Western Canadian Select (WCS) fact sheet
Creating new benchmark crude
In conjunction with Canadian Natural Resources Limited, Suncor and Talisman Energy Inc., we have implemented a new heavy oil stream named Western Canadian Select (WCS).
WCS — produced out of Western Canada — is made up of existing Canadian heavy conventional and bitumen crude oils blended with sweet synthetic and condensate diluents. It is a consistent high quality crude blend that was launched in December 2004 with volumes of approximately 250,000 barrels per day, and is well-positioned to become a North American benchmark.
A diverse Canadian oil market
There are approximately 25 separate heavy oil streams marketed out of Western Canada and this number continues to grow. The abundance of streams results in several inefficiencies. WCS offers an ideal solution:
|Issue||25+ separate oil streams||WCS Solution|
|infrastructure||— requires more tankage which increases costs||
— a blend of crudes reduces the number of streams
— more effective use of existing tankage in the pipeline delivery systems out of Western Canada
|Crude quality and consistency||— increases the risk of downstream quality deterioration due to mixing of varying grades in tanks en-route to market||
— by virtue of its stream size, minimizes contamination caused by mixing of various grades
— delivers more consistent quality to the buyer
|Conventional diluent supply||
— most Western Canadian heavy oil streams require diluent for transportation
— as Canadian production continues to grow, the demand for diluent is expected to increase, yet the supply is expected to remain flat
|— using sweet synthetic and condensate as a diluent reduces dependence on conventional diluent alone and improves reliability|
|Market liquidity||— a growing number of separate heavy oil streams results in reduced liquidity in any one stream, reducing crude acceptance and narrowing the ability for it to trade||— as a large stream of consistent quality crude, WCS can increase liquidity and should constitute a highly acceptable, more widely traded crude for producers and refiners alike|
West Texas Intermediate (WTI) and Brent are recognized as benchmark crudes. WCS has satisfied much of the criteria to become a benchmark. WCS has achieved threshold volumes of approximately 250,000 barrels per day and may grow from those numbers, whereas WTI and Brent are both declining from their current volume of about 350,000 barrels a day each. Furthermore, as a new benchmark, WCS is more effective than WTI as a means of financially hedging price risk against North American heavy oil grades because WCS addresses issues around product, price and location.
Benefits to producers and refiners
Producers: improved use of existing downstream pipeline facilities means that producers can deliver consistent quality crude with reliable on-time delivery to market. In addition, the improved stream liquidity will make WCS a more widely traded crude.
Refiners: refiners will have access to a stable, reliable and rateable crude, stringently monitored by the producing parties.
Our market development initiatives
To recognize the full value of Canadian crude oil, we are committed to:
- Creation of WCS, a new heavy oil steam benchmark that will provide greater operational efficiency; greater market reach; and greater liquidity.
- Developing new markets, such as the Southern mid-Continent, the Gulf of Mexico, and the West Coast, for heavy crude oil.
- Promoting the development of new heavy oil conversion projects in core markets.