While in Fort McMurray I have a lot of access to maps of North America and the pipe lines embedded in the ground that you wouldn’t normally see on a driving map. Seeing where these lines are, I am starting to piece together why some areas are more populated than others. It appears people follow the oil (because that’s where the money is).

I will try to explain to you why Fort mcMurray has a unique relationship with Sarnia and Sarnia with the rest of North America. By understanding this relationship you will start to see why Sarnia is going to expand more in the future. (You are beginning to see this with the billion dollar expansion at Suncor and also why Shell announced the construction of a new refinery – (which is the only new Refinery constructed in the last 20 years in all of North America)).

Fort McMurray
If you don’t know its location, it is an 8 hour drive North of Calgary. I am writing this from Fort Mac so let me give you a quick break down – its cold (minus 30) and I haven’t seen the sun in 4 days. Fort McMurray is also the home to the oil sands and the oil sands contain probably the largest oil reserve in the world (over 3 trillion barrels).

The problem in Fort Mac is that the oil is in the sand and until very recently (say the last 15 years) it cost more money than it was worth to extract the oil from the sand. With the addition of new technology and a souring global demand for oil ($65 + a barrel) the oil sands has now becoming easier, cheaper and very profitable to produce.

There are two main pipeline feeds that come out of Fort McMurray for all the oil extracted (which is an INSANE amount and only climbing. Suncor alone produces 260,000 barrels a day and predict that by 2010, it will extract over 500,000). The two pipes travel east and end in Wisconsin. From their, they split. One line travels to Chicago and the other to Sarnia (under the great lakes).

Is a HUGE depot. From here some of the oil is refined and distributed to the local vendors. The pipeline from Fort McMurray continues on and travels south and meets up with Oklahoma (Oklahoma is a MASSIVE depot and connects all the other southern states that refine, add to, subtract from and manipulate the oil.)

The pipelines going to Fort McMurray are like two way roads and in Chicago the depot receives oil from down south and Fort McMurray. But it doesn’t just stop their. The depot sends that oil through their own pipeline (a combination of Fort McMurray and southern oil) and continues to travel east. Can you guess where that line goes to?

Is the location responsible for receiving a pipeline directly from Fort McMurray and indirectly from Chicago. In Sarnia, the oil is refined and many plants operate their to manipulate, extract and add to the oil. 2 pipelines come into Sarnia and after its been manipulated and tweaked with it then sends the oil on further. The first line sends the oil to the heart of Indiana. From there is it received, off loaded and distributed. (This pipeline runs parallel with Interstate 75).
The second pipeline travels to Toronto (which travels parallel with Highway 402 and highway 401).
The pipeline that comes from Sarnia and travels to Toronto spirals off in many directions. One spiral is Ottawa. In Ottawa the oil is received, extracted and distributed.
Another spiral is New York. New York receives all of its oil from this Toronto line. They receive it, extract it and distribute it.
To recap: Sarnia provides the vast majority of oil to Toronto, Ottawa, New York, Boston (anything east you can imagine).

History Lesson
The relationship that Fort McMurray and Sarnia have is unique. But to go further on this relationship we’ll have to do a quick history lesson.

There are two types of oil crude: Sweet and Sour. Sweet is the crude you want. It’s easy to process and make into gasoline. All the cars (anything with a motor) receive sweet.
Where do you find sweet crude? The Middle East. In the Middle East it’s as easy as dropping a pipeline in the ground and the sweet crude just explodes to the surface. It’s very cheap to produce (probably why gas is 2 cents a litre in Kuwait).

The problem in the Middle East is instability. Totally understandable because the ground they occupy is VERY VALUABLE. All these religious wars that have been and that are going on probably have some ties (if not all) to the oil. (This is an entirely different topic of discussion and can be debated another time).

The Oil Sandsin Alberta has the largest supply of Sour crude in the world (the stuff you don’t want). This sour crude has to be processed, broken down and made into sweet. It’s a big process and quite costly. To be accurate, it now costs about $22 a barrel to take sour and turn it into sweet. Back in the 70s when gas was very cheap, the oil sands were too expensive for oil production and the oil sands only cost companies money.

Travel 20 years later into 90s and you find a different story. With the increase in car production, house heating, electricity, 3rd world countries becoming developed, an unstable middle east the demand for oil has increased at an incredible rate. So much demand that the oil sands are now very producible and very profitable.

In the last 15 years the oil sands went from being a black hole for company pockets to becoming the backbone of the company profit. The only problem now is who is going to change the sour crude into sweet? North America was never built to receive sour crude (at least not in the amount that the oil sands can produce it) but Sarnia was. Sarnia has always received sour crude. This is why you see companies dumping heap loads of money into southwest Ontario. The pipelines already point to Sarnia so why not keep sending it that way and building more there.

So the relationship that Fort McMurray and Sarnia has is that Fort Mac pulls it out of the ground, they send it across the country (which takes 26 days), Sarnia receives it, converts it and sends it on its way.