In the last month a new narrative has arisen in the anti-Trans Mountain pipeline community: that the market for bitumen is non-existent because it is “far inferior to the higher-quality oil” sold in the United States and that due to the new Louisiana Offshore Oil Port (LOOP) there will be no market for Alberta’s bitumen. Needless to say this narrative is both uninformed and completely wrong. But given the number of places I’ve read this codswallop, it is clear that someone has to debunk the claims. I will spend the rest of this post demonstrating how and why this narrative is completely misguided and unfounded.
Let’s start with some stuff we should all know. Crude oils are described based on their API gravity. API gravity is the standard specific gravity used by the oil industry. To borrow from a useful web site:
Specific gravity for API calculations is always determined at 60 degrees Fahrenheit. API gravity is found as follows:
API gravity = (141.5/Specific Gravity) – 131.5
Though API values do not have units, they are often referred to as degrees. So the API gravity of West Texas Intermediate is said to be 39.6 degrees. API gravity moves inversely to density, which means the denser an oil is, the lower its API gravity will be. An API of 10 is equivalent to water, which means any oil with an API above 10 will float on water while any with an API below 10 will sink.
The API gravity is used to classify oils as light, medium, heavy, or extra heavy. As the “weight” of an oil is the largest determinant of its market value, API gravity is exceptionally important. The API values for each “weight” are as follows:
- Light – API > 31.1
- Medium – API between 22.3 and 31.1
- Heavy – API < 22.3
- Extra Heavy – API < 10.0
Bitumen is a heavy oil. It is characterised by high viscosity, high density (low API gravity), and high concentrations of nitrogen, oxygen, sulphur, and heavy metals. This differentiates it from virtually all the new oil finds in the US which are lighter oils (like the Bakken crude which has an API gravity of 42). As analogies go bitumen is often described as a lot like peanut butter while Bakken oil is like a salad oil.
Note the comparisons that are used to describe these types of crude oil. They imply that one type of crude oil (lighter blends) are more appealing than the heavier crude oils. This is a common theme in the activist literature. Light crude oils are “good” or “higher-quality” and the heavy crude oils are “inferior“. The problem with that narrative is that it is demonstrably wrong.
Heavy crudes and light crudes are simply different products and have different characteristics and different demand curves. To explain let me make a simple analogy, consider the two major types of transportation fuels: gasoline and diesels. Both gasoline and diesel are refined petroleum hydrocarbon fuels but they aren’t interchangeable. You can’t fill a diesel train with low-octane gasoline and expect that diesel engine to run. Nor can you fill a race car with diesel and expect it to operate. You use gasoline when you want horsepower and you use diesel when you want torque. No one would say diesel fuel is inferior to gasoline. It is simply a different fuel.
The same is true in the differences between heavy and light crude oils. Like gasoline and diesel engines, there are light crude and heavy crude oil refineries. Light crude oil refineries tend to be simpler in design and cheaper to build than heavy oil refineries. This primer on the topic can really help fill in your gaps but the critical thing to understand is that any refinery is incredibly expensive to build and when built a refinery is optimized for a certain type of input and does not operate well using the wrong input.
Heavy crude oil refineries will include very expensive cracking and coking units, designed to break down the long chain hydrocarbons into the smaller hydrocarbons used in gasoline, kerosene and diesel. Unfortunately, the simpler light crude refineries don’t typically have these cracking and coking units. Ironically, this can mean that the light crude refineries can’t handle the heavier components in the light crude oils and so the refineries end up producing more undesirable byproducts (like petroleum coke) per barrel of input. What this means is that the heavy oil refineries produce more gasoline/diesel/kerosene per barrel of heavy crude oil than the light refineries do per barrel of light crude oil and the heavy refineries produce a lot less waste petroleum coke per barrel as well. In financial terms, the heavier crudes produce much higher margins per barrel of input than their lighter crude cousins and generate less waste byproduct that have to be disposed.
