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Bitumen Upgrading Explained

Bitumen Upgrading Explained

Upgrading is a process by which bitumen is transformed into light oil by fractionation and chemical treatment, removing virtually all traces of sulphur and heavy metals. About 40% of Alberta's bitumen, mostly sourced from mined oil sands, is upgraded into light/sweet synthetic crude before being sold to downstream refineries. Learn more about the bitumen upgrading process.

Bitumen extracted from the oil sands is a heavy crude oil which contains a large fraction of complex long-chain hydrocarbon molecules. Depending on the extraction process used, bitumen product can sometimes contains as much as 2% water and solids, which does not meet pipeline specifications for transport over long distances. Pipeline specifications can be met either by upgrading or dilution with a very light oil. Any crude that meets pipeline specs can be sold to downstream refineries, regardless of grade or quality.

WHY PIPELINE SPECS MATTER
In order to meet pipeline specs, any crude oil sold to market must contain less than 0.5% water and solids (total) and have a minimum viscosity of 350 cSt, which translates into a maximum density of 940 kg/m³. These specifications ensure the crude will flow at low temperatures, and minimizes the risks of corrosion and erosion. Bitumen produced from the oil sands does not meet these specifications, particularly for viscosity, and must therefore be upgraded to a lighter crude or diluted with a very light oil (typically condensate) before being sold to market via pipeline.

TO UPGRADE OR NOT TO UPGRADE: THAT IS THE QUESTION

Refineries typically blend different grades of crude feedstock with varying quality specifications, but not all refineries are built the same. Depending on the type, capacity and configuration of process equipment, each refinery has a limited ability to handle heavy grades of crude, with high concentrations of sulphur and other impurities. 

Simple refineries can only process light crude feedstock with a low sulphur content. Bitumen produced from the oil sands would be too heavy and too sour for a simple refinery. In order for bitumen to be sold to this type of refinery, it must first be upgraded in a lighter crude oil.

More complex refineries, commonly referred to as high-conversion refineries, have the ability to process heavier feedstock, with higher concentrations of sulphur and nitrogen. These facilities have a larger capacity to process heavy crude, cracking the heavy components into lighter streams. High-conversion refineries actually prefer heavy/sour feedstock, producing better yields and improved profit margins. In order for bitumen to be sold to a high-conversion refinery, significant volumes of diluent must be added prior to transport, sometimes as high much as 40% by volume. This diluent, typically natural gas condensate, is required in order to meet pipeline specifications.

 
oil sands bitumen upgrader dilbit synthetic crude

FROM BITUMEN PRODUCTION TO THE REFINERY: TWO PATHS FOR ALBERTA'S DILUTED BITUMEN
 

Both diluted bitumen and upgraded synthetic crude therefore have very different specifications, affecting both the selling price and marketability of the product. The decision to upgrade, or not, therefore depends on the quality of the bitumen, the needs of the final customer and the price differential between heavy/sour versus light/sweet crude.

 
DILBIT VS SYNTHETIC CRUDE: A TALE OF TWO FEEDSTOCKS

DILUTED BITUMEN
(NON-UPGRADED)
SYNTHETIC CRUDE
(UPGRADED)
• heavy/sour crude
• 3 to 4% sulphur
• up to 0.5% water + solids
• contains trace Na, Ni, V, Fe
• high TAN (acidic feedstock)
• light/sweet crude
• 0.1% sulphur
• n/d water & solids
• n/d metal ions & salt
• non-acidic feedstock
 

OIL SANDS PRODUCTION BY TYPE
million bbl/day • data by Statistics Canada

CLICK FOR MOST RECENT MONTHLY AVERAGES →
HOW THE US SHALE BOOM KILLED ALBERTA'S UPGRADERS

Prior to the 2007/08 collapse in oil prices, almost a dozen upgraders were slated for constuction or expansion in Alberta. But rising light oil production out of US shale deposits shifted the prospects for Alberta's bitumen.

