Canada - Oil and GasCanada - Oil and Gas

Overview 

Canada has the world’s third largest crude oil reserves, after Venezuela and Saudi Arabia and represent 97% of Canada’s 171 billion barrels of crude oil reserves. The provinces of Alberta, Saskatchewan and British Columbia share the sedimentary basin for natural gas production in Canada. Shale gas resources, meanwhile, are found in nearly all Canadian provinces. 

The oil and natural gas industries are key driving forces in the Canadian economy, accounting for 7% of Canada’s gross domestic product and employing upwards of 500,000 countrywide. The nation’s oil and gas and mining sectors are premier export markets for U.S. providers of machinery, equipment and related supply chain goods and services. Thanks to cost leadership and adoption of emerging technologies, U.S. manufacturers hold a significant advantage over competing regions. 

Falling oil prices during 2013-2017 caused a stall in exploration and production in Canada, resulting in a slowdown in capital expenditures. The resulting decline in production royalties earned by the provincial governments of Alberta and Saskatchewan, paid to the federal government, have adversely impacted the Canadian economy. The Canadian Association of Petroleum Producers (CAPP) estimated total capital spending to be CDN$40 billion in 2018 – a 48 per cent decline compared to $81 billion in 2014. In 2019, it is forecasted to further decline to $37 billion. Regulatory uncertainty has further stalled investment prospects. 

CAPP observes that a lack of export capacity to global markets is a factor in reducing revenues and a hindrance to sector growth, even as the price of Canada’s natural gas falls. The current market is stressed by a growing demand for pipeline systems to convey increasing volumes of oil and gas to foreign markets, both westward to tidewater ports in British Columbia and the United States and southward to midwestern U.S. transfer facilities and Gulf Coast tidewater ports. Production rates are also impacted by unclear regulatory policies, and increased transportation costs incurred when using conventional rail.  U.S. and Canadian governments have recently approved continuation of the Keystone XL pipeline and Trans Mountain extensions. These factors have become a point of political controversy among provincial and federal governing bodies, and in bilateral relationships with state and federal governments in the United States.

Amid these scenarios, however, CAPP forecasts oil sands production to reach 4.25 million barrels per day in 2035, from 4.66 million in 2018. In 2016, CAPP estimated that more than 1,500 U.S.-based companies supplied equipment, parts and services used in Alberta’s oil sands alone during the industry’s recent slowdown, a number expected to remain stable. Therefore, Canada continues to be a leading destination for investment and sales of American goods and services as the industry’s countrywide supply chain continues to signal demand for expert solutions from the United States.

The table below charts how crude oil and natural gas production has been trending in Canada. Production of the two commodities have been steadily increasing since 2016, with the 2019 estimate for production being 4.9 million barrels/day. Natural gas on the other hand has also been experiencing growth in marketable production, with an estimated 491 million cubic meters in 2019.

Table: Annual Canadian Oil and Gas Production (US$ Thousands)

Sub-Sector Best Prospects 

Top opportunities related to the oil and gas sector in Canada, direct and indirect, are predominantly based on dealing with large industry players with a focus on long-term projects. The current economic environment provides opportunities for U.S. companies that present cost-efficient and environmentally responsible solutions.

The following prospects currently exist within the Canadian oil and gas market:

• Field machinery and equipment

• Specialty mining and extraction equipment/services

• Drilling services

• Refinery equipment & pipeline construction equipment. 

• Maintenance, repair, & operations support services provide robust opportunity for current and future projects.

Canadian oil and gas development firms are looking to integrate protection for water resources, land reclamation, and environmental remediation into their operations, to reduce greenhouse gas emissions. Development of oil and gas technology focusing on these categories will be needed for companies to achieve their compliance and Corporate Social Responsibility (CSR) targets.

With an increased focus on innovative methods for decreasing operating costs and increasing value of assets, new technologies such as solvent injection/co-injection (in situ), waterless extraction (mining), radiofrequency heating/electrical heating (in situ), and “field” upgrading techniques to reduce production costs are currently in demand. 

