September 2017 CERI Crude Oil Report The Eastern Refinery Market: Canadian and poor environmental standards, or do not have a carbon Imported Oil Supply and Transportation emissions policy. Options In fact, if such substitution were to happen, what are the Andrei Romaniuk associated costs and benefits for refineries and the Canadian economy? The Canadian Energy Research Canada is the fifth largest oil producer in the world, Institute (CERI) is currently completing a study titled “An accounting for 4.8 percent of world production in 2016, Economic and Environmental Cost-Benefit Analysis of ranking behind the United States (13.4%), Saudi Arabia Eastern Canadian Crude Oil Imports”. The study is aimed (13.4%), Russia (12.2%) and Iran (5.0%) [1]. Canada’s at answering many questions about substitution and will proved reserves, totaling 171.5 billion barrels or 10 provide a cost and emissions comparison of domestic vs. percent of the world’s share of proved reserves, are foreign crude in the eastern Canadian refinery market as behind only Venezuela (300.9 billion barrels) and Saudi well as highlight other implications. The study will model Arabia (266.6 billion barrels) [1]. several scenarios and compare the effects with base year 2016. Despite this, Canada still imports oil. In 2016, imports in four provinces – Ontario, Quebec, New Brunswick and This article presents a snapshot in time. Gathering data Newfoundland and Labrador – comprised 607 thousand from various sources and synthesizing it to present the barrels per day (Mbpd) [2]. Major suppliers were the 2016 snapshot was conducted by CERI. It explores the United States (259.4 Mbpd), Saudi Arabia (86.7 Mbpd), refineries themselves, their technologies, Canadian and Algeria (84.8 Mbpd) and Nigeria (73.7 Mbpd) [2]. The imported feedstock supply, as well as existing and total cost of imported crude for 2016 was C$12.7 billion; potential transportation routes for western and eastern C$5.6 billion from the United States and C$7.1 billion Canadian oil to the eastern refinery market. In order to from other countries (Statistics Canada Trade Data, FOB discuss any substitution, it is critical to grasp and realize base, does not include transportation costs from foreign the sheer complexity of the eastern refinery market. oil offloading points to a Canadian refinery gate) [2]. Eastern Refineries Crude Intake As Canadian oil production capacity and reserves are Canada is a net exporter of refined products – refinery high, there is an argument being made which suggests capacity exceeds domestic demand, notably in Quebec complete or partial substitution of imported oil in the and Atlantic Canada. On the national level, Canada Eastern refinery market. The motives vary and are exports 28 million liters of refined products, while it generally driven by economic and social rationale. On imports 14 billion liters [3]. the economic side, benefits are expected to come from using domestic production and, hence, leaving money to There are 15 refineries in Canada, seven of which are work inside the economy rather than leaving the national located in western Canada and eight located in eastern border. On the social side, the push aimed at substitution Canada [3]. The total refining capacity in the East of crude oil coming from authoritarian states, which (Ontario, Quebec, and Atlantic Provinces) is 1.23 million score low on democratic or human rights indices, have barrels per day [4]. Four refineries reside in Ontario, two in Quebec, and one each in New Brunswick and CERI Crude Oil Report Editorial Committee: Ganesh Doluweera, Paul Kralovic, Dinara Millington, Megan Newfoundland and Labrador. All eight refineries, their Murphy, Allan Fogwill capacities, utilization rates, crude intakes, and intake by About CERI oil type are illustrated in Table 1. The Canadian Energy Research Institute is an independent, not-for-profit research establishment created through a partnership of industry, academia, and government in 1975. Our mission is to provide relevant, independent, objective economic research in energy and related environmental issues. For more information about CERI, please visit our website at www.ceri.ca or contact us at [email protected]. Relevant • Independent • Objective Page 2 Table 1: Eastern Refineries Crude Intake Utilization Crude Intake Province Refinery Location Capacity Rate (Mbpd) (%) Total Light SCO Heavy Bitumen Ontario Imperial Sarnia 121 86% 104.1 51.4 21.5 6.0 25.2 Ontario Shell Canada Corunna 75 88% 65.9 37.5 13.6 14.8 - Suncor Ontario Sarnia 85 92% 77.8 47.0 16.1 14.8 - Energy Ontario Imperial Nanticoke 112 86% 96.3 61.7 19.9 14.8 - 197.5 71.0 50.3 25.2 Quebec Valero Levis 265 88% 232.8 131.9 81.2 8.1 11.6 Suncor Quebec Montreal 137 92% 125.4 109.0 - - 16.4 Energy 240.8 81.2 8.1 28.0 New Irving Oil Saint John 318 87% 277.8 250.6 11.9 