CANADA: ONE OF THE LARGEST
Canada is one of the world's five largest energy producers and is the principal source of U.S. energy imports.
Canada is a net exporter of most energy commodities and is an especially significant producer of conventional and unconventional oil, natural gas, and hydroelectricity. It stands out as the largest foreign supplier of energy to the United States, its southern neighbor and one of the world's largest consumers of energy. Just as the United States depends on Canada for much of its energy needs, so is Canada profoundly dependent on the United States as an export market. However, economic and political considerations are leading Canada to consider ways to diversify its trading partners, especially by expanding ties with emerging markets in Asia.
Canada is endowed with an exceptionally rich and varied set of natural resources, ranking among the five largest energy producers in the world, behind China, the United States, Russia, and Saudi Arabia. Canada produced an estimated 19 quadrillion British thermal units (Btu) of primary energy in 2012, relative to 13.3 quadrillion Btu of primary energy consumed. Canada was the world's seventh largest energy consumer after China, the United States, Russia, India, Japan, and Germany. Canada has a population of more than 35 million (37th largest in the world) with a gross domestic product (GDP) on a purchasing power parity basis of $1,526 billion (13th largest in the world) in 2013.
Canada's economy is relatively energy intensive compared to other industrialized countries, and is largely fueled by petroleum, natural gas, and hydroelectricity.
Canada's oil sands are a significant contributor to the recent growth and expected future growth in the world's liquid fuel supply, and they comprise most of the country's proved oil reserves, which rank third globally.
Canada is the world's fifth-largest oil producer, and virtually all of its crude oil exports are directed to U.S. refineries. Canada is a major onshore and offshore producer of crude oil, and the recent growth in its liquid fuels production has been driven by bitumen and upgraded synthetic crude oil produced from the oil sands of Alberta. Most of Canada's reserves and the expected future growth in Canada's liquid fuels production will be derived from these resources.
According to the Oil & Gas Journal (OGJ), Canada had 173 billion barrels of proved oil reserves at the beginning of 2014. The Alberta Energy Regulator places Canada's reserves at 169 billion barrels of proved oil reserves at the end of 2013.2 Canada controls the third-largest amount of proved reserves in the world, after Venezuela and Saudi Arabia. Among the top ten reserve holders, the only other state that is not a member of the Organization of the Petroleum Exporting Countries (OPEC) is Russia. Canada's proved oil reserve levels from 1980 to 2002 were well below 10 billion barrels. In 2003, they rose to 180 billion barrels after oil sands resources were deemed to be technically and economically recoverable. The oil sands now account for approximately 167 billion barrels,3 nearly all of Canada's current proved oil reserves.
Exploration and production
Canada produced more than 4 million barrels per day (bbl/d) of petroleum and other liquid fuels in 2013, an increase of more than 930,000 bbl/d from a decade ago. Of this production, 3.3 million bbl/d was crude oil and a small amount of lease condensate.
Oil production in Canada comes from three principal sources: the oil sands, the resources in the broader Western Canada Sedimentary Basin (WCSB), and the offshore oil fields in the Atlantic Ocean. Production from the oil sands accounted for more than half of Canadian oil output in 2013, a proportion that has steadily increased in the past decade. In total, Alberta was responsible for 78% of Canadian oil production in 2013. About 80% of Alberta's production came from the oil sands. Other noteworthy producing provinces are Saskatchewan, with 13% of national output from its share of the WCSB, and offshore areas on the east coast of Canada, primarily in Newfoundland and Labrador. Production from offshore reserves off the coast of the eastern provinces comes from mature oilfields, with few opportunities to mitigate decline rates. Accordingly, western provinces are expected to comprise an increasing proportion of overall Canadian oil production in the future.
Canada is expected to be one of the largest sources of growth in global liquid fuel supply, in both the near term and long term. EIA's Short-Term Energy Outlook forecasts that Canada's production will grow by an annual average of 180,000 bbl/d in 2014 and 2015. Looking forward, the 2014 International Energy Outlook projects that Canadian production could grow to 6.7 million bbl/d by 2040 as a result of the growing expansion of the oil sands.
Almost 97% of Canadian oil exports were directed to the United States in 2013,24 and Canada is the largest supplier of foreign oil to the United States. Canada accounted for one-third of U.S. crude oil imports in 2013. That year, the United States imported 3.1 million bbl/d of oil and petroleum products from Canada, of which 2.6 million bbl/d were crude oil, including diluents.
