Canadian Crude Values Increase 15-Fold, Ontario Authorizes 28 New Natural Gas Expansion Projects

A new report by Statistics Canada and the Canada Energy Regulator (CER) found that the value of the nation’s crude oil exports increased by a factor of 15 since 1990; a growth that is demonstrated through what is now a sizeable share of Canada’s overall exports.

Canadian crude now makes up 14.1 percent of Canada’s total exports, a steep increase from 1990, when crude oil made up just 3.6 percent of Canada’s exported products.

Kevin Birn, a chief analyst for IHS Markit, shared some context around the significant rise in value of Canadian crude. Birn states that some of the growth can be attributed to rising oil prices in the late 2000s, which then caused global investors to pour capital into Canada’s oil sands which still had significant room for development:

“The world thought it was running out of oil so capital was poured into the oilsands which were seen as one of the few last places in the world that was free and open to foreign investment to drive oil and gas production higher to meet anticipated growing demand.”

Growth Could Have Been Even Higher

A number of obstacles impeded the acceleration of the growth of Canadian crude. The first and most recent being the COVID-19 pandemic. In April 2020, oil values dropped to their lowest point since 2002, which wreaked havoc on Canadian oil producers who were forced to make major cutbacks as a result. Despite the impact from the pandemic, Birn said the rebound for Canadian oil is noteworthy

“It’s still is a significant economic force in the country and a major driver of prosperity.”

Another major challenge that stood in the way of growth for Canadian crude is the lack of infrastructure development to bring the increased production to market. The shutdown of TC Energy’s Keystone XL pipeline last week is a prime example.

Dennis McConaghy, a former executive at TransCanada Corporation, states the cancellation of Keystone XL simply removes value from Canada, as opposed to reducing emissions:

“Cancelling the pipeline doesn’t impact global emissions. It just basically takes value out of Canada. Those refineries will still get the same heavy oil, they’ll simply get it from other countries that almost undoubtedly have lower overall environmental standards than Canada.”

Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers, also commented on the cancellation of Keystone XL, acknowledging that demand for Canadian oil will only continue to grow, and by canceling projects such as Keystone, Canada’s value as a global energy leader will only be diminished:

“Global demand continues to rise sharply and Canada is a supplier of choice. If we limit Canada’s ability to supply heavy (oil), they will get it from Venezuela. They’ll get it from Iran. There’s a lot of heavy oil options in the world that I don’t think serves us as a nation, our climate goals or our security objectives.”

Role of Natural Gas Expanding in Ontario

As Canadian crude continues to grow, the role of natural gas at the provincial level is expanding, too.

Last week, Ontario’s government announced it will add 43 rural, northern and Native communities to its natural gas distribution network. The provincial government authorized to spend C$234 million on 28 new projects to connect these communities to natural gas.

Bill Walker, Ontario’s Associate Minister of Energy, emphasized the natural gas expansion project are in-line with the government’s intention to make life more affordable for Ontario residents:

“We’re sending a clear message that Ontario is open for business. As part of our government’s plan to make life more affordable, we prioritized broad distribution across Ontario to help as many homes and businesses keep the cost of energy low, support jobs and attract new investment. This will be a game-changer for these 43 communities.”

The increased natural gas distribution will replace oil and propane, both of which drastically increased energy costs, specifically for rural communities, due to distribution and other factors. And, by replacing oil and propane with natural gas, the Ontario Energy Board estimates Ontario consumers will save C$25.9 million if all of its anticipated infrastructure projects come online.

Enbridge Inc. Executive Vice President of Gas Distribution & Storage Cynthia Hansen spoke to the economic benefits the new natural gas projects will bring to the Ontario region:

“Through Ontario’s Natural Gas Expansion Program, these projects will bring much needed and wanted natural gas to additional communities while supporting jobs, helping to attract local investment, and providing energy savings to residents and businesses.”

All 28 natural gas expansion projects are expected to be under construction by the end of 2025.

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