As light oil supply expanded in the US, imports of heavy oil from Venezuela and Mexico began to decline due to lack of investment. After spending billions converting refineries to accept more heavy/sour crude, US refineries, particularly in the Gulf Coast, found themselves short of heavy feedstock, increasing demand for Alberta's diluted bitumen and narrowing the spread between light and heavy oil.

As capital costs for Alberta's upgraders spiraled out of control and US demand for light/sweet crude declined, the economics of upgrading bitumen in Alberta no longer made sense. As production from the oil sands continues to grow, upgrading capacity is unlikely to grow with it, making Alberta's crude exports increasingly heavy and sour.

UPGRADING ECONOMICS: ADDING VALUE TO A BARREL OF CRUDE

Traditionally, a majority of the bitumen produced in Alberta was upgraded into synthetic crude oil before being sold to downstream refineries. However, some bitumen is good enough to send directly to high-conversion refineries, which have a preference for heavy/sour feedstock.

As more and more refineries around the world convert to heavy oil feedstock, there is less of a demand for stand-alone bitumen upgrading. The economics of upgrading therefore lies in the price differential between heavy diluted bitumen and light crude oil.

According to IHS Markit, Alberta's upgraders have a typical operating cost of US$8-10 a barrel, excluding cost of capital. Factoring in the cost of capital, which can be north of $60,000 per flowing barrel, a new upgrader requires a light/heavy price spread of about US$25 per barrel in order to be economically viable.


AVERAGE DIFFERENTIAL BETWEEN CDN LIGHT & HEAVY CRUDE
Annual average price • USD/bbl

CLICK FOR MOST RECENT MONTHLY AVERAGES →
 
WHY UPGRADE? BALANCING BIG BENEFITS VS HEAVY COSTS

PROS: CONS:
• no diluent required
• improved pipeline utilization
• higher realization price
• wider marketability
• very high capital costs
• higher operating costs per bbl of crude
• higher GHG emissions per bbl of crude
• loss of yield w/carbon rejection process 7
 
REFINERY COMPLEXITY EXPLAINED
A refinery's ability to handle a wide range of crudes is defined by its Nelson Complexity Index (NCI), which ranges from 1 for a very simple refinery to over 15 for a very complex facility. A simple topping refinery is designed for light sweet crude, with very limited ability to handle heavier feedstock. A very complex refinery has a higher conversion capacity, and is better able to crack heavy molecules into light final products. Almost all refineries built after 2003 are highly complex. US refineries rank the highest, averaging over 9.5 on the NCI scale and well over 13 for Gulf Coast refineries. Europe has simple, older refineries, with an average NCI of about 6.5. Canadian refineries tend to average just over 8 on the NCI scale and therefore have a limited ability to process heavy diluted bitumen from the oil sands.

UPGRADING 101: FROM DILUTED BITUMEN TO SYNTHETIC CRUDE

Although flowsheets can vary among the operators, upgrading heavy bitumen to a light synthetic crude involves 5 basic steps:

  1. Diluent Recovery: Diluent use to transport the bitumen is removed and returned back to the bitumen production facility. This diluent is typically a naphthenic solvent (commonly referred to as naphtha) but can also be a paraffinic solvent or condensate.
     
  2. H:C Ratio Upgrading: The hydrogen to carbon (H:C) ratio is improved either through carbon rejection (coking) or hydrogen addition (hydroconversion). A higher H:C ratio is indicative of a better quality crude.
     
  3. Heavy to Light Conversion: The lower-value heavy portion of the bitumen is converted into lighter hydrocarbons. This can be done through:
    • fractionation (or distillation) where the different crude oils are separated by boiling point, and/or
    • cracking, where the complex long-chain hydrocarbon molecules are broken down (cracked) into shorter-chain, simpler hydrocarbon molecules.
       
