Energy Sources

natural Gas

Canada is the world's third-largest producer and exporter of natural gas. As part of a fully integrated and continental natural gas market, Canada moves its natural gas resources seamlessly across provincial and national borders, from supply basins to demand centres. Regional prices reflecting market forces, including transmission costs, are established within this market.

Shale Gas

Key Facts

  • Shale gas is emerging as the new low-cost source of natural gas in North America.
  • In Canada, potential and producing shale gas resources are found in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia. Most of the current drilling and production activities are occurring in northeast British Columbia in the Montney and Horn River shale basins.
  • Natural gas is a relatively clean-burning, abundant and efficient source of energy. It has become a popular fuel for residential, commercial and industrial applications.
  • Natural gas is an important transition fuel for a low-carbon economy, because it is cleaner burning than any other fossil fuel and is in abundant supply. Current research estimates that the natural gas supply in North America, largely in the form of shale gas, will last more than 100 years.
  • Natural gas offers the potential to replace fuels that produce more greenhouse gases (GHGs) and that are currently used for power generation, heating and transportation. For example, GHG emissions from natural gas combustion are approximately 30 percent cleaner than those from oil and 45 percent cleaner than those from coal.
  • Technological advancements in drilling (long-reach horizontal well bores) and completion techniques (multistage hydraulic fracturing) have allowed commercial production of natural gas from shales, which has increased the long-term outlook for the supply of natural gas in North America.
  • Hydraulic fracturing has been used by the industry to safely stimulate oil and gas production in North American conventional reservoirs for more than 60 years.
  • Although shale gas development is a relatively mature industry in the United States (with more than 40 000 producing wells), shale gas is still in its nascent stages in Canada.

About Crude Oil and Petroleum Products

Key Descriptors

  • Canada's proven oil reserves are second only to Saudi Arabia's. At the end of 2006, Canada's remaining established reserves amounted to 179 billion barrels, of which more than 95 per cent are in the form of crude bitumen in oil sands.
  • Crude oil production has been increasing fairly steadily during the last two decades. While conventional resources continued to account for more than half of crude oil production, most of the production growth in recent years has come from oil sands.
  • Canada is a net exporter of crude oil. Domestic oil is exported from the western provinces while the eastern provinces import international oil. In 2006, exports reached $38 billion and imports amounted to $23 billion.
  • Canada has an extensive network of pipelines carrying crude oil to domestic refineries. The three main refining centers in Canada are in Edmonton (Alberta), Sarnia (Ontario) and Montreal (Quebec).
  • Oil is the most important energy source used in Canada, ahead of natural gas and electricity. Over two-thirds of the refined petroleum products sold in Canada are used for transportation: gasoline, low-sulphur diesel and aviation fuel.
  • After a period of low and relatively stable prices during the 1990s, crude oil prices have risen in recent years in international markets. This has resulted in increased revenues for Canadian producers and higher prices for Canadian consumers.
  • In coming years, the Canadian oil sector will be dominated by the pace of oil sands development. New pipeline and refining capacity will also be required to accommodate supply and market requirements.

What is Oil?

Crude oil is a naturally occurring, flammable liquid found in rock formations in the Earth. It is a complex mixture of several hydrocarbons, which are compounds consisting of hydrogen and carbon. Crude oil may also include other organic compounds such as nitrogen, oxygen and sulphur. Crude oil may vary in appearance depending on its composition, but it is usually black or dark brown in colour.
The various hydrocarbons found in crude oil can be separated through distillation and can be used to produce different types of refined petroleum products. These products can be used as fuels because they can be combusted in the presence of oxygen. Like natural gas and coal, crude oil is labelled a fossil fuel because it is deemed to come from the transformation of plant and animal remains over millions of years.