Reading back that last paragraph something becomes clear. If you have spent the billions to build a heavy oil refinery there is absolutely no way you are going to fill it with light crude. It would be like building a high-precision race car at the big race and filling it with a low-quality ethanol blended gasoline…it just isn’t something anyone would do. This is particularly important because:
over the past 10 years, most refineries in the Gulf Coast and US Midwest have been modified into high-conversion facilities. These refineries crack and coke the heavy crude “bottoms” into high-value products, removing all traces of sulphur to produce expensive low-sulphur fuels. These highly complex facilities are specifically designed to process heavy sour feedstock, such as Western Canadian Select. In fact, refining margins are better with heavy crude feedstock than lighter oil.
Going back to the topic of this blog post we now understand three things:
- A heavy oil refinery will seek heavy, not light crude oils for its inputs.
- The US and China have a lot of very expensive high-conversion heavy oil refineries.
- Virtually all the oil produced in the US is light crude that is not an appropriate input for the high-conversion refineries in the US Midwest and Gulf Coast.
Now let’s look at all these recent articles that popped up in my Twitter feed in the last month:
- The fatal flaw of Alberta’s oil expansion – National Observer
- Why Kinder Morgan’s Pipeline Is DOA – Tyee
- Alberta’s oil exports face ocean of trouble – Climate News Network
- Out of the LOOP: The Fatal Flaw of Alberta’s Oil Export Expansion – The Energy Mix
- Another reason why expansion of Alberta’s oil/tar sands has a weak business case – Toronto sustainability series
All these articles share two common features:
- they all claim that there will be no demand for Alberta bitumen because of recent developments in the US, and
- they all derive their analyses back to a single author: Paul McKay at The Energy Mix.
The number of times this same analysis has been sent to me is simply insane. The man is a one-man, bad-content provider who, through the power of repetition via numerous alternative publications, has almost single-handedly convinced the activist community that there is something wrong with bitumen and that there will be no demand for this “inferior” product in the future. As I have shown in this blog post, the truth is entirely different. The heavy oil refineries in the US Midwest, the Gulf Coast, in California and in China all want heavy crude and do not want light crude. They like the high margins, the lower volume of waste and the range of products that a high-conversion refinery can produce that a light oil refinery can’t produce. This would explain why the US is importing so much Canadian heavy oil while exporting so much of their light crude oil production. It would also explain why sophisticated oil companies are looking for ways to move oil sands to market via rail and pipelines.
So when an activist links to one of these ridiculous screeds recognize it is simply a load of codswallop and that even a cursory investigation into the actual business of refining shows how this narrative is completely misguided and unfounded.
A Chemist in Langley 
The largest refinery in the world at Jamnagar, India accepts heavy crude and has a processing capacity of over 1 million barrels each day. The owner, Reliance Industries, would welcome Canadian heavy crude as feedstock to help them supply fuel to several billion people across Asia. The eco people love to quote *huge* numbers when talking about spills so let me translate the math for them: Jamnagar takes in 160 million litres of crude oil *every* day.
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There’s another argument, which is that people are allowed to produce stuff that no-one wants. Canada is not yet a state-directed economy.
It’s not up to activists, of any stripe, to say what other people can produce. I would ban organic food production, myself, since it is wasteful of land to produce food of exactly the same nutritive value. But it’s not my place to say what other people choose to value.
While I appreciate your detailed dismantling of the stupidity of slighting heavy crude, there is no need. If the producers think there is a demand, then they are almost certainly right. They’ve rather more expertise than the Greens, after all. And they should be allowed to do it, even if there is a chance they are wrong.
