Diversifying markets for Canada’s oil and natural gas production is vital to ensure Canada receives full value for its natural resources, and to ensure the industry continues to support Canadian jobs, government revenues and contributions to Canada’s gross domestic product (GDP).
Canada produces more oil and natural gas than we need to meet energy demand within our country, so the remainder is exported. Essentially all of Canada’s oil and natural gas exports go to one customer: the United States.
CANADA AND THE U.S.
Canada and the U.S. share a comprehensive trading relationship of which energy is a major part. Canada is uniquely positioned to contribute to meeting U.S. energy demand.
While the U.S. will continue to be an important market for Canadian energy products, growing oil and natural gas production in the U.S. means that country is not only Canada’s biggest customer but also Canada’s number one competitor. Because of limited pipeline capacity and export infrastructure, Canada sells 99% of its oil into a saturated North American market at low prices. This means Canada isn’t getting full value for its resources.
Canadian oil producers supply oil to Canadian markets and export to the U.S.
There are 17 refineries in Canada that have a collective crude oil refining capacity of 2.0 million barrels per day (b/d).
Canada is currently the largest supplier of oil to the U.S. In 2019, Canada exported more than 3.7 million b/d of oil to the U.S. – less than 1% of Canadian exports were delivered to other countries.
World demand for crude oil is expected to grow in the coming decades. According to the International Energy Agency (IEA) report World Energy Outlook 2021, global oil demand will increase 21% by 2040, from 87.9 million b/d to 103.6 million b/d. The combined demand growth from China and India is 5.9 million b/d.
Canada’s Oil Imports
Despite having the world’s fourth-largest oil reserves, Canada imports oil from foreign suppliers. Currently, more than half the oil used in Quebec and Atlantic Canada is imported from foreign sources including the U.S., Saudi Arabia, Russian Federation, United Kingdom, Azerbaijan, Nigeria and Ivory Coast. In 2019, Canada spent $18.9 billion to import foreign oil. Canada imported more than 660,000 b/d of oil in 2019.
Canada’s natural gas producers supply natural gas to markets in Canada and export natural gas to the U.S.
From 2014 to 2019, exports to the U.S. increased slightly, but overall exports to the U.S. have dropped 22% over the past 10 years. Canada urgently needs new international markets for our natural gas.
Advances in horizontal drilling and hydraulic fracturing have enabled the U.S. to increase its own natural gas production by more than 40% — the U.S. has been the world’s top natural gas producer since 2011. (Source: U.S. Energy Information Administration)
The result has been low prices in North America due to oversupply, and declining exports of Canadian natural gas particularly into the eastern U.S., where shorter transportation distances give American producers a significant cost advantage. Plus, the U.S. is increasing its exports — including into Ontario and Quebec — displacing natural gas from Western Canada.
Demand for natural gas in the form of liquefied natural gas (LNG) in India, China and Southeast Asia is growing.
World demand for natural gas is expected to increase 22% by 2040, driven by rapidly expanding Asian economies. (Source: IEA World Energy Outlook, 2021) Canada’s natural gas is uniquely positioned to meet that growing energy demand by developing a West Coast LNG industry.
However, Canada is falling behind. The U.S. Federal Energy Regulatory Commission has approved 15 LNG export plant proposals, most located on the U.S. Gulf Coast. The U.S. is set to become a major exporter of LNG. (Source: U.S. Energy Information Agency)
Several LNG export terminals have been proposed on Canada’s West Coast but only two are currently under construction.
CANADA’S RESOURCES, CANADA’S BENEFITS
Without better access to markets within Canada and to international markets, Canada receives fewer economic benefits from development of its oil and natural gas.
Over the next six years, the oil sands industry is expected to pay an estimated $8 billion in provincial and federal taxes (Economic Recovery Pathways For Canada’s Energy Industry 2020-2025, CERI). These revenues contribute to government spending on infrastructure, social services and other important programs.