15.3 - Brunswick North Come by Newfoundland Atlantic 115 81% 93.1 93.1 - - - Chance Refining Total 1228 1073 782 164 74 53 The data for this article (and the forthcoming CERI study) All of Ontario’s refineries are located in the southern part was obtained from several sources including Statistics of the province, with three refineries located in the Canada, Natural Resources Canada (NRCan), the greater Sarnia area (Suncor Energy and Imperial Oil Canadian Fuel Association (CFA), the Canadian operate refineries in Sarnia while Shell Canada operates Association of Petroleum Producers (CAPP), various the Corunna Refinery in nearby St. Clair). Imperial Oil refinery websites, midstream companies’ websites operates a refinery in Nanticoke. Québec has two (Enbridge and others), Clipper Data (transportation of oil refineries, Suncor Energy’s Montreal Refinery and by tankers), as well as calculations and estimates by CERI Valero’s Jean-Gaulin Refinery, located in Lévis, near where needed. If the data was suppressed, missing or Québec City. Atlantic Canada also has two refineries, conflicted with one another, CERI reconciled using Irving Oil Refinery in Saint John, New Brunswick and the multiple sources in order to infer quality and certainty in North Atlantic Refinery in Come By Chance, data. Newfoundland and Labrador. In 2016, Quebec refinery utilization rates did not seem to Light oil prevails in the supply slate for the four provinces be representative across the refining industry in Canada comprising 71 percent, followed by synthetic crude oil (an average 78% for two refineries) [5]. For the purposes (SCO) with 15 percent in the crude slate; heavy and of modelling, an adjusted utilization rate of 88% was bitumen both comprise 12 percent of the crude intake assumed for Valero, and 92% for the Suncor Energy [4]. Even though the intake is largely light and SCO, refinery. For reference, the factual 2016 import in process-wise refineries are equipped with technologies Quebec was 214.1 thousand barrels (Mbpd) [2]; the to process heavy oil and high sulphur crude. These modelled 2016 import is 9.8% more than factual – 235 include: Mbpd. All import volumes were increased proportionally by the same rate – 9.8%. CERI Crude Oil Report Page 3 Coking (25.5 Mbpd in Ontario) supplies 206 Mbpd, followed by Saskatchewan at 72.6 Visbreaking (5 Mbpd in Ontario and 40 Mbpd in the Mbpd, and Manitoba at 6.4 Mbpd. Atlantic provinces) Hydrocracker (around 60 Mbpd in Ontario, 22 Mbpd Suncor’s Montreal refinery imports light oil from four in Quebec, and 72 Mbpd in the Atlantic provinces) countries – the US (92.7 Mbpd), Azerbaijan (4.5), UK (4.1) Catalytic cracker (98 Mbpd in Ontario, 67.5 Mbpd in and Norway (1.9). Of the total crude that comes from the Quebec, and 95 Mbpd in the Atlantic provinces), and US, 62.1 Mbpd comes from North Dakota and Michigan Hydrotreating (290 Mbpd in Ontario, 320 Mbpd in through Enbridge Mainline and Line 9 (from Sarnia to Quebec, and 255 Mbpd in the Atlantic provinces) [6]. Montreal). All other crude, including 30.6 Mbpd from Texas, is transported by tankers from loading ports to Sources of Supply and Transportation Modes Portland, Maine and then transported via the Portland- Fifty-six percent of oil into the eastern region is Montreal pipeline to the refinery. Canadian supplies imported, while thirty-nine percent comes from western include 16.4 Mbpd of bitumen and 5.8 Mbpd of light Canada and five percent is supplied from Canadian crude that comes from eastern offshore assets. Bitumen eastern offshore assets (offshore Newfoundland & comes through Enbridge Mainline and Line 9, while the Labrador) (unless otherwise sourced, this and further eastern crude follows the path of international oil via information is cited from CERI’s Crude Flow Model [4]). Portland. Among eastern Canadian refineries, Ontario receives the highest amount of western Canadian crude (almost 83%), With the Line 9 reversal and purchase of two Panamax followed by Québec (33%) and New Brunswick (4%). tankers by Valero with the goal to move 130-160 Mbpd Newfoundland & Labrador does not receive oil from from Montreal to Lévis [7], the crude intake slate in the western provinces (Table 2). Valero refinery has changed dramatically. In 2016, it used 101 Mbpd of western Canadian crude, which includes Table 2: Eastern Refineries, Crude Intake by Source of synthetic, bitumen and heavy. The imported light oil Supply came from four countries: Algeria (92.1 Mbpd), Western Eastern Kazakhstan (21.1), Nigeria (11.5), and the US (Texas,7.2). Total Imported Refinery Canada Supply Canada Supply Intake (Mbpd) All foreign oil comes to Valero by tankers. (Mbpd) (Mbpd) Imperial, ON 104.1 86.5 - 17.6 Shell Canada, The Irving Oil refinery in New Brunswick relies more 65.9 54.8 - 11.1 ON heavily on imported oil and Eastern offshore supply.