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Dear Mr. Chemist, Sorry i don’t know your name,
I have been subscribed to your blog for a while and I am impressed with your knowledge regarding our Alberta Oil Sands. This is information that needs to be widely dispersed to counteract the greenie propaganda we are inundated with. i am asking for permission to reproduce the above article in my blog “A conservative view and gateway” justinction.com . Thank you for your consideration, Ray Meroniuk Editor
On 17 April 2018 at 23:07, A Chemist in Langley wrote:
> Blair posted: “In the last month a new narrative has arisen in the > anti-Trans Mountain pipeline community: that the market for bitumen is > non-existent because it is “far inferior to the higher-quality oil” sold in > the United States and that due to the new Louisiana Offs” >
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My name is Blair and reposting is acceptable
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Can I do it too? I would run it on http://www.mccollmagazineonline.com
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As long as you link back to my blog the work can be shared freely.
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The article shows me no new major qualitative information concerning the intricacies of crude, but opens my eyes (just my naïve nature) to the influence that one man can have on a major industry.
I find his (Paul McKay) reasoning mind boggling:
Fact : Majors leave the oil sands.
Reasoning : Oils sands are uneconomic and will remain stranded.
Conclusion : Pipelines are no longer required.
Huh?
He publishes it on several platforms and others take it as from an authoritative source.
I’m sure his “LOOP” would love to handle heavy crude for export services, if only they could lay their hands on it, which will not happen as there are too many buyers on the US east coast.
A quote from Paul:
“The terminus of the Keystone XL will be refineries on the Texas Gulf Coast near Houston which are not connected to the LOOP. Even if future Alberta bitumen were to be refined there, it would take three fully-loaded Aframax tankers leaving Texas for ship-to-ship transfers to each VLCC.”
As if, when one builds a Keystone XL, one cannot build an export line to “LOOP”?
(if at all required as US refineries may decide to produce for the home market for better return on investment.)
Love the expression: “low-quality ethanol blended gasoline”.
As far as this post is concerned, thanks.
This still does not change my “belief” concerning 20m sea-level rise this century.
Have fun.
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The Observer article about the “Loop” and “hew” VLCC’s is typical of the activist nonsense Blair refers to…VLCC’s and ULCCs have been around for about 25 or 30yrs..Until recently they could not use the Panama Canal, however since the twinning was completed it is capable of handling them and will likely be seen a lot more often in this hemisphere…
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I’m not too aware of what is possible in shipping, but (ref. Paul McKay) ship to ship transfer of refinery product to a VLCC, petrol in a crude carrier? Has that ever been done before? Does this question reflect on my stupidity or his?
I don’t mind being dumb, it’s a good way to learn more 🙂
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Thank you for making this analysis available to your readers. It is an incredibly important message to present. The notion that we’ll just build new refining capacity for whatever, wherever is naive in the extreme. Using and expanding existing refining capacity to meet demand is the most responsible action. It is incredibly frustrating to be faced daily with the energy illiteracy in our society. I have spent my career working to provide safer, cleaner, more environmentally responsible and less costly energy and the by-products made from hydrocarbon mixtures to my fellow Canadians and the world. Thank you again for these informative and well conceived posts.
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Thanks again for an excellent rebuttal of the latest in the barrage of propaganda and misinformation from the activists…The radical environmental agenda is not accountable for truth or technical accuracy..unlike the oil and gas industry which is has a host of local and federal regulations and laws to follow, and full responsibility for cleanup remediation and compensation if there is an incident
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Thanks for posting and showing that heavy crude oil actually sinks.
The API in your posting shows heavy <10. < in the math that I took 31.1
Medium – API between 22.3 and 31.1
Heavy – API < 22.3
Extra Heavy – API < 10.0 "
Thanks for exposing the truth of the matter.
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Once mixed with condensate the resulting product is lighter and as the research shows does not decompose fully so doesn’t actually sink in marine spills. Check out my post on the topic where the scientists from Natural Resources Canada who have investigated the product.
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Thanks for posting and showing that heavy crude oil actually sinks.
