19th World Petroleum Congress, Spain 2008

Forum 10: Unconventional crude oils and feedstocks to refineries

Alberta Oil Sands - production and use of synthetic

crudes
Mr Mike Ashar, Suncor Energy, Canada

Abstract
At the current price levels of conventional crude oils, there is a renewed interest in
nonconventional hydrocarbon sources that could serve as feedstocks to existing or modified
refineries.

The most prominent representatives of such feedstocks are extra-heavy crude oils and
syncrudes from oil sands. The session will be devoted to all aspects related to the production
of syncrudes from oil sands, the transportation of such syncrudes and their use as feedstocks
in conventional refineries. Likewise, the salient features of extra-heavy crude oils will be
discussed along with the available technologies for their conversion into today's high-quality
refinery products.

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 19th World Petroleum Congress, Spain 2008
Forum 10: Unconventional crude oils and feedstocks to refineries

Alberta Oil Sands - Production and Use of Synthetic Crudes

Background

The bitumen from Alberta is a heavy (8º - 10º API) viscous crude recovered through open pit mining or
through in-situ techniques such as steam stimulation.

The bitumen is typically upgraded to synthetic crude oil (SCO). Production of synthetic crude oil has
grown from 250,000 b/d in 1990 to current levels of 1.5 million b/d. According to CAPP (Canadian
Association of Petroleum Producers), the total oil sands production is forecasted to grow to 3 million b/d
by 2015 and 4 million b/d by 2020.

Ultimately all crude oil from the oil sands gets processed at an oil refinery. However, this crude oil can
take different paths from “dirt to pump” or “well to wheels”.

In the simplest scheme the bitumen is blended with diluent for ease in pipeline transport and then
processed at refineries with upgrading facilities. The bitumen is also upgraded to light synthetic crude oils
at world scale upgraders in Alberta. The synthetic crude oils are then processed at refineries in
downstream markets.

Upgrading

Upgrading can mean many things to many people. In general, upgrading can be broken into two
categories;

Primary Upgrading – removing carbon from bitumen (e.g. coking) or adding hydrogen to bitumen (e.g. LC
Fining) or a combination of both. Primary upgrading produces a product lower in viscosity and higher in
API gravity. Conducting primary upgrading in a location near the resource, reduces the need for acquiring
and transporting large quantities of diluent.

Secondary Upgrading – hydroprocessing the products from primary upgrading to make a higher quality,
fungible and saleable product.

When thinking about upgrading, the producer must consider the numerous options to upgrade in a
systems context… what might look like the best choice for one producer may be totally out of the question
for the next. Some key questions:

Is upgrading one of my core competencies

Do I already have my workforce trained and expert in one technology and is there sufficient
economic incentive to move away from what I know
How far down the value chain do I want or need to go
Do I have an economic outlet for a partially upgraded product or do I need to produce a fungible
commodity like sweet synthetic crude
Do I believe that making finished products creates superior returns
Do I have existing upgraders or downstream assets from which I might find synergies
Do I believe there are attractive economics for upgrading add-ons such as a pitch or coke gasifier
or the pots and pans to produce gasoline

Each producer is likely to have different answers to these questions and thus a different answer to
upgrading.

So why upgrade?

There are many potential reasons but the key three reasons are:

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© World Petroleum Council. This document forms part of the 19th WPC Proceedings and is issued under licence. This file must not be reproduced by any means, or transmitted
or translated into a machine language without the written permission of the copyright holder. Published by the Energy Institute.
 19th World Petroleum Congress, Spain 2008
Forum 10: Unconventional crude oils and feedstocks to refineries

You are concerned that heavy-light differentials will be large, volatile and erode your project economics
(see figure 1 from Bloomberg)
The cost and availability of diluent are a risk to your project
You believe upgrading (and potentially refining) are good value-creating businesses

While upgrading may look attractive to many producers, challenges from rising capital costs, dilution of
experienced personnel in contractors’ shops, an ageing and limited construction workforce and increasing
focus and cost to manage EH&S issues make upgrading a challenging undertaking.

Figure 1 - The History of Heavy Oil Differentials

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© World Petroleum Council. This document forms part of the 19th WPC Proceedings and is issued under licence. This file must not be reproduced by any means, or transmitted
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Forum 10: Unconventional crude oils and feedstocks to refineries

Technology Options
Primary Upgrading

Delayed Coking has been the technology of choice for most of the heavy oil upgrading (operating and
announced capacity) in North America and the world. Many improvements in scale and reliability have
been made over the years which continue to make this a tough technology to beat. This has been the
preferred technology for Suncor, Total, Petro-Canada, ConocoPhillips and many others.

Fluid Coking is the preferred technology of the Syncrude JV. The process burns some of the petcoke
produced for heat. The process has slightly better liquid yields. It is a different process that requires
excellent operations and support in order to have competitive on-stream time.

LC Fining and HOil RC are ebulated bed hydrogen addition processes. This is the preferred technology
for Albian Sands/Shell, Northwest Upgrading and was the original upgrading technology for Husky’s
Lloydminster Upgrader. These are more capital intensive processes than coking and have higher
operating costs. They do however get excellent liquid yields and if high resid conversion can be achieved
are competitive with coking. There is a belief that when both processes are combined with gasification for
the production of hydrogen, the economics of Eb Bed/gasification and coking/gasification are similar.