Industry Structure

  • There are several segments in the crude-oil and petroleum industry in Canada:
  • the upstream oil and gas industry operates oil and gas properties through activities such as exploration, drilling, production and field processing;
  • a variety of firms provide support services to oil and gas extraction operations, on a contractual or fee basis, such as drilling and well maintenance;
  • petroleum refineries process crude oil into a number of refined petroleum products;
  • oil pipelines transport crude oil and petroleum products between production areas, refineries, export or import border points, and end-use markets;
  • a variety of firms distribute refined petroleum products at the wholesale and retail levels.
  • Each of these segments is composed of a large number of private sector firms, from multinationals to regionally based firms to small independent businesses. Some firms are vertically-integrated, having activities from exploration to retailing, while other firms specialize in very specific activities. Several associations exist to represent the interests of these industrial segments, including the Canadian Association of Petroleum Producers, the Canadian Petroleum Products Institute and the Small Explorers and Producers Association of Canada.
  • Regulatory authority over the production, transportation and distribution of crude oil and petroleum products within a province resides primarily with provincial governments. This authority is often exercised through provincial departments and regulatory agencies such as Alberta's Energy Resources Conservation Board. The federal government exercises its jurisdiction over the interprovincial and international movement of oil through the National Energy Board.

Resource

Canada has a substantial oil resource as its large landmass contains several areas with a favourable geology for petroleum resources. The most important area is the Western Canada Sedimentary Basin, a huge basin that extends from southwestern Manitoba to southern Saskatchewan, Alberta, northeastern British Columbia and the southwest corner of the Northwest Territories. Crude oil has also been found in many other areas, from the east coast offshore to the Arctic Ocean.
Canada's established reserves (proven oil reserves) are second only to those of Saudi Arabia. At the end of 2006, Canada's remaining established oil reserves amounted to 179 billion barrels. This is the volume of crude oil that can be recovered, using current technology under present economic conditions, from known reservoirs specifically proven by drilling, testing or production.
Canada's established reserves include 5.4 billion barrels of conventional oil reserves. Conventional oil, trapped in underground geological formations, is extracted by drilling and pumping. The bulk of these reserves is found in Alberta, Saskatchewan and the east coast offshore.
Most of Canada's established oil reserves - more than 95 per cent - is in the form of oil sands. The oil sands are a mixture of crude bitumen (a semi-solid form of crude oil), silica sand, clay minerals, and water. Several processes have been developed for separating the bitumen from the other elements, which can then be upgraded to synthetic crude oil. In Canada, the oil sands reserves are found primarily in Alberta. The oil sands deposits are in the Athabasca, Cold Lake and Peace River areas.
Canada's established reserves are sufficient to meet Canadian demand for the next 200 years at current production rates. Some oil discoveries have not yet been categorized as established reserves. The actual oil resource is believed to be much larger than the current established reserves. In fact, undiscovered conventional reserves are thought to exist based on geological information, but have yet to be found. The ultimate potential of Alberta oil sands is estimated at 315 billion barrels. This is much larger than the current established reserves of 173 billion barrels.

Exploration and Development

In order to produce crude oil, the upstream industry must first find reserves through exploration activities. Once reserves have been established, the industry then develops an infrastructure at the field level to extract and process the crude oil so that it can be transported by pipeline to refineries. Drilling is a key element of the exploration and development phase as it is used to find new reserves, gather information on known oil reservoirs, and extract crude oil.
Most Canadian petroleum companies are active in both crude oil and natural gas development. Capital investment in exploration and development has increased significantly in recent years. In the conventional sector, spending on exploration and development reached a record level in 2006. Capital investment in the conventional oil and gas industry has grown steadily from a range of about $5 billion to $10 billion annually in the early 1990s to $39 billion in 2006.
Most of these expenditures support increased drilling activities. Drilling for crude oil has increased, with the number of annual oil well completions reaching 4,500 to 6,000 in recent years, compared with a level of about 2,000 at the start of the 1990s.
There has also been significant growth in development activities in Canada's oil sands sector. In the oil sands, capital investment in exploration and development, which averaged less than $1 billion annually in the early 1990s, reached a record level of $14 billion in 2006. This increase in investment has supported significant growth in the oil sands as producers expand existing operations and construct new facilities.

Production

Canada is currently the 7th largest oil producer in the world. Canada's crude oil production has risen fairly steadily over the past two decades. Annual crude oil production amounted to 609 million barrels in 1990 and reached 969 million barrels in 2006. While conventional sources continue to account for more than half of crude oil production, oil sands operations have been responsible for most of the growth in oil production in Canada in recent years.
Commercial oil sands operations began in 1967 with the opening of the first oil sands mine. In 1990, Canada's annual oil sands production amounted to 125 million barrels. Since then, its production has more than tripled, reaching 413 million barrels in 2006.
Most of Canada's crude oil comes from the western provinces, especially Alberta, which was responsible for about 69 percent of Canadian production in 2006. Production from the east coast offshore has increased in recent years, reaching 12 per cent of Canadian production in 2006.

