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Report on Energy Supply-demand in Canada 2006

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Canada’s demand for energy fell by 2.0% in 2006, thanks to declining consumption in the nation’s industrial, transportation, residential and commercial sectors.

Declines in those sectors offset an increase in consumption in the mining sector, particularly in fuel used by the oil sands industry.

In 2006, Canada consumed 7,643 petajoules of energy, down 2.0% from 7,796 petajoules in 2005. One petajoule equals roughly the amount of energy required to operate the Montréal subway system for one year.

Energy use derived from the three main fossil fuels – natural gas, refined petroleum products and coal – declined 2.1%, due to reductions in demand from the pulp and paper, chemical, residential and commercial sectors.

The industrial sector, the biggest user of energy, consumed 1.0% less in 2006 than the year before. The reduction was due primarily to two industries: pulp and paper, and chemical products. Historically, the industrial sector accounts for just under one-third of total energy consumption.

Demand slipped 2.9% in the residential and agriculture sectors and by 4.6% in the commercial and public administration sectors due to warmer weather conditions throughout Canada in 2006. Generally, these sectors account for about 20% of total consumption.

Energy consumption decreased 0.7% in the transportation sector. The transportation sector, the second largest user of energy, accounted for about 31% of final demand.

Crude oil production increases

Canadian companies produced about 154 million cubic metres of crude oil in 2006, up 5.4% over 2005. (A cubic metre contains 1,000 litres). This amounted to about 422,000 cubic metres a day.

A 1.1% decline in the production of conventional crude oil in 2006 was offset by a significant 31.1% increase in the production of synthetic crude oil. This reflected a return to normal operations after a facility fire hampered output throughout the first three quarters of 2005.

The productive capacity of Canada’s East Coast increased by 30% in 2006. However, production increased only marginally during this period as a result of operational problems in the Hibernia and Terra Nova oil fields.

Alberta’s oil sands remain an important source of crude oil production. In 2006, they accounted for over 43% of total crude oil and equivalent production, up slightly from 39% in 2005 and well above the proportion of 28% in 2000.

In 2006, the oil sands produced 180,000 cubic metres of oil a day. In 2007, this figure had jumped to an estimated 184,000 cubic metres a day, roughly 44% of Canada’s total crude oil production.

The Canadian Association of Petroleum Producers is forecasting oil sands production to surpass 693,000 cubic metres of oil a day, or 82% of total Canadian crude oil production, by 2020. Capital investment, which amounted to $14 billion in 2006, was expected to reach an estimated $16 billion in 2007.

Exports of crude oil, primarily to the United States, increased 12.8% from 2005. These exports accounted for more than 67% of all Canadian production in 2006.

The US Midwest remained the most significant market for Western Canadian crude oil, consuming 71% of total exports to the United States. According to the United States Energy Information Administration, in 2006 Canada remained the leading export country to the United States, ahead of both Mexico and Saudi Arabia. Canadian crude oil represented 17% of total US demand for imported crude oil.

In 2006, average Canadian crude oil prices rose to more than $66 a barrel. This was a 27% increase over 2005, and more than double 1990 prices.

Modest gain in natural gas production

Natural gas production increased 0.4% in 2006 from 2005. Record gas drilling activity in the first half of 2006 was offset by a reduction in wells drilled in the last half of the year, resulting in an annual total slightly below 2005 levels.

Natural gas exports to the United States declined to 3,906 petajoules in 2006, down 3.9% from 4,066 petajoules in 2005. This decrease reflected the return to normal U.S. production levels (which dropped in 2005 as a result of hurricanes Katrina and Rita) combined with milder winter weather.

Well over half (59%) of total Canadian natural gas production is exported. In the United States, Canadian natural gas accounts for 18% of total US demand for natural gas.

Canada's trade surplus for crude petroleum, refined petroleum and other products, natural gas, coal and electricity reached $52.0 billion in 2006, down from $53.0 billion in 2005.

Marginal decrease in electricity production

Electricity production from primary sources (hydro, nuclear, wind and tidal) decreased 0.6% in 2006, due primarily to reduced demand as a result of warmer weather conditions in many parts of Canada. Nuclear generation increased 6.4% in 2006, reflecting the return to service of Ontario Power Generation’s Pickering A, Unit 1.

Hydro generation accounted for 59% of electric power in 2006, the largest source. Nuclear energy provided about 16% of total Canadian electricity production.

However, in Ontario, nuclear power accounts for more than 52% of total electricity generation, enough to supply all the homes in the province.

Nationally, the proportion of electricity generated using fossil fuels declined 7.0% in 2006.

Although electricity generation from wind, solar and tidal sources continues to increase, combined generation from these sources in 2006 represented less than 0.5% of total generation. However, wind generation projects continued to grow. Capacity more than doubled from 2005 to 2006, rising from 680 megawatts to 1,460 megawatts. Ontario posted the largest increase, adding 400 megawatts of capacity. According to the Canadian Wind Energy Association, by the end of 2006, Canada ranked twelfth in the world in terms of wind energy capacity.

Electricity demand decreased 2.1% in 2006, mainly the result of lower demand by Canada’s manufacturing sector.

Sales of motor gasoline remain virtually unchanged

Volumes of motor gasoline sales in 2006 remained virtually unchanged from 2005 levels. Canadian drivers consumed more than 40 billion litres of motor gasoline, up slightly from 2005 levels.

Gasoline prices peaked throughout much of the country in August 2006. In Montréal, prices reached an average of 112.7 cents per litre for regular unleaded at self-service stations. Gas prices averaged 103.3 cents in Toronto, 109.4 cents in Edmonton and 114.3 in Vancouver.

Total demand for all refined petroleum products decreased 2.1% in 2006 over 2005 levels.

Coal production, exports and consumption decreases

Coal production slipped 3.7% in 2006, primarily the result of lower demand by electric utilities.

Final demand for coal by the manufacturing sector decreased 1.1% from 2005. Exports of coal decreased marginally in 2006 from 2005, reflecting lower demand for Canadian coal, primarily from Brazil and Chile.

Alberta energy consumption growing fastest among provinces

Alberta’s growth in energy consumption led the pack, increasing 2.9% from 2005. Higher demand for natural resource-based products, combined with agricultural gains, contributed more to the growth of the economy than any other industry.

Alberta’s increase was due primarily to higher energy use in the oil sands sector. Alberta accounted for an 18% share of total national consumption.

Energy consumption declined faster than the national average of 2.0% in eight provinces: Nova Scotia, Newfoundland and Labrador, New Brunswick, Prince Edward Island, Manitoba, Ontario, Quebec and British Columbia.

Energy use by all sectors, or “final demand”, declined 10.8% in Nova Scotia, 10.0% in Newfoundland and Labrador, 8.3% in New Brunswick, 4.0% in Prince Edward Island, 3.8% in Manitoba, 2.7% in Ontario, and 2.4% in Quebec and in British Columbia.

Consumption declined 2.7% in Ontario, which accounted for over 34% of the country’s entire energy demand. Consumption in Quebec decreased 2.4%, putting its share at 21%.