The Canadian Industry

Figure 1 - Canadian Crude Oil Supply and Disposition (1000 m³/d) - 2008 Estimates

Source: NEB

The Upstream Industry: Oil Production

There are two major producing areas in Canada, the Western Canada Sedimentary Basin (WCSB), which includes Alberta, Saskatchewan and parts of British Columbia and Manitoba, and offshore eastern Canada. Oil is also produced in modest volumes in Ontario and the Northwest Territories.

Conventional production in the WCSB, of both light and heavy crude oil, is on the decline and, as a result, investment has shifted to Alberta's oil sands and offshore eastern Canada.

Figure 2 shows Canadian crude oil production since 2000 and the NEB's outlook through 2009. Beyond 2009, continued decline in WCSB conventional production is expected, but will be more than offset by growing oil sands (mined and in situ bitumen) and East Coast production. Canada is one of a few countries outside of the Organization of Petroleum Exporting Countries (OPEC) with significant long-term prospects for production growth.

Figure 2 - Canadian Crude Oil Production

Source: NEB

Monthly Canadian oil production statistics

NEB publications that include outlooks for Canadian oil supply

The Downstream Industry: Oil Refining and Marketing

When crude oil is processed, the hydrocarbons are sorted, split apart and reassembled, and blended at refineries and petrochemical plants before they can be used in many products ranging from gasoline to synthetic rubber. Figure 3 shows domestic sales of petroleum products. Almost 70 percent of domestic sales are transportation fuels, including aviation turbo fuel, gasoline and diesel. These percentages may vary by region and season. In the summer, refineries increase their output of gasoline and asphalt, while in the winter refineries, particularly in central and eastern Canada, produce more heating fuel or light fuel oil.

Figure 3 - Estimated Domestic Sales of Refined Petroleum Products
- 2008

Source: Statistics Canada and NEB

There are 19 refineries operating in Canada with a total capacity of about 2.1 million barrels per day (332 000 m³/d). One of these produces only asphalt while another produces only petrochemicals. The remaining 17 refineries produce a broad range of refined petroleum products. Figure 4 shows the location and capacity of Canada's refineries. Generally, refineries were built to supply regional markets but inter-provincial and international trade also occurs. Canada is a net exporter of both crude oil and petroleum products.

Refineries in the Atlantic and Québec import most of their requirements with the remainder being East Coast production. In 2006, an estimated 34 percent of the crude processed by refineries in Ontario was imported while the remaining 66 percent was obtained from western and eastern Canada. Western Canadian refineries only process Canadian crude oil.

Canadian refining capacity has grown moderately in recent years and utilization has been slightly over 90 percent, and this is expected to continue. For some time now, global refining capacity has been constrained. This comes mainly as a result of growing demand for petroleum products while industry investment in refining, for many reasons, has not kept pace. This situation has been a major contributor to higher prices for petroleum products in recent years.

Figure 4 - Canadian Refineries - 2006 Capacities (Thousand barrels per day)

Source: NEB

The network required to supply petroleum products from refineries to end-users involves a complex system of pipelines, ships, railways and trucks. The downstream industry also includes service stations and other retailers of petroleum products. As the physical distance from refinery to consumer point-of-sale increases, prices can be expected to be higher because of transportation costs. In addition, in rural areas where fewer retailers exist and competition is less intense, prices would also tend to be higher than in larger centres.

The downstream petroleum sector is complex and highly competitive. Each petroleum product in each regional market reacts to a different set of supply/demand and transportation pressures. Refiners must balance a number of competing factors in deciding what type of crude oil to process, what kind of equipment to invest in and what range of products to manufacture. The viability of the industry depends on its ability to earn an acceptable rate of return in a marketplace where prices are set by international and local markets.

Historically, Canada has been a net exporter of gasoline and middle distillates (jet fuel, heating oil and diesel), exporting amounts in excess of Canadian requirements.