before transport to the refinery (CARB 2015b).
AB Heavy Yes Modelled Western Canadian Heavy Sour Represents conventional heavy sour crude oils from the heavy oil belt
by CERI Blend regions of AB (CARB 2015b; COLC 2016; Crude Quality Inc. 2017).
AB Bitumen Yes Modelled Western Canadian Dilbit Western Canadian Select is a blend of conventional and oil sands
by CERI Select production that represent AB dilbit (COLC 2016; Crude Quality Inc. 2017).
Foreign Crude Oils
Algeria Yes Yes Algeria Saharan Ultra-Light Saharan Blend represents Algerian light crudes and is an actual crude oil
Saharan Blend Sweet brand imported to Canada.
Blend
Azerbaijan Yes Yes Azerbaijan Azeri Light Sweet Azeri Light represents Azerbaijanian light crudes and is an actual crude oil
Azeri Light Light brand imported to Canada.
Colombia Yes Yes Colombia Castilla Heavy Sour Castilla Blend represents Colombian heavy crudes and is an actual crude
Castilla Blend Blend oil brand imported to Canada.
Congo Djeno Yes Yes Congo Djeno Blend Medium Djeno Blend represents Congolese medium crudes and is an actual crude
Sweet oil brand imported to Canada.
Denmark Yes Yes Denmark Dansk Light Sweet In the absence of publicly available data for the offshore DUC Blend, light
DUC Blend sweet Denmark Dansk Blend (collected from some of the same fields in
the North Sea) was used as a proxy for the purposes of modelling (Wang
et al. 2016).
Equatorial Yes Yes Equatorial Guinea Medium Zafiro Blend is one of the actual Equatorial Guinea medium crude oil
Guinea Zafiro Zafiro Blend Sweet brands imported to Canada and was used as a proxy for the purposes of
modelling.
Ivory Coast Yes Yes Ivory Coast Baobab Heavy Baobab represents Ivorian heavy crudes and is an actual crude oil brand
Baobab Sweet imported to Canada.
January 2018
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Eastern Canadian Crude Oil Imports
Crude oil Is this Is this an Individual crude oil Crude Assumptions/reasons for selecting individual crude oil brand/blend as a
brand/blend name used existing brand/blend category proxy for GHG emissions modelling
name as used for crude crude oil selected as proxy
in the report flows blend? for GHG emissions
modelling? modelling
Ivory Coast Yes Yes Ivory Coast Espoir Light Sweet Espoir represents Ivorian medium-light crudes and is an actual crude oil
Espoir brand imported to Canada.
Kazakhstan Yes Yes Kazakhstan Tengiz Ultra-Light In the absence of publicly available data for the CPC Blend, Kazakhstan
CPC Blend Sour Tengiz that represents approximately 60% of the Blend was used a proxy
for the purposes of modelling (Chevron Corporation 2017).
Nigeria Akpo Yes Yes Nigeria Akpo Blend Ultra-Light Akpo Blend is an actual Nigerian crude oil brand imported to Canada.
Blend Sweet
Nigeria Yes Yes Nigeria Bonga Medium Bonga is an actual Nigerian crude oil brand imported to Canada.
Bonga Sweet
Nigeria Yes Yes Nigeria Bonny Light Light Sweet Bonny Light is an actual Nigerian crude oil brand imported to Canada.
Bonny Light
Nigeria Brass Yes Yes Nigeria Brass River Light Sweet Brass River is an actual Nigerian crude oil brand imported to Canada.
River
Nigeria Qua Yes Yes Nigeria Qua Iboe Light Sweet Qua Iboe is an actual Nigerian crude oil brand imported to Canada.
Iboe
Nigeria Usan Yes Yes Nigeria Usan Medium Usan is an actual Nigerian crude oil brand imported to Canada.
Sweet
Norway Yes Yes Norway Ekofisk Light Sweet Ekofisk is an actual Norwegian crude oil brand imported to Canada.
Ekofisk
Norway Yes Modelled Norway Oseberg Light Sweet In the absence of data regarding a specific Norwegian light crude brand
Norwegian by CERI imported to Canada, light sweet Norway Oseberg was used as a proxy for
Crude the purposes of modelling.
Saudi Arabia Yes Modelled Saudi Arabia Light Sour In the absence of data regarding a specific Saudi Arabian light crude brand
Light by CERI Ghawar imported to Canada, light sour Saudi Arabia Ghawar that has the highest
production volume was used as a proxy for the purposes of modelling
(CARB 2015b).
UK Brent Yes Yes UK Brent Light Sweet Brent is an actual crude oil brand imported to Canada from the UK.