While overall U.S. imports of crude oil are declining, Canada is one of the few countries from where U.S. crude oil imports are increasing. From a decade ago, U.S. imports of Canadian crude have increased 59%, while imports from the other major suppliers have decreased.
Although the United States is a large net crude oil importer from Canada, at 2.6 million bbl/d in 2013, the cross-border oil trade flows in both directions. With existing legal restrictions, Canada is the only country to import U.S. crude oil (133,000 bbl/d in 2013). The United States exported 415,000 bbl/d of petroleum products to Canada in 2013.
Nearly all of Canadian crude oil exports to the United States come from the western provinces of which 70% (1.8 million bbl/d) goes to the U.S. Midwest. The U.S. Gulf Coast imported 128,000 bbl/d from Canada in 2013. While the Gulf Coast refineries are best suited to handle the heavier crudes coming from western Canada, the current pipeline infrastructure allows the Gulf Coast to import less than a tenth of the crude oil that is sent to the Midwest. The eastern provinces, which are more densely populated but have less oil production, import some of the energy products they consume from the United States, including crude oil.
Canada is the world's fifth-largest producer of dry natural gas and the source of most U.S. natural gas imports.
Despite holding a relatively smaller share of the world's proved natural gas reserves, Canada ranks fifth in dry natural gas production. It is the fourth-largest exporter of natural gas, behind Russia, Qatar, and Norway. Although Canada has plans to export liquefied natural gas (LNG), all of Canada's current natural gas exports are sent to U.S. markets via pipeline.
The U.S. Energy Information Administration (EIA) estimates that Canada's proved natural gas reserves were 67 trillion cubic feet (Tcf) at end of year 2012. Most of Canada's natural gas reserves are traditional resources in the WSCB, including those associated with the region's oil fields. Other areas with significant concentrations of natural gas reserves include offshore fields near the eastern shore of Canada, principally around Newfoundland and Nova Scotia, the Arctic region, and the Pacific coast.
Exploration and production
Canada is the fifth-largest producer of dry natural gas, behind the United States, Russia, Iran, and Qatar. Dry natural gas production has decreased by more than 300 billion cubic feet (Bcf) since 2010. EIA estimates that Canada produced 6.3 Tcf of gross natural gas in 2012, of which 5.1 Tcf was dry natural gas, 5.6 was marketed natural gas, 675 Bcf was reinjected, and 65 Bcf was vented or flared. Most of Canada's natural gas production derives from production in the WCSB. Alberta produced more than two-thirds of Canada's gross natural gas in 2013, according to NEB data,42 with most of the remaining amount coming from British Columbia.
Although production of natural gas is undergoing declines as a result of reserve depletion, technological advances have spurred rapid investment in the region, and natural gas production from the WCSB will increasingly come from shale gas, tight gas, and CBM. A number of major and independent companies, including Encana, Apache, Devon, and Quicksilver, are already active in British Columbia's Horn River shale play. Foreign interest in the resource was also demonstrated by the joint development agreements that Encana signed with CNPC and Korean Gas Corp. (KoGas) in 2010. Shale gas production in Canada is currently limited, and the shale gas basins in eastern Canada are in even earlier stages of exploration and development.
Offshore natural gas production has been focused primarily off the coast of Eastern Canada, in the Scotian Shelf geological area near the province of Nova Scotia. The most mature project is the Sable Offshore Energy Project (SOEP), of which ExxonMobil has a majority stake45. As it matures, production in SOEP declined. In 2012, SOEP produced 200 million cubic feet per day (MMcf/d) of raw natural gas from a peak of 500 MMcf/d.46 Encana is developing another major natural gas project off Nova Scotia, the Deep Panuke Project, which began production in 2013. The project is designed to produce 300 MMcf/d and up to 892 Bcf during the life of the project.
All of Canada's natural gas exports are directed to the United States via pipeline. However, for the first time, small amounts of LNG were trucked into the United States. For five months in 2013, Canada sent LNG via trucks to New England utilities to meet inventory requirements in anticipation of winter demand. The purchase agreement has been renewed for 2014.
The United States imported 2.8 Tcf of natural gas from Canada in 2013, of which less than 1% (555 MMcf) was LNG, down from near-peak levels of 3.8 Tcf in 2007. Canada accounts for 97% of U.S. natural gas imports, most of which come from western provinces. Although the United States is a net importer of natural gas from Canada, it exported more than 900 Bcf of natural gas to Canada in 2013, a dramatic increase from less than 100 Bcf in 2000. As prospects for domestic U.S. natural gas production continue to improve, the United States is expected to have lower natural gas import needs in the future while exporting more to its North American trading partners.
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