Project Scenarios for Bitumen Upgrading

Abstract

Abstract The size of Alberta's heavy oil resource has been well documented with allthe superlatives regarding its size. It is truly enormous with establishedreserves of 178 billion barrels and potential recoverable reserves of 315billion barrels. However, the logistics of recovery, upgrading, andtransportation to market are daunting. Even after the challenges of production, utilization of the produced bitumenis far from straightforward. It is too viscous to transport by pipeline and notprocessable by the vast majority of existing refineries. Thus in order todevelop a mass market, the bitumen must be upgraded to a quality that can beprocessed by the existing North American refinery market. The intent of this paper is to analyze the factors impacting which method ofupgrading to follow and give some illustrative examples. Markets and Demand A recent study, "Markets For Canadian Bitumen-Based Feedstock", wasundertaken by the Canadian Energy Research Institute (CERI) to determine marketpotential in 2007 for diluted bitumen and synthetic crude oil produced by theupgrading of bitumen. In doing so, CERI assessed the economic viability of awide range of bitumen feedstocks relative to their refining values. Thesensitivity of refinery demand to the prices of these feedstocks was examined, as well as the competitiveness among bitumen-based feedstock and conventionalcrudes. The three major markets for Western Canadian bitumen based feedstock arePADD II in the USA, Western Canada, and Ontario. In 1998, these marketsconsumed 54%, 31% and 12% respectively of the total bitumen based feedstockproduced. PADD II includes the US Midwest. CERI concluded that potential demand in 2007 for bitumen based blends in theWestern Canadian producers' natural markets of PADD II, Western Canada, andOntario will be about 555,000 bpd. The demand for synthetic crude oil, derivedfrom bitumen, was estimated to grow to 806,000 bpd. This represents 244,000 bpdof incremental demand for bitumen-based blends and 450,000 bpd of incrementalbitumen derived synthetic crude oil demand over 1998 consumption. Incomparison, the Alberta Energy and Utilities Board (AEUB) has estimated theincremental demand for non upgraded bitumen products to be approximately315,000 bpd while the incremental demand for synthetic crude is estimated at535,000 bpd by 2007. Based on the incremental demands shown above, the market share for thebitumen feedstocks increases from about 14 percent in 1998 to about 25 % in2007. To achieve these results, bitumen based blend must replace US andCanadian conventional crudes, while synthetic crude oil replaces imports fromoutside North America. While both bitumen-based blends and synthetic crude oilare expected to show significant growth, synthetic crude oil is expected togrow faster. Ultimately the demand for bitumen blend will be capped by NorthAmerican refineries ability to convert it to transportation fuels. The demand for bitumen based blends depends strongly on refineryconfigurations and asphalt demand in the targeted markets mentioned above.Refiners with the capability to process and convert a high proportion of vacuumresidue are well suited to include bitumen in their crude diet. As shown inCERI's study, the majority of refiners are now preoccupied with meeting cleanfuels specifications. Consequently, expansion of the bitumen based blendcapacity of refiners will probably not be at the top of refiners' capitalspending priorities until the end of the decade. If refiners do not addconversion capacity, bitumen producers will need to consider upgrading to sellinto the market.