I Want You to (Refine) Me - Canadian Refiners Grappling With Morphing Market Realities

Canada may be the land of backyard hockey, lacrosse, and loonies, but Canadians have many similarities to folks in the U.S. The same holds true for Canada’s refining sector, which like its American counterpart has been adjusting to big changes in domestic crude oil production, a declining need for imported oil, and, most recently, a period of severe refined-product demand destruction caused by the pandemic. What Canadian refiners lack, though, is the attention they deserve. After all, nearly 2 MMb/d of crude oil flows through their 17 refineries. And, by the way, they now turn to U.S. producers for virtually all their oil imports — a far cry from where things stood before the Shale Era. Today, we kick off a three-part series that examines Canada’s refining sector in greater detail.

We have blogged often about the trials and tribulations of the refining sector in the U.S. (see The Big Money, Close the Door, or Where Are You Going for recent happenings), but we have not spent a lot of time discussing the same in Canada. With today’s blog as an opening salvo, we are taking a closer look at the past and present state of Canada’s refining industry. Our goal here is to discuss the basics, such as where are the refineries located, their capacities, what kind of crude they run, the sources of that crude, and the kinds and quantities of refined products that are consumed.

Of course, to understand the present you first have to take a look back, and we’ll do that here — briefly. Using historical data from the Canadian Association of Petroleum Producers (CAPP) and more recent company disclosures on refinery capacities, we know that Canada’s refining sector has grown from very humble beginnings. Just after the end of the Second World War, its combined oil throughput capacity totaled only 264 Mb/d (blue bars and left axis in Figure 1) and its refineries were small –– there were 32 of them (red diamonds and right axis), with an average capacity of less than 9 Mb/d! In the 70-plus years since, the number of refineries has shrunk by almost half to 17, but with a much larger combined throughput capacity of 2 MMb/d — and an average capacity of about 116 Mb/d. Canada’s refining capacity has actually held fairly steady near the 2-MMb/d mark since 1983. (Over that same period, refining capacity in the U.S. increased by 20%, to about 19 MMb/d today.)

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