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Study: Canada's crude petroleum industry

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The Daily

Monday, September 11, 2006

Canada is both an exporter and an importer of crude oil. Canadian companies exported about 63% of our 2005 domestic production, the vast majority of which went to the United States, according to a new report.

Canada supplied almost 10% of American crude oil needs in 2005.

Domestic crude accounts for only about 45% of Canada's oil consumption. Imports represented the remaining 55%, mostly coming from either North Sea countries or the Middle East. Imported oil feeds refineries mostly in Eastern Canada.

The article "Boom times: Canada's crude petroleum industry", published today in the online Analysis in Brief series, examined trends in crude oil prices, the production and exports of Canada's crude petroleum industry, and Canada's imports of crude petroleum.

The outlook for domestic crude production is particularly strong, with estimated reserves for Canadian oil at slightly over 28 billion cubic meters, second only to Saudi Arabia.

As for markets, Canada will be looking abroad, mainly to the United States. A National Energy Board report published at the beginning of 2006 said the domestic market does not hold tremendous growth opportunities for producers.

For enterprises involved in gas and oil extraction, operating profits soared by 50% last year, going from close to  $21 billion in 2004 to over $30 billion in 2005.

Consequently, income tax paid by these enterprises jumped as well. Gas and oil extraction enterprises paid $7.5 billion in income taxes in 2005 compared with $4.5 billion in 2004, a 65% increase.

Boom times in the oil patch

These are boom times in Canada's oil patch, particularly in Alberta, where the soil abounds in black gold.

Across Canada, crude oil flows in seven provinces, but the biggest player by far is Alberta. High oil prices, coupled with robust global demand for oil during the past several years, have fuelled a huge expansion of the province's oil sands industry.

Canada produced 136.4 million cubic metres of crude petroleum in 2005, about two-thirds of which came from Alberta. The massive oil sands resource accounted for 42.0% of the province's total production.

Saskatchewan was a distant second, contributing 17.8% of total Canadian crude production, while Newfoundland and Labrador's offshore oil rigs accounted for 13.0%.

In 2005, as a result of a 30% surge in prices, Canadian oil exporters got $30 billion for their products, up from $25 billion the year before, even though there was a slight drop in the volume of crude oil exports.

First decline in crude production in six years

Canadian companies pumped out 136.4 million cubic metres of crude petroleum in Canada in 2005, down 2.3% from the year before. (One cubic metre is equivalent to 6.292 barrels.)

This was the first annual drop in the past six years. In general, this occurred mostly because of lower output from the conventional sector as well as unplanned interruptions in the non-conventional sector, and in particular because of a fire at a major oil sands processing facility in Alberta.

In Newfoundland and Labrador, production was also down, by 3.1%, the result of a maintenance slowdown at the Terra Nova oil field.

Alberta's oil supplies accounted for two-thirds (66.5%) of crude oil production in Canada. About a million barrels a day are coming out of the oil sands alone.

Despite expansion in oil production in Newfoundland and Labrador, Saskatchewan's overall oil production still exceeds that of the Atlantic province. Since 2000, crude oil production in Saskatchewan has held steady at roughly 25 million cubic metres a year. In 2005, it accounted for 17.8% of total Canadian production.

The Hibernia oil fields, located 386 kilometres off the southeast coast of Newfoundland and Labrador, produced 3.8 million cubic metres of oil in 1997, the first full year of operation.

At that time, the province accounted for only 3.2% of Canada's total crude production. With the addition of the Terra Nova offshore project in 2003, and the White Rose offshore oil platform, which was launched late in 2005, Newfoundland and Labrador now contributes nearly 20 million cubic metres of crude oil a year. This is 13.0% of total Canadian crude production.

Rounding out Canadian production in 2005 were Ontario, Manitoba, British Columbia and the Northwest Territories which produced a combined 3.8 million cubic metres, or 2.8% of total production.

Biggest breakthrough: mining the oil sands

The financial and technological feasibility of mining the oil sands of northern Alberta has been the biggest breakthrough in crude petroleum production in Canada because oil sands production is relatively expensive.

In 2003, the Alberta Energy and Utilities Board estimated the economically viable reserves in Canada at less than 795 million cubic metres. As the outlook remains firm for sustained high oil prices, estimates of crude reserves in Alberta have skyrocketed.

According to this board, at the beginning of 2006, Alberta's remaining established oil reserves amounted to 28 billion cubic metres, or the equivalent of 174 billion barrels. This places Canada second in the world after Saudi Arabia's 42 billion cubic metres.

Definitions, data sources and methods: survey number 2201.

The analytical article "Boom times: Canada's crude petroleum industry" (11-621-MIE2006047, free) is now available online in the Analysis in Brief series.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Miles Rowat (613-951-1852), International Trade Division.