Both Tofino and Ucluelet have organizations that work very hard to get Tourists to visit the area. The vast majority of tourists consume petroleum products to get here. The following explains how these products are delivered :
Petroleum Products Distribution Networks
logistics network required to supply petroleum products from the
refineries to the end-users is a complex system of pipelines, ships,
railways and trucks. Often several methods of transportation are
utilized to move petroleum products from the refineries, ports and large
terminals to tremendously disperse markets all across Canada. The long
distances and variety of transportation modes used can pose challenges
for the refiners who must maintain strict product specifications.
Degradation or contamination of product in transit can result in costly
re-processing at the delivery point if the integrity of the distribution
system is not carefully monitored. This is increasingly important as
environmental regulations result in cleaner and more stringent product
order to reduce transportation costs and to capitalize on increasing
economies of scale, refiners enter into a large number of product
exchange agreements with one another. Product exchanges occur when one
refiner provides another refiner with specific products in a certain
location in exchange for a similar quality and volume of products in
exchanges significantly reduce the volumes and distances over which
products are moved, thereby considerably reducing transportation costs
and environmental exposure. These agreements have not only allowed the
industry to consolidate their operations at the refinery level but have
also led to a consolidation of local product terminals. It is no longer
unusual to purchase gasoline from a branded outlet that was produced by
one of its main competitors.
cases where product exchanges are not available, companies need to make
other arrangements to supply their terminals and retail networks. The
method of transportation they select to move their products will be
influenced by several factors. Geographic barriers are a major concern
as well as the volume of products demanded in each of these markets and
the relative costs of transportation. Each mode of transportation has
its own inherent strengths and weaknesses.
Refineries to Terminals
terminals are more widely distributed than refineries and are generally
located near major markets. Pipelines are the safest, most reliable and
cost-effective way of transporting the large volume of petroleum
products that must be moved throughout Canada each day. However, the
enormous capital cost associated with constructing pipelines limits
their use to locations where very large volumes of product are to be
moved for an extended period of time. The payback period for these
projects is often 15-20 years or greater.
the volume of petroleum products cannot justify the construction of a
pipeline, petroleum products are transported to terminals across land by
truck and rail and over water by marine tanker. In Atlantic Canada, all
petroleum product terminals are serviced by marine tanker. In other
areas of Canada, railways and trucks are much more important. Although
transportation by truck is the most expensive transportation method, it
is also the most flexible. Highway truck tankers transport all gasoline
from the terminals or refinery truck loading facilities (commonly
referred to as "racks") to underground storage tanks at each retail
of Canada's refined petroleum product distribution network is operated
by three national oil companies (Shell, PetroCanada, and Imperial Oil)
and a handful of regional refiners (Irving Oil, Ultramar, Suncor Energy,
Federated Co-op, Husky and Chevron). With only a few exceptions, all
products terminals are owned and operated by one of these companies.
Canadian downstream petroleum industry can be broken into three
distinct regions: Western Canada, Ontario and Quebec/Atlantic Canada.
Although some product movements do occur between regions, such as
shipments from Quebec refiners into Ontario, each of these regions has
historically been self-sufficient. In 2005 Ontario shifted to a net
import position with the closure of the Oakville refinery and increased
product movements from Quebec refineries. Product imports can play a
significant role in satisfying petroleum product demand in Canada. The
availability of both crude oil and petroleum product imports in every
region hinges on geographic constraints. Some regions are better suited
than others to accommodate imported products. Each area has its own
natural features and this creates some unique situations.
the Atlantic/Quebec region, product movements from refineries to
terminals occur primarily by ship. An exception is the unit train
employed by Ultramar to move product from their refinery near Quebec
City to Montréal. Ultramar is currently planning to build a pipeline
from the St. Romuald refinery across the river from Quebec City to
east-end Montreal to be operated in conjunction with the unit trains.
locations are governed by proximity to markets and alternative
transportation modes. This region provides an excellent example of
product exchanges as Imperial Oil and Irving Oil provide refined
petroleum products to Shell, PetroCanada and Ultramar at Atlantic
terminals in exchange for similar quantities of product in Montreal and
Because of their connection via major waterways, Atlantic Canada and Quebec have good access to imports from the northeastern U.S. and
Europe. As a result there are a number of major independent marketers
who import petroleum products into Montreal for sale in the Quebec and
movements from refineries to terminals within Ontario are primarily
done by pipeline, although some movements by marine are made into Sault
Ste Marie and Thunder Bay. Thunder Bay is also supplied by rail from
Winnipeg, and Sault Ste-Marie is partially supplied by rail and ship
from Quebec. Eastern Ontario (Cornwall and Ottawa) obtains a large
amount of their supply from Montréal via the Trans Northern Pipeline (TNPL). Three product pipelines, two from Sarnia refineries and the TNPL from
Montréal, supply the Toronto area. Toronto is one location where
essentially all refiners maintain terminals due to the large demand for
products in the area. In 2005 the Toronto to Cornwall section of TNPLwas reversed to allow product to move from Quebec refineries all the way into Toronto.