UK North Sea Yes Modelled UK Brent Light Sweet In the absence of data regarding a specific UK North Sea light crude brand
by CERI imported to Canada, the UK Brent collected from the offshore fields in the
North Sea was used as a proxy for the purposes of modelling.
January 2018
150 Canadian Energy Research Institute
Crude oil Is this Is this an Individual crude oil Crude Assumptions/reasons for selecting individual crude oil brand/blend as a
brand/blend name used existing brand/blend category proxy for GHG emissions modelling
name as used for crude crude oil selected as proxy
in the report flows blend? for GHG emissions
modelling? modelling
US Bakken Yes Yes US Bakken (No Light Sweet Represents light sweet crude oils from the Williston basin (Bakken play) in
(ND) Flare) North Dakota (CARB 2015b; Wang et al. 2016). US Bakken is an actual
crude oil brand imported to Canada. US Bakken (No Flare) was used as a
proxy for the purposes of modelling.
US Eagle Ford Yes Yes US Eagle Ford (TX) Ultra-Light Represents light sweet crude oils from the complex Eagle Ford play in
(TX) Sweet Texas where production zones range from oil to gas (Wang et al. 2016).
Eagle Ford (TX) is an actual crude oil brand imported to Canada.
US LLS (LA) Yes Yes US LLS (LA) Light Sweet Represents light sweet crude oils from the coast of Louisiana (Lake
Washington field) (Wang et al. 2016). US Louisiana Light Sweet (US LLS) is
an actual crude oil brand imported to Canada.
US Thunder Yes Yes US Thunder Horse Light Sour Represents light sour crude oils located offshore in the US Gulf of Mexico
Horse (LA) (LA) (Wang et al. 2016). US Thunder Horse is an actual crude oil brand
imported to Canada.
US Michigan Yes Modelled US Bakken (No Light Sweet In the absence of publicly available data for the US Michigan Light Sweet
Light (MI) by CERI Flare) crude oil, US Bakken (No Flare) was used as a proxy for the purposes of
modelling.
US WTI Yes Yes US WTI Light Sweet Represents light sweet crude oils from the Permian basin (Wang et al.
2016). US West Texas Intermediate (US WTI) is an actual crude oil brand
imported to Canada.
Data Sources: (Enbridge 2016b, 2017f; CARB 2015b; Chevron Corporation 2017; COLC 2016; CrudeMonitor.ca (Crude Quality Inc. 2017); Wang et al. 2016), CERI assumptions.
Notes:
1. Mixed Sweet Blend as transport commodity includes Pembina, Gibson Light, Joarcam, Kinder Morgan Sweet, Pembina Sweet Blend, Peace Pipe Light, Rangeland Sweet,
Redwater, Rainbow Light, Federated, HCT Sweet Blend, Gibson Mixed Blend Sweet, Light Smiley, MB Sweet Tundra, Plains Sweet Regina, and BP SW as receipt commodities
(Enbridge 2016b, 2017f; COLC 2016).
2. Mixed Sour Blend as transport commodity Includes Gibson Sour, Kinder Morgan High Sour, Pembina High Sour, Peace Pipe Sour, Rangeland Sour, Gibsons High Sour, Central
AB Pipeline, Pembina Light Sour, Gibson Light Sour, Joarcam, Kinder Morgan Low Sour, Pembina Low Sour, Gibsons Low Sour, and Hardisty Light as receipt commodities
(Enbridge 2016b, 2017f; COLC 2016).
3. Light Sour Blend as transport commodity includes MB Light, South East Sask, Tundra Light Sour, ICG Light Sour, and Moose Jaw Tops as receipt commodities (Enbridge
2016b, 2017f; COLC 2016).
4. Midale as transport commodity includes MB Medium and Wispur Midale as receipt commodities (Enbridge 2016b, 2017f; COLC 2016).
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Table C.2: Results of Upstream and Midstream GHG Emissions Modelling for Canadian and Foreign Crude Oils Used in the Study
Crude oil GHG emissions,
Input data sources and assumptions for GHG emissions calculations
brand/blend kg CO2 eq/bbl crude
name Upstream Midstream Upstream1 Midstream2
Canadian Crude Oils
Mixed Sweet 40.8 15.3 Input data: California ARB (CARB 2015b). Input data: CrudeMonitor.ca mini-assay (Crude Quality
Blend Input data use average crude production parameters Inc. 2017) converted to the PRELIM format3. Default
for AB to model conventional light and medium blends refinery configuration: hydroskimming.
from Western Canada, due to the lack of data for
specific fields that constitute each crude oil blend
(CARB 2015b).
