Market Snapshot: A tour of Canada’s oil sands upgraders

This article was published by the Canada Energy Regulator on February 23, 2022.

Bitumen or crude bitumen is a thick, sticky form of crude oil. When extracted from the ground, bitumen has the consistency of peanut butter and is too thick to be transported by pipeline. Therefore, it is either upgraded to a lighter synthetic crude oil (SCO) or diluted with a light hydrocarbon-like condensate (referred to as diluted bitumen or “dilbit”). SCO has an advantage when compared to heavy conventional oil or diluted bitumen as it is easier to refine, because it does not require expensive facilities to convert it into light products like gasoline, jet fuel, or diesel.

Bitumen can be upgraded by either removing carbon from the bitumen (coking) or by adding hydrogen (hydroconversion). An upgrader using coking technology has a lower capital cost than one using hydroconversion,^Footnote1 but the total yield of SCO will be lower (80 – 90 per cent of bitumen processed). Hydroconversion, however, offers a better yield (100 per cent or more) because of the hydrogen addition.^Footnote2

In 2020, there were four active upgraders in Alberta and two in Saskatchewan, with a total SCO capacity of 223.8 thousand cubic meters per day (1 407.5 thousand barrels per day (10³ bbl/d)). The same year, Alberta upgraders processed 42 per cent of the 3.0 million barrels per day of bitumen produced in the province, yielding 1.1 million barrels per day of SCO.^Footnote3

Figure 1: Western Canada’s upgraders and bitumen refineries

Upgrader	Company	Location	Province	Status	SCO Capacity
					(10³m³/d)	(10³bbl/d)
Horizon	Canadian Natural Resources Limited (CNRL)	Near Ft. McMurray	AB	Active	39.7	250.0
Scotford	Shell Canada	Scotford	AB	Active	50.9	320.0
Upgrader 1 & 2	Suncor Energy	Near Ft. McMurray	AB	Active	56.8	357.0
Syncrude	Syncrude Energy	Mildred Lake	AB	Active	55.6	350.0
New Grade Upgrader	CO-OP	Regina	SK	Active	7.8	49.0
Bi-Provincial Upgrader	Husky Energy	Lloydminster	SK	Active	13.0	81.5

Active Upgraders Capacity
Alberta	203.0	1 277.0
Saskatchewan	20.7	130.5
Western Canada	223.8	1 407.5

Bitumen Refineries

Refinery	Company	Location	Province	Status	Refined Products Output
					(10³m³/d)	(10³bbl/d)
Sturgeon	North West Redwater Partnership	Sturgeon County	AB	Active	7.9	50.0

The Bi-Provincial Upgrader in Lloydminster, Saskatchewan, and New Grade Upgrader in Regina, Saskatchewan, are integrated with the Lloydminster and Regina refineries, respectively. The Scotford upgrader in Alberta is also integrated with the Scotford refinery. The North West Redwater Partnership’s bitumen refinery in Sturgeon County, Alberta, is currently licensed as an upgrader, but it operates as a refinery, producing refined petroleum products.

Upgrading was used to commercialize the oil sands when it started production in the late 1960s, because there was no other way to transport bitumen to markets. However, skyrocketing upgrader capital costs and shrinking light-heavy oil differentials from the late 2010s onwards (due mostly to the shale oil revolution), made it difficult to build new upgraders, and only expansions of existing facilities have been completed . New technologies to process and dilute bitumen for pipeline transportation have also made upgrading bitumen optional. Today, the economics of building (or expanding an existing upgrader) depends now on the price differential between West Texas Intermediate (WTI) and Western Canadian Select (WCS), as synthetic crude oil (SCO) is tied to WTI and the value of bitumen is now linked to WCS and diluent prices in Alberta.

Footnotes