WCS (Western Canadian Select) is a benchmark heavy oil blend from Western Canada comprised of 20 heavy oil streams, bitumen, and upgraded synthetic crude. It was created in 2004 to standardize the marketing of heavy oil from the region. WCS is a high-sulfur, heavy crude that is well-suited for high-conversion refineries which can process the heavy bottoms into valuable fuels. Most of Canada's heavy oil, including WCS, is exported to the US by pipeline where it is refined primarily in the Midwest. However, transporting WCS to the US Gulf Coast refineries would increase its price due to proximity to larger, complex refineries optimized for heavy crude.

1. WESTERN CANADIAN
SELECT EXPLAINED
Oil Sands Magazine • February 20, 2016
Western Canadian Select is often advertised as Canada's
discounted heavy oil produced exclusively for the US
market. But there's a lot more to that story ...

2. What is Western Canadian Select?
WCS is North America's largest heavy oil
benchmark comprised of:
20 heavy conventional oil streams
Athabasca bitumen from the Alberta oil sands
upgraded bitumen, or light synthetic crude oil (SCO)
condensate, added to reduce pipeline viscosity.

3. What is a benchmark?
A benchmark is a specific grade of crude oil
priced out of a specific location:
West Texas Int.
• 39.6° API
• 0.25% sulphur
• Cushing, OK
North Sea Brent
• 38.3° API
• 0.37% sulphur
• Sullom Voe, UK
W. Cdn Select
• 21° API
• 3.3% sulphur
• Hardisty, AB

4. Why was WCS created?
There are dozens of different heavy oil streams produced
in Western Canada, each with varying degrees of quality.
Each grade of oil requires separate pipeline and storage
space, creating a marketing and distribution nightmare.
In order to fix this problem, 4 oil producers - Suncor,
Cenovus, CNRL and the former Talisman Energy, created
the WCS heavy oil blend in 2004.

5. What are the specs for WCS and
how "heavy" is this crude?
WCS is heavy (bordering on
medium) on the API scale and
quite sour, having a sulphur
content well above 0.5%.
20.5 to 21.5° API
3.0 to 3.5% sulphur
925 to 935 kg/m³

6. How does WCS compare to other
benchmark crudes?
US refineries balance out light domestic oil with heavy
foreign imports, such as WCS. WCS is closest in quality
to Mexican Mayan crude.
Average API US produced crude: 40 to 45°
Average API US oil imports: 20 to 25°
Average API US refinery input: 32°

7. Why is heavy oil so desireable?
High-conversion refineries make more money by
processing heavy sour crude, such as WCS. These
refineries crack and coke the heavy crude "bottoms" and
remove all traces of sulphur to produce value-added
low-sulphur gasoline and diesel fuels.

8. How much heavy oil does
Canada produce?
Canada produces about 4 million bbl/day of crude oil.
Western Canada produces 2.8 million bbl/day of heavy
oil, much of it from the oil sands.
Western Canada also produces 400,000 bbl/day of
conventional heavy oil.

9. How much of
Canada's heavy oil
is upgraded into
light sweet crude?
35% of Alberta's heavy oil
is upgraded into light
synthetic sweet crude oil.
The remaining 65% is
blended and sold to market
as heavy sour crude oil,
including WCS, diluted
bitumen and conventional
heavy oil.
Canadian heavy oil sales to
market by type:

10. Where does all this Canadian oil go?
Production: 4 Mbbl/day
Consumption: 2 Mbbl/day
Exports: 3 Mbbl/day
Imports: 1 Mbbl/day
Canadian crude oil ... 95% of Canada's heavy oil is
exported to the US. Most of
Canada's conventional light oil is
processed in Canadian refineries.
East Coast refineries import
foreign oil due to pipeline
constraints.

11. Where is Canadian
heavy oil consumed?
Only 14% of Canada's oil is
exported to the Gulf Coast due
to pipeline constraints. Gulf
Coast (PADD III) refineries rely
heavily on crude-by-rail and
would have benefited greatly
from the Keystone XL pipeline.
Destination for Canadian
oil exports to US:
64% of Canada's oil is exported
to PADD II refineries, centred
around Chicago, IL. PADD II has
a refining capacity of 3.8 million
bbl/day.
PADD III has triple the refining
capacity of PADD II.

12. How is WCS priced?
Unlike other benchmark crudes, WCS Crude Oil
Futures Contracts reflect the differential to WTI and
not the actual WCS price. WCS contracts trade on the
Chicago Mercantile Exchange (CME). Monthly average
settlement prices are also posted on the National
Energy Board (NEB) website.

13. Is WCS cheap because it's heavy & sour?
Sale price is a function of transportation costs, not
quality. For example:
California Kern is the heaviest N. American crude, much
heavier than WCS but sells on par with WTI. The Kern blend
is processed directly in California refineries with minimal
transportation costs.
Mexican Mayan crude is identical in quality to WCS but sells
for $10/bbl more due to easy access to Gulf Coast refineries.
US refinery feedstock price at point of discharge, USD/bbl (Sep. 2015 average from EIA & NEB )

14. Who pays the transport costs?
Benchmark prices reflect the sale price at the point of delivery,
commonly termed FOB (free on board). The refinery has to
factor in crude shipment to its facility. A refinery will always
pick the cheapest crude, so high shipping costs will drive down
the selling price. Therefore, the same stream of crude will
have a different selling price at different locations.

15. What's the best way to increase
the sale price of WCS?
LOWEST
WCS
DISCOUNT
CLOSEST
BIGGEST
CUSTOMER
CHEAPEST
SHIPPING
METHOD
KEYSTONE
XL PPL
US GULF
COAST
HIGHER
WCS PRICE
+ =

16. The End!
For more information on Canadian heavy oil,
be sure the check out our website:
www.OilSandsMagazine.com