Alberta’s oil sands potential seems to be almost limitless, with production expected to double in the next decade. However, this vast resource potential has one Achilles heel – the very limited market that exists for raw product. The recent move by the United States federal government to defer the decision on the Keystone XL pipeline acted as a wakeup call to the oil and gas industry as well as politicians in Alberta. While the project is widely expected to proceed in the future, it underlined the need to reassess the market for our oil sands resources.

Bitumen produced from the oil sands is one of the heaviest crudes in the world. As a result, it can only be utilized by select refineries that have modified their operations to process this material.  Currently, the market is limited to a few refineries along the United States gulf coast that have been, or will be, modified to accept bitumen. Even refineries that used to process heavy crude from Mexico will have to be modified for Alberta bitumen.

What happens if the logistic supply chain in the form of a pipeline is delayed or disrupted? What if future environmental rules or other factors threaten the operations of these few select refineries?  The end result is a lot of bitumen that doesn’t have a home. So what is the answer to this dilemma?

The provincial government’s reaction has been to throw their weight behind the development of the Enbridge Northern Gateway pipeline. This project provides access to Asian markets who would construct specialized refineries or upgraders to accept Alberta’s bitumen. While this helps alleviate the problem of a single market, it still has a long regulatory road to travel. And though it creates a second market, it does not truly open up the global market for Alberta’s energy products.

Upgrading bitumen in Alberta is a viable and promising option in the diversification debate. We continue to be strong and vocal supporters of expanding value added capacity in our province to help diversify the oil sands markets and ensure we receive a fair value for the resource. Once bitumen is upgraded, the resulting product (synthetic crude oil) can be marketed to just about any refinery in the world. This opens up markets across North America, and the Asian markets could include all refineries instead of just a few specialized ones.

We have consistently promoted the “value” in adding value to Alberta’s resources through upgrading.  This creates new economic opportunities, diversifies our economy, as well as builds a future knowledge economy in our province. On top of these attributes, upgrading our resources also helps ensure Alberta has multiple buyers for what many believe is our single greatest product.