There is also need for general construction materials; coking and recovery units; instrumentation and control systems; safety and security equipment; pressure vessels; heat exchangers; and transportation equipment. 

Opportunities 

• Twenty-six liquefied natural gas (LNG) export facilities have been proposed for Canada – 20 in British Columbia, 2 in Quebec, 1 in New Brunswick and 3 in Nova Scotia – with a total proposed export capacity of 355 million tonnes/year (MTPA) of LNG (or approximately 48 Bcf/d of natural gas). Between 2011 and December 2018, 24 LNG projects have been issued long term export licenses. 

• Imperial Oil’s Kearl Mine - Started in Q3 2015; Phase 3 completion of the project is expected by 2020. The cost of the project is $16 billion. 

• Frontier is a proposed truck-and-shovel oil sands mine located between Fort McMurray and Fort Chipewyan in northeast Alberta. At full production, Frontier will produce 260,000 barrels per day of bitumen, which will be transported via pipeline. Frontier is anticipating a 41-year mine life, generating long-term employment and economic activity. This project is currently under review, with construction beginning in 2019. 

• Fort Hills, scheduled to produce its first oil beginning fourth quarter of 2017, is forecasted to achieve 90% of its planned production capacity of 180,000 barrels per day within 12 months. In the second quarter of 2019, Fort Hills was able to increase its oil sands production to 89,300 barrels per day from 70,900 barrels per day in the same quarter of 2018. It will create work for approximately 1,600 permanent positions when fully operational. 

• Aspen oil sands project started construction in late 2016 and is scheduled for completion in 2020. Aspen is projected to produce up to 150,000 barrels of bitumen a day. 

• Trans Mountain Expansion Project, a $5.9 billion expansion will parallel the 1,150-km route of the existing Trans Mountain Pipeline. The pipeline capacity will increase from 300,000 to 890,000 barrels of oil per day. 

• Enbridge’s Line 3 Replacement Program between Hardisty, AB and Superior, WI; construction is already underway.   

Market Barriers 

No major barriers in the cross-border flow of trade exist between the United States and Canada. There are a few general barriers intrinsic to the oil and gas sector, including: 

High startup costs that make it difficult to enter the sector for some companies.

Federal and provincial government environmental regulations often require additional capital investment. 

Upcoming Events/Trade Shows 

Oil Sands Trade Show and Conference 
September 10-11, 2019
Fort McMurray, Alberta 
https://oilsandstradeshow.com/

Louisiana Gulf Coast Oil Exposition (LAGCOE) 
October 22-24, 2019
Lafayette, Louisiana
http://www.lagcoe.com/home-expo

Offshore Technology Conference (OTC) 
May 4-May 7, 2020
Houston, Texas
http://2020.otcnet.org/

Global Petroleum Show 
June 9-11, 2020
Calgary, Alberta
https://globalpetroleumshow.com/

Web Resources 

Statistics Canada:  https://www.statcan.gc.ca/eng/start
Canadian Association of Oilwell Drilling Contractors (CAODC): https://caodc.ca/
Alberta Innovates - Energy Research Institute (AI-EES): http://www.ai-ees.ca/
Canadian Society for Unconventional Resources (CSUR): http://www.csur.com
Petroleum Services Association of Canada (PSAC): https://www.psac.ca/
Natural Resources Canada: http://www.nrcan.gc.ca/home
Canadian Energy Pipeline Association (CEPA): http://www.cepa.com/
Canadian Association of Petroleum Producers (CAPP): http://www.capp.ca/
JuneWarren-Nickle’s Energy Group: http://www.jwnenergy.com/
Canadian Energy Research Institute: https://ceri.ca/
Suncor: https://www.suncor.com/newsroom/news-releases/1887619

For additional information on the oil and gas sector, please contact Commercial Specialist Connie Haider at Connie.Haider@trade.gov; tel: (403) 265-2116.