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Has Big Oil exposed itself to billions in losses from a widening price differential between light (West Texas Intermediate, or WTI) and heavy (Western Canadian Select, or WCS) oil?

That’s the hypothesis in a report by Scotiabank as reported in The Vancouver Sun on Feb. 20 (Pipeline delays impose demonstrable cost ($10.7 billion) to Canada’s economy: Scotiabank).

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But Big Oil isn’t stupid. Scotiabank didn’t ask the obvious question: How much Canadian crude sells at a price subjected to the light to heavy differential? If it had, it would know it’s only about 10 per cent.

Suncor is one of Canada’s largest bitumen producers. CEO,Steve Williams recently said: “We have virtually no exposure to the light/heavy differential.” Canvassing Canadian Natural Resources Ltd., Cenovus, Imperial Oil, and Husky reveals similar information. Here’s why:

Canada produces about 4.2 million barrels a day of crude, including three million barrels a day of heavy oil, with bitumen representing nine out of every 10 barrels of heavy produced. Forty per cent of the bitumen produced is upgraded to Synthetic Crude Oil (SCO) in local facilities owned by oilsands producers. SCO has been selling at a premium to WTI, not a discount.