Mixed Sour 42.0 27.3 Input data: California ARB (CARB 2015b). Input data: CrudeMonitor.ca mini-assay (Crude Quality
Blend Input data use average crude production parameters Inc. 2017) converted to the PRELIM format3. Default
for AB to model conventional light and medium blends refinery configuration: medium conversion (FCC & GO-
from Western Canada, due to the lack of data for HC).
specific fields that constitute each crude oil blend
(CARB 2015b).
Light Sour 41.4 32.2 Input data: California ARB (CARB 2015b). Input data: Assay Inventory spreadsheet (PRELIM v1.1),
Blend Input data use average crude production parameters CrudeMonitor.ca assay. Default refinery configuration:
for AB to model conventional light and medium blends medium conversion (FCC & GO-HC).
from Western Canada, due to the lack of data for
specific fields that constitute each crude oil blend
(CARB 2015b).
Midale 49.7 33.9 Input data: California ARB (CARB 2015b). Input data: Assay Inventory spreadsheet (PRELIM v1.1),
Input data use average crude production parameters CrudeMonitor.ca assay. Default refinery configuration:
for AB to model conventional light and medium blends medium conversion (FCC & GO-HC).
from Western Canada, due to the lack of data for
specific fields that constitute each crude oil blend
(CARB 2015b).
Hibernia 12.2 24.2 Input data: Stanford University (Wang et al. 2016), Input data: Assay Inventory spreadsheet (PRELIM v1.1),
ExxonMobil website. ExxonMobil crude assay. Default refinery configuration:
medium conversion (FCC & GO-HC).
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6. For the purposes of the study, Ivory Coast Baobab (API gravity 23.0) was considered as heavy crude oil, rather than medium, therefore, deep conversion (FCC & GO-HC) was
selected as a default refinery configuration.
7. Upstream GHG emissions for Nigeria Bonny Light based on input data provided by four producing companies (SPDC, Chevron, Total E&P, others) differ 2.5 times (CARB
2015b). Upstream GHG emissions outputs based on Chevron data were selected for the purposes of the study to reflect the fact Chevron has one of the highest oil
production volumes and the biggest number of producing wells within this field.
8. Upstream GHG emissions for Nigeria Brass River based on input data provided by six producing companies (SPDC, Chevron, NAOC Phillips, Addax, AENR/AGIP, others) range
ten-fold difference (CARB 2015b). Upstream GHG emissions outputs based on Chevron data were selected for the purposes of the study to reflect the fact Chevron has one
of the highest oil production volumes and the biggest number of producing wells within this field.
9. US Louisiana Light Sweet (LLS) is identified as US Louisiana Lake Washington Field in (Wang et al. 2016).
10. US West Texas Intermediate (WTI) is identified as US Texas Spraberry in (Wang et al. 2016).
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14.1 US Pipeline,
Michigan Mainline
4.1 UK Tanker,
Portland-
Montréal
pipeline
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34.17 US Tanker
Louisiana
6.16 UK Tanker
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CO2eq
Province Refinery Upstream Refining Transport Total kg/bbl
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CO2eq
Province Refinery Base/Scenario Upstream Refining Transport Total kg/bbl
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CO2eq
Province Refinery Base/Scenario Upstream Refining Transport Total kg/bbl
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CO2eq
Province Refinery Base/Scenario Upstream Midstream Transport Total kg/bbl
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Note: Two points for the same type of oil is explained by different location of refineries. The one with higher emissions and
more expensive denotes Nanticoke as it is further away from Sarnia.
Comparison comments (as study focused on light oil, comparison for this type is illustrated):
• AB Light and SK Light are both more expensive than foreign oil; they also yield more total emissions than foreign light
crude
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Comparison comments (as study focused on light oil, comparison for this type is illustrated):
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Figure G.3: Quebec – Cost of Feedstock vs. GHG Emissions (zoomed in portion of Figure G.2)
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Comparison comments (as study focused on light oil, comparison for this type is illustrated):
• AB Light is cheaper than 4 of 12 foreign light crude oils; it also yields less total emissions than 6 of 12 foreign crudes
• NL Offshore Light is cheaper than 5 of 12 foreign light crude oils; it also yields less total emissions than any foreign
light crude, except for Azerbaijan’s Azeri Light.
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Figure G.5: Newfoundland & Labrador – Cost of Feedstock vs. GHG Emissions
Comparison comments (as study focused on light oil, comparison for this type is illustrated):
• NL Offshore Light is cheaper than 7 of 9 foreign light crude oils; it also yields less total emissions than any foreign light
crude, except for Denmark’s DUC.
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Figure H.2: Selected Foreign Crude Oil Brands Import Volumes and Full-cycle Delivered
Average Prices
(with transportation costs to a refinery)
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