  4. Impurity Removal: Sulphur and nitrogen are removed, producing hydrogen sulphide and ammonia during a process known as catalytic hydrotreating. Removing these impurities enhances the quality and marketability of the final crude oil product.
     
  5. Product Blending: The different liquid fractions produced by the upgrader are then blended together to produce the desired crude oil product specification. Upgrader product is typically referred to as Synthetic Crude Oil (or SCO), which is then marketed to downstream refineries for conversion into final consumer products.
 
oil sands bitumen upgrader

BITUMEN UPGRADER: GENERIC PROCESS FLOW DIAGRAM
 

SYNTHETIC VS REGULAR CRUDE: COMPARING PRODUCT SPECS

Synthetic crude produced by a bitumen upgrader is slightly better in quality than conventional light/sweet crude, due to its lower sulphur and heavy metals content. Alberta's synthetic crude normally sells at par with West Texas Intermediate, and sometimes even trades at a small premium.

COMPARISON OF LIGHT/SWEET CRUDE STREAMS

WEST TEXAS INTERMEDIATE (WTI) SYNTHETIC CRUDE OIL (SCO) CANADIAN LIGHT
827 kg/m3
39.6° API
0.24% Sulphur
1.6% MCR
5 ppm Ni
15 ppm V
865 kg/m3
32° API
0.1% Sulphur
n/d MCR
n/d Ni
n/d V
825 kg/m3
40° API
0.4% Sulphur
2.0% MCR
5 ppm Ni
8 ppm V
US benchmark for conventional light/sweet crude Upgraded bitumen produced from the oil sands Conventional light/sweet from Western Canada
SYNTHETIC CRUDE OIL EXPLAINED:
The term synthetic refers to light crude produced through the upgrading of heavy bitumen, intended to distinguish from "regular" crude extracted from conventional oil reservoirs that requires little treatment before being sold to downstream refineries. However, synthetic and conventional crudes are (almost) physically and chemically identical.

ALBERTA'S UPGRADERS: SIMILAR BUT DIFFERENT

About 60% of Alberta's bitumen is diluted with condensate and sold directly to market, without an intermediary upgrading step. This Dilbit is mostly sourced from in-situ operations and two oil sands mining facilities - Imperial Oil's Kearl Lake Mine and the upcoming Fort Hills Mine. 

The remaining 40% of bitumen produced from the oil sands is upgraded into synthetic crude before being sold to market. There are currently 4 operational bitumen upgraders in Alberta:

With exception of Shell's Scotford upgrader, all other upgraders are located adjacent to the mine and integrated with the Bitumen Production facility.

Nexen's Long Lake Upgrader is Alberta's only upgrader integrated into an in-situ facility. However, Long Lake was idled in the summer of 2016 after a fire crippled the upgrader. The adjacent SAGD (steam-assisted gravity drainage) facility remains operational and now produces a heavy diluted bitumen, just like most other SAGD operators in the area.

The Alberta Government has also partnered with Canadian Natural Resources to build a new 50,000 barrels per day bitumen upgrader in Sturgeon County, AB. The Sturgeon Refinery should be operational by the middle of 2018. 

