Light vs Heavy Crude Oil
Light Crude oil is liquid petroleum that has low density and that flows freely at room temperature. It has low viscosity, low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. It generally has a low wax content as well. On the other hand, heavy crude oil or extra heavy crude oil is any type of crude oil which does not flow easily. It is referred to as “heavy” because its density or specific gravity is higher than that of light crude oil. Heavy crude oil has been defined as any liquid petroleum with an API gravity less than 20°. Extra heavy oil is defined with API gravity below 10.0 °API (API gravity, is a measure of how heavy or light a petroleum liquid is compared to water. If its API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks. )
Light crude oil receives a higher price than heavy crude oil on commodity markets because it produces a higher percentage of gasoline and diesel fuel when converted into products by an oil refinery. Heavy crude oil has more negative impact on the environment than its light counterpart since its refinement requires the use of more advanced techniques an the use of contaminants.
The sweet light crude oil Western Texas Intermediate (WTI) is used as a benchmark in oil pricing.
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Canadian heavy oil production is centered in the greater Lloyminster region covering both sides of the Alberta-Saskatchewan border where companies enjoy year round access. Heavy oil is extracted from multiple-zone formations at shallow drill depth of 400-700 meters. To date, only 6.5% has been recovered from the 32 billion barrels of initial petroleum in place.
Oil produced from the greater Lloydminster fields falls in the heavy oil category as it has API gravity between 10° and 22°. It’s called heavy because it does not flow easily; it’s a gooey type of crude. The API gravity measures how heavy or light petroleum liquid is compared to water. Anywhere above 10° floats on water and vice versa. Heavy oil producers suffer from a price differential of about 20% to WTI (West Texas Intermediate) prices because it results in less higher end products when refined (refining costs are thus higher). Producers believe the price differential should narrow with increased refining capacity and pipeline takeaway.
Even though heavy oil production lacks the “sex appeal” of tight oil extracted from shale, it remains a low risk high reward operation as the shallow drill depth translates into lower drilling costs and completion costs since mostly conventional vertical wells are drilled.
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