Market Snapshot: Diluent is a growing share of total crude oil supply
Release date: 2022-08-17
Over the last decade, lighter hydrocarbons such as pentanes plus and condensate have become a larger part of western Canada’s crude oil supply. This growth is due to their role as diluentDefinition* for heavy crude oil.
What is diluent?
BitumenDefinition*, a thick, sticky form of crude oilDefinition* that looks like molasses at room temperature, and other heavy crude oilsDefinition*, are usually too thick to flow in pipelines or into rail cars. They must be diluted with a lighter hydrocarbon, diluent, to create a thinner product.
Where does diluent come from?
The top three sources of diluent in western Canada are, in decreasing order: pentanes plusDefinition* and condensateDefinition* from Alberta natural gasDefinition* production; pipeline imports of pentanes plus, condensate, and naphthaDefinition* from the United States (U.S.); and condensate and pentanes plus from British Columbia (B.C.) natural gas production.Footnote 1 Other smaller sources of diluent include imports of condensate or pentanes plus via rail, butaneDefinition* production, and synthetic crude oilDefinition* or light crude oilDefinition* production.
Figure 1 shows that Alberta’s pentanes plus and condensate production tripled from 119 thousand barrels per day (Mb/d) in 2011 to 343 Mb/d in 2021. Total pipeline imports of pentanes plus and condensate were 226 Mb/d in 2021. Driven by increasing liquids-rich natural gas production, pentanes plus and condensate production from B.C. grew from 17 Mb/d in 2011 to 109 Mb/d in 2021.Footnote 2
Pentanes plus and condensate production
Domestic production of condensate and pentanes plus in western Canada has grown over the past decade as companies focused on liquids-rich natural gas resources.Footnote 3 The Montney Formation in western Alberta and northeastern B.C. is liquids-rich, including pentanes plus and condensate, especially on the Alberta side of the Montney.Footnote 4 This, along with the liquids from the Duvernay Shale in west-central Alberta and other formations in Alberta, makes the province the top source for diluent in western Canada. Liquids-rich natural gas production from B.C. has also increased, making B.C. another large source of diluent supply.
The other main source of diluent in western Canada are imports from the U.S. on the Cochin and Southern Lights import pipelines.Footnote 5 The Cochin Pipeline started importing diluent in 2014 and receives condensate from the Explorer, TEPPCO, and Wabash pipelines at its Kankakee, Illinois, terminal and delivers it to Fort Saskatchewan, Alberta. The Southern Lights Pipeline started importing diluent in 2010, and transports it from Manhattan, Illinois, to Edmonton, Alberta.
Figure 1: Largest diluent sources in western Canada
Sources and Description
Description: The stacked area chart shows the volume of diluent supply from 2011 to 2021 from the top three diluent supply sources in western Canada. Alberta condensate and pentanes plus from Alberta natural gas production increased from 119 Mb/d in 2011 to 343 Mb/d in 2021. Total pipeline imports of condensate and pentanes plus increased from 65 Mb/d in 2011 to 226 thousand b/d in 2021. B.C. condensate and pentanes plus from B.C. natural gas production increased from 17 Mb/d in 2011 to 109 Mb/d in 2021.
Diluent share of Crude Oil Supply
Combined supply from the top three diluent sources increased from 201 Mb/d in 2011 to 678 Mb/d in 2021. Meanwhile, these top three diluent sources grew from 7% of western Canadian crude oil and equivalent (COE) supply in 2011 to 14% in 2021, largely to meet growing diluent needs from growing bitumen and heavy oil production.Footnote 6 Heavier oil that needs blending means diluent makes up more of western Canadian COE supply. Figure 2 shows the share of total COE of the top three diluent sources over the last decade. Note that the diluent in the crude oil exports to the U.S. may either be used in U.S. markets or be imported back into western Canada via the Cochin or Southern Lights pipelines.
Figure 2: Total crude oil and equivalent supply in western Canada
Source and Description
Description: The stacked area chart shows the volume of diluent supply from the top three diluent supply sources in western Canada, and their portion of total crude oil and equivalent (COE) supply from 2011 to 2021. Total crude oil and equivalent supply grows from 2.9 million barrels per day (MMb/d) in 2011 to 4.7 MMb/d in 2021, and the top three diluent sources make up 7% of that supply in 2011 and 14% in 2021. The difference between the top three diluent sources and total crude oil and equivalent supply, is the remainder of crude oil and equivalent supplies which includes non-upgraded bitumen production, synthetic oil production, conventional oil production, tight oil production, shale oil production, and other diluent supply used.
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