Canadian Refining Regionalism

Digging into the unique features of Canada’s key refining regions—where they are, where they get their crude, what they’re producing, and why they remain critical to Canada's ongoing energy security.

I had the opportunity to discuss recent oil market weakness yesterday on BNN Bloomberg’s The Close—encourage you to check out that full interview here

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• Canada’s roughly 1.8 MMbpd capacity refining fleet can be divided into three key regions—Western Canada, Ontario, and Quebec & Atlantic Canada—each which is unique in terms of the types and origins of crude feedstock sourcing, as well as the balance of products refineries in each region produced.

• The bulk of Canada’s refining fleet is best suited for processing lighter crude blends, which make up nearly three-quarters of total charged feedstock nationally.

• Western Canadian refineries process entirely domestically sourced crude oils (largely upgraded synthetic crude), while Ontario processes largely Western Canadian crude with some US feed mixed in, and Quebec and Atlantic Canada are much more dependent on imported crude, with much of it coming from OPEC countries.

• Canada’s import dependence has been steadily declining, however, as more Western Canadian crude makes its way east and import-intensive facilities close their doors; even more, that import sourcing is shifting closer to home and the US now accounts for more than half of the seaborne total.

• Canadian refineries have benefited greatly from the recent refining market crisis, especially diesel-rich Albertan facilities, and capacity utilization has been running especially hot for the past two years in an effort to capture that crack spread.

Fuel prices are once again topping the political agenda given considerable volatility over the past eighteen months. In Canada, high consumer prices have even led the Federal Government to reverse course on, arguably, the signature legislation of the governing Liberals, announcing just recently a 3-year exemption for home heating oil (effectively diesel used in home boilers in the role typically reserved for natural gas) from the national carbon tax. 

There’s no doubt that the ongoing refining crisis remains one of the largest contributing factors. While oil prices remain moderately high, crack spreads (i.e., refining margins) on fuels like diesel have been far, far higher. While oil refining is immensely complex, a macro overview of a country’s refining industry is reasonably approachable given the relatively small number of refining facilities in the scheme of the broader industry. That’s especially true in Canada, where you can nearly count the number of oil refineries from coast to coast to coast on two hands. 

We’ve written a lot about the broader COVID-era refinery crisis (see Collapsed Bridge To The Refining Crisis and Refiners’ Unbalanced Barrel) and the recent hair-raising ups and downs in crack spreads (see: Oil Context Weekly), as well as broader trends in the North American refining industry. Now it’s time to get to know Canada’s refining industry to better understand how it was positioned and how it fared through the recent refining market tumult. (I’ll also be publishing a future exploration of the same details south of the border.)