Ontario also has access to supplies from large U.S. markets
and can also bring in cargos via the St. Laurence Seaway from Quebec,
Atlantic or offshore refineries. However, logistical constraints, such
as the size of ships that can navigate the Seaway and the
seaway-shipping season, increase the cost of these supplies. Other modes
of transportation, such as pipeline, unit train and trucking, are
necessary to bring in products from other regions.
of Western Canada is landlocked, and as such, has very limited access
to supplies from other regions. Only British columbia has access to
imported product as the current infrastructure was not designed to
transport supplies to the Prairies from other regions. However, the
Edmonton refineries supply petroleum products into the Vancouver market
via the TransMountain pipeline (TMPL).
In the event of a supply shortage in the Prairies, these Alberta
refiners have the ability to balance supply and demand by importing
product into Vancouver from Washington State, freeing up additional
Edmonton production for consumption in prairie markets.
movements from refineries to terminals in the West are primarily done
by pipeline. Movement by rail to the territories, B.C. interior and to
Thunder Bay in western Ontario also occurs. Barges carry product from
Vancouver to terminals on Vancouver Island and along the coast and from
terminals in the Northwest Territories to more northern locations along
the MacKenzie River.
refineries provide about 50-60% of the petroleum product needs in the
Vancouver market. The rest of the Vancouver area is supplied either by
the Chevron refinery in Vancouver, or with product imports from the U.S. The
West has some unique dual product pipelines. Enbridge Line 1 pipeline
from Edmonton, Alberta, to Gretna, Manitoba, ships refined products plus
natural gas liquids (NGLs) and synthetic crude. TMPL from
Edmonton to Vancouver ships refined products plus all types of crude
oil. The crude oil leaves deposits of substances, like sulphur, on the
pipeline wall as it passes through the pipeline. These can be picked up
by the clean products like gasoline that follow the crude oil through
the line. Gasoline shipped viaTMPL to Vancouver must undergo further treating prior to sale to remove impurities picked up in transit.
a result of the significant rationalization of terminals over the last
20 years, in some markets, only one terminal exists and all marketers
load at that terminal. From these local terminals, petroleum products
are trucked to retail / customer sites. Each product has a different
delivery system from the terminal depending on the customer base. For
example, jet fuel is often moved by pipeline directly to the airport.
Diesel fuel is distributed through retail outlets, large commercial card
lock facilities where trucking companies can fill up at unattended
distribution sites, or by truck delivered directly to customer tankage.
Furnace oil is distributed from the terminal directly to home heating
the most visible and widely used of all the products, has the most
dispersed distribution network. Before the gasoline leaves the terminal,
some gasoline retailers will add performance and detergent additives to
distinguish their brand from those of their competitors. The formula
for each additive package is unique to that specific brand. As many
companies pick up product from the same terminal, the proprietary
additives are generally added at the terminal and are the only way to
differentiate gasoline at retail outlets.
and ethanol-blended gasoline, because of its ability to pick up water,
cannot be transported by pipeline. Ethanol can be shipped by railcar or
truck but must be blended at the terminal for those locations supplied
by marine or pipeline. Dedicated tanks are required to store the ethanol
and the gasoline-blending component with which it will be mixed. The
handling of ethanol-blended fuels also requires modifications to other
aspects of the fuel distribution system, including trucks, retail
storage tanks and service station pumps.
marketing and retailing of gasoline is carried out by many firms, which
can generally be divided into two types. The first type consists of
outlets operated by the integrated refiner marketers who produce the
gasoline, distribute it and market it, often through affiliate or
licensed operators who own individual outlets. These companies provide
gasoline to their own network and to other retailers under contract. The
second type consists of the independent marketers. Independent
marketers are those who do not own a refinery but either buy their
product from Canadian refiners or import the gasoline. They tend to
operate small numbers of outlets in specific locales, but some large
networks exist. Some of the larger networks of independent stations
include Wilson Fuels, Couche-Tard, OLCO, Canadian Tire, Cango, and Domo.
Generally, the large independents have a 15-25% share of the sales
volume in urban markets.
three major refiners - Imperial Oil, Shell and PetroCanada - account
for about 36% of the branded stations in Canada and have the largest
share of stations in each of the regions except the Atlantic. Imperial
Oil is the largest retailer in Canada with 1,978 Esso stations followed
by Shell's 1,762 and PetroCanada's 1,375 sites. It is important to note
that a large percentage of these "branded" stations are independently
owned and operated under supply contracts with the company whose brand
of gasoline is sold at that outlet.
to a report published by MJ Ervin and Associates (December 2004), of
the 14,034 service stations in Canada, only 16% of all gasoline stations
come under the price control of one of the three majors and only 32% of
service stations come under the price control of one of the 10
refiner-marketers. Independent proprietors operate the remaining 68% of
Canadian service stations and set their own prices.
is also an important distinction between the number of outlets a
company owns and their market share. Not all stations have the same
volume throughput. The majors tend to have higher volume throughput per
outlet so generally are able to capture a larger share of the market
with fewer stations. In 2004, Shell service stations averaged sales of
4.1 million litres, while Esso and Petro-Canada's company-owned sites
had average sales of more than 5.6 million litres per site. Since 2000,
the three major oil companies have increased their sales by 4.5% despite
reducing the number of outlets they own by 18%.
the major and regional refiner-marketers have been closing some of
their low performance outlets, independent retailers have been
increasing their presence in the gasoline market. The most notable new
participants are supermarkets. Grocery chains such as Superstore and
Safeway have entered the retail gasoline market. The supermarkets are
known for their high-volume, low-margin retailing and are considered by
many as an efficient and aggressive new source of competition in the competition in the industry.