Pretty much right. Oil is produced in the heartwood, not...

Pretty much right. Oil is produced in the heartwood, not sapwood. But not all logs will contain enough heartwood as heartwood formation is not an automatic given and is dependent on age, genetics, environmental factors etc. Once heartwood is processed, there is no log left, just what they call spent charge (powder). So basically they have to grade logs to the highest and best use, some might be oil, others as whole logs.