UPGRADER:
MILDRED LAKE
UG 1&2
SCOTFORD
HORIZON
LONG LAKE 2
NW REFINERY 3
OPERATOR: SYNCRUDE SUNCOR SHELL CNRL NEXEN NRW PTR
BITUMEN FEEDSTOCK: Mildred Lake & Aurora North Base Plant, MacKay River & Firebag Muskeg River & Jackpine Horizon Mine Long Lake SAGD CNRL Cold Lake & BRIK 4
CAPACITY (bbl/day1): 350,000 357,000 255,000 240,000 58,500 50,000
PUG: carbon rejection + hydroconversion carbon
rejection
hydroconversion carbon
rejection
carbon
rejection
hydroconversion
Fluid Coking +
LC‑Fining
Delayed
Coking
LC-Fining Delayed
Coking
OrCrude + Solvent Deasphalting LC-Fining
SUG: hydrotreater hydrotreater hydrotreater hydrotreater hydrocracker hydrotreater + hydrocracker
GASIFIER: No No No No Yes Yes
CC&S5: No No Yes No No Yes
PRODUCT: light/sweet light/sweet +
heavy/sour 6
light/sweet +
heavy/sour 6
light/sweet light/sweet light/sweet
YIELD: 85% 81% 100+% 85% 83% 100+%
DETAILS ➜ DETAILS ➜ DETAILS ➜ DETAILS ➜ DETAILS ➜
UPDATED: DEC 27, 2017
SITE MAP: TECHNICAL / OIL SANDS 101 / BITUMEN UPGRADING
NOTES:
1 SCO (SYNTHETIC CRUDE OIL) PRODUCTION CAPACITY
2 OFFLINE
3 UNDER CONSTRUCTION
4 BRIK: BITUMEN ROYALTY-IN-KIND
5 CC&S: CARBON CAPTURE AND STORAGE
6 PARTIALLY UPGRADED PRODUCT
7 NO LOSS OF YIELD W/HYDROCONVERSION PROCESS
VENDOR RESOURCES:
CHEVRON LUMMUS GOLBAL • LC-FINING
UOP • RCD UNIONFINING™ PROCESS
SHELL GLOBAL SOLUTIONS • RESIDUE GASIFICATION
SOURCES:
GOVERNMENT OF ALBERTA • UPGRADING
CRUDE MONITOR • WESTERN CANADIAN CRUDE ASSAYS
IHS MARKIT • EXTRACTING ECONOMIC VALUE FROM THE CANADIAN OIL SANDS • NOV 2017
IHS MARKIT • COMPARING GHG INTENSITY OF OIL SANDS TO THE AVERAGE US CRUDE • MAY 2014
NWR PARTNERNSHIP • STURGEON REFINERY: TECHNOLOGIES
NRCAN • UPGRADING AND REFINING PROCESS DEVELOPMENT • DEC 2015
CEG • IN-PROVINCE UPGRADING: ECONOMICS OF A GREENFIELD OIL SANDS REFINERY • APR 2014
COQA • WTI/DOMESTIC SWEET QUALITY SPECIFICATIONS • FEB 2015
CDN OIL SANDS • ANNUAL INFORMATION FORM • DEC 2014
NATIONAL POST • SUNCOR SCRAPS VOYAGEUR OIL SANDS UPGRADER PROJECT • MAR 2013
GLOBE & MAIL • SUNCOR CEO: ECONOMICS OF VOYAGEUR UPGRADER CHALLENGING • DEC 2012
CALGARY HERALD • OILSANDS TECHNOLOGY DEFIES EASY COMPARISONS • JAN 2012
WIKIPEDIA • OPTI CANADA
CNOOC/NEXEN • ABOUT NEXEN'S OIL SANDS BUSINESS • JUN 2015
NEXEN/OPTI • APPLICATION FOR APPROVAL OF LONG LAKE SOUTH PROJECT • DEC 2006
OPTI CANADA • THE LONG LAKE INTEGRATED UPGRADING PROJECT • OCT 2006
ALBERTA OIL MAGAZINE • OPTI CANADA HAS ARRIVED IN ALBERTA’S OIL SANDS • JAN 2005
SUNCOR ENERGY • VOYAGEUR UPGRADER: PROJECT APPLICATION • MAR 2005
SUNCOR ENERGY • PROJECT MILLENNIUM APPLICATION • APR 1998
UNIVERSITY OF ALBERTA • TUTORIAL ON UPGRADING OF OILSANDS BITUMEN
In-Situ Bitumen Extraction

In-Situ Bitumen Extraction

Products from the Oil Sands: Dilbit, Synbit & Synthetic Crude Explained

Products from the Oil Sands: Dilbit, Synbit & Synthetic Crude Explained

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