The API in your posting shows heavy <10. < in the math that I took 31.1
Medium – API between 22.3 and 31.1
Heavy – API < 22.3
Extra Heavy – API < 10.0 "
Thanks for exposing the truth of the matter.
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In its natural state, yes, but once mixed with condensate for transport the resulting mixture is lighter than water and floats,. When spilled some condensate remains resulting in a mixture that is lighter than water.
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Blair does the Parkland refinerie in Burnaby have plans to install coke crackers to refine bitumen? Does Parkland refine heavy oil now.
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No to either question
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Reinforcing a fact you mention above, from a different angle; Alberta bitumen can be processed and consumed almost entirely, with comparatively little leftover coke. Unlike the worst of the heavy oils from Venezuela and the second worst, from Saudi Arabia.
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Your articles says:
1. The US and China have a lot of very expensive high-conversion heavy oil refineries.
2. Virtually all the oil produced in the US is light crude that is not an appropriate input for the high-conversion refineries in the US Midwest and Gulf Coast.
One of the main arguments for the Trans Mountain pipeline is to have access to other markets so that the bitumen can command a higher price than the discounted price in the US. If there is such a need for heavy oil in the US, why is there a discount in that market? This doesn’t make sense.
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There is a discount because they have a captive market and because the difference in costs to transport the oil. Oil-by-rail costs much more to move and that difference is the discount the seller has to make to allow the buyer to meet the international market.
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On Feb 13, 2018: The judge dismissed all charges in the lawsuit brought against Dr Tim Ball by BC Green Party leader Andrew Weaver. It is a great victory for free speech.
‘The Deliberate Corruption of Climate Science’.
Tim’s website is
“Human Caused Global Warming”, ‘The Biggest Deception in History’.
http://www.drtimball.com
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Let’s not overlook a couple of relevant quotes regarding the earlier comment about the Weaver v Ball defamation case:
– ” .. The judge noted that Ball’s words ‘lack a sufficient air of credibility to make them believable and therefore potentially defamatory’ and concluded that the ‘article is poorly written and does not advance credible arguments in favour of Dr. Ball’s theory about the corruption of climate science. Simply put, a reasonably thoughtful and informed person who reads the article is unlikely to place any stock in Dr. Ball’s views…” (https://en.m.wikipedia.org/wiki/Timothy_Ball).
– ” .. Simply put, a reasonably thoughtful and informed person who reads the Article is unlikely to place any stock in Dr. Ball’s views, including his views of Dr. Weaver as a supporter of conventional climate science .. ” (https://www.desmogblog.com/2018/02/14/judge-dismisses-libel-claim-sceptic-tim-ball-not-credible-enough-take-seriously).
‘Nuff said!!!???
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“In February, 2018 Andrew Weaver’s defamation suit against Ball was dismissed completely. The judge noted that Ball’s words “lack a sufficient air of credibility to make them believable and therefore potentially defamatory” and concluded that the “article is poorly written and does not advance credible arguments in favour of Dr. Ball’s theory about the corruption of climate science. Simply put, a reasonably thoughtful and informed person who reads the article is unlikely to place any stock in Dr. Ball’s views…”.
Source: Wikipedia.
Searched: Dr Tim Ball.
We have to remain critical of all sources.
I don’t necessarily believe a judge and I too believe what Dr. Tim Ball says.
Anyone to help me out?
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Do you have any info on the number of bitumen upgraders/heavy oil refineries currently operating or planned in China? i haven’t been able to find that.
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Thank you for this great post that does a great job at explaining the specifics of bitumen as a heavy crude and the specific pathway to transform it into refined petroleum products. One regret is your post overlooks the higher energy requirements (and associated carbon emissions) to transform bitumen into RPPs. Most peer-reviewed and industry literature shows that on a lifecycle basis, bitumen needs more energy and emits more GHGs than lighter crudes, and I believe this is actually what’s feeding the narrative of bitumen being an ‘inferior’ source of oil. I would love to hear your thoughts on this.
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