SDA / Thermal Cracking is the preferred technology package for the OPTI-Nexen upgrader at Long Lake.
The asphaltenes from the SDA plant are gasified to produce hydrogen and fuel gas. This technology is
expected to have different liquid yields than coking. However, having a liquid-fed gasifier is expected to
reduce operating costs and the integration of the produced syngas and steam from the gasifier with the
SAGD operation is expected to provide some interesting synergies. This technology configuration
remains to be commercially proven but should be in operation later this year.

Secondary Upgrading

Generally the choices here are comprised of various levels of hydrotreating and more recently, in some
project applications, various degrees of gas oil hydrocracking. In future, aromatics saturation may be
required for improved diesel and jet component qualities in sweet synthetic crude.

Emerging technologies

Oil sands companies work individually and in consortiums to help develop new ideas for bitumen
upgrading. The Upgrading Research Group at CONRAD and the HUDTF industry/government group
have both spent a significant amount of time and money over the past few years looking at emerging
technologies and how they might be advanced.

The most interesting emerging resid upgrading technology is slurry hydrocracking. There are old slurry
hydrocracking technologies around such as CANMET, Veba Combi-Cracking and the old Exxon Microcat
technology. The new generation of this technology combines moly-sulfide catalyst cocktails with the latest
slurry reactor designs and novel catalyst capture and recycle schemes to produce very high conversions
and potentially superior upgrading economics. ENI, Chevron, Headwaters and Mobis are all working on
variations of this technology. ENI is in the process of building their first commercial plant in Italy.

A type of cross-flow coking has been developed by ETX Systems and is now undergoing pilot testing.
This technology claims to have higher yields and lower capex than conventional coking processes.

In-situ upgrading has been talked about for years. Shell has been piloting ICP (the in-situ conversion
process) at an oil shale lease in Colorado. This technology may be applicable for the carbonate oil sands
resource in Alberta. Petrobank Energy claims their THAI process causes some partial conversion of the
bitumen in-situ. This technology is in the demonstration phase at the Whitesands project.

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© World Petroleum Council. This document forms part of the 19th WPC Proceedings and is issued under licence. This file must not be reproduced by any means, or transmitted
or translated into a machine language without the written permission of the copyright holder. Published by the Energy Institute.
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Forum 10: Unconventional crude oils and feedstocks to refineries

Alternate Integration

Instead of full upgrading in Alberta, some of the companies have announced projects which integrate
production of bitumen in Alberta with further downstream upgrading at the refineries. Announced
collaborations include: BP – Husky; Encana – ConocoPhillips and Marathon.

Marketing
The oil sands region in the early 1990’s provided only two types of crude oils – bitumen and synthetic
crude. With the increase in crude production and the deployment of a variety of technologies in extraction
and upgrading, there is a wide spectrum of crudes available from Alberta.

In the early 1990’s the oil sands crudes were marketed in a narrow orbit of Edmonton-Chicago-Sarnia.
With the increased Alberta production and the decrease in U.S. conventional production, the marketing
orbit has widened considerably. This orbit will continue to grow and by 2020 will include the newer
markets in West Coast U.S., Padd 4, Padd 2, and the US Gulf Coast. In the longer term, markets in Asia
and the northeast U.S. will become accessible to oil sands producers.

The oil sands producers have been on a ‘learning curve’ in the areas of bitumen extraction and
upgrading. The midstream companies and the downstream companies have also been on a different
learning curve with respect to transport and processing of a wide spectrum of oil sands crudes. The
different characteristics of the synthetic crudes provide risks and opportunities for refiners.

The unconventional crudes have processing challenges such as – TAN, Nitrogen, metals, aromaticity,
cetane and a slightly different distribution along the TBP curve. On the other hand, refiners who process
international crudes are used to a wide variation in crude qualities. The synthetic crudes provide
significant advantages to a refiner who may have been accustomed to a traditional diet of conventional
crudes.

The primary advantage of synthetic crude is the fact that it is bottomless. This allows the refiner to make
a richer product slate and improve the profitability of the refinery. With the decline of conventional oil
production, the refiners in the northern tier of US will have steady, reliable access to a growing pool of
crude oils from Alberta oil sands.

The refining industry processes 80 million b/d at some 900 refineries. Yet no two refineries are alike.
The sheer increase in volume and the range of synthetic crudes from Alberta provides refiners in the oil
sands marketing orbit, a choice set unlike any in the past. A refiner can combine their traditional supply
with a portfolio of crude oils from heavy to super sweet light synthetic. With efficient pipelines, the refiners
are ‘virtually integrated’ with oil sands crudes. The oil sands crudes in effect, allow the refiner to optimize
its entire feedstock to improve asset utilization and profitability.

Conclusion
The oil sands industry is at an inflection point in its evolution. The key trends from 2008 to 2030 are:

Production will increase substantially

The range of crude oils produced will broaden
The marketing orbits for Alberta oil sands crudes will increase
The refiners of oil sands crudes will have a richer set of opportunities to improve their profitability

© World Petroleum Council

© World Petroleum Council. This document forms part of the 19th WPC Proceedings and is issued under licence. This file must not be reproduced by any means, or transmitted
or translated into a machine language without the written permission of the copyright holder. Published by the Energy Institute.