Uranium

Canada has the world's largest reserves of high-grade low-cost uranium, located mostly in northern Saskatchewan. Canada is also the world's largest producer of uranium, with 23% of global production in 2007.
Canada is the world's leading producer of uranium, accounting for roughly one-third of total global output.
The mining and milling of uranium is a $500-million-a-year industry that directly employs over 1,000 Canadians, many of whom are residents of northern Saskatchewan. Uranium is used in commercial nuclear power plants in several countries to produce electricity, including Canadian-built CANDU (CANadian Deuterium Uranium) reactors, which currently supply about 15% of Canada's electricity.
Staff in the Uranium and Radioactive Waste Division (URWD) of Natural Resources Canada work with industry and government officials to ensure that uranium mining and milling in Canada is conducted in a sustainable fashion. The Uranium and Radioactive Waste Division provides expert technical, policy and economic information and advice to the Minister and the federal government on issues affecting Canadian uranium exploration, development, environmental protection, production, supply capability, foreign ownership, domestic and international markets, exports, international trade and end uses. It also represents Canada on uranium issues in various multinational organizations and administers the Non Resident Ownership Policy in the Uranium Mining Sector, which sets out certain conditions that must be met by the stage of first production at uranium mines in Canada.

Coal

Key Descriptors

  • Canada has an abundant coal resource. The largest known reserves are located in the western provinces, which are also Canada's principal producers. Coal is also mined in Atlantic Canada.
  • Globally, Canada is a mid-size coal producer. Over half of its production is used domestically for electricity generation and various industrial applications. The remaining production is exported.
  • Canada also imports coal, primarily for electricity generation, as well as for metallurgical applications.
  • Coal consumption may eventually decline in Canada as a result of environmental policies. It could also continue to thrive with the development of new technologies aimed at reducing air emissions.

Resource

  • Canada has a large coal endowment. British Columbia, Alberta and Saskatchewan have the largest known reserves and resources in Canada that are actively mined. Coal is also mined in Nova Scotia and New Brunswick. Coal reserves and resources have been identified in Yukon, Ontario, Newfoundland and Labrador, Northwest Territories and Nunavut, but these resources are not currently mined.
  • Canada currently holds 8.7 billion tonnes of proved resources of coal-in-place, which are the resources in known deposits that have been carefully measured and assessed. Of that amount, 6.6 billion tonnes are deemed recoverable using existing technology under current and expected local economic conditions. At today's production rate, these recoverable resources will last about 100 years.
  • The geological resource in Canada is far larger, however. In addition to the proved resources, there are 190 billion tonnes of estimated resources of coal-in-place, which is the indicated and inferred tonnage with foreseeable economic interest. This estimate includes amounts that could exist in unexplored extensions of known deposits or in undiscovered deposits in known coal-bearing areas, as well as amounts inferred from favourable geological conditions. Speculative amounts are not included.

Production

  • Annual coal production has remained relatively steady since 1990, hovering between 65 and 75 million tonnes. Canada produces both thermal and coking coals. Thermal coal production has been steady, but coking coal production has been fluctuating due to demand changes on the global coking coal market. In 2007, 70 million tonnes of coal were produced.
  • There were 22 coal mines operating in Canada at the end of 2007. British Columbia and Alberta hosted 17 of these mines and were the two highest producing provinces, together accounting for more than 80% of Canada's coal production.
  • Generally speaking, all of Canada's metallurgical coal — that is all the coal produced in British Columbia and some of the coal produced in Alberta — is exported. Almost all of its thermal coal (all of Saskatchewan's, New Brunswick's and Nova Scotia's coal and most of Alberta's coal) is consumed domestically for coal-fired power generation.

Canadian Coal Production

  • Annual coal production in Canada has remained relatively steady since 1990, hovering between 65 and 75 million tonnes. Canada produces both thermal and metallurgical coals. This graph illustrates in millions of tons the amount of thermal and metallurgical coals produced between 1990 and 2007. In 2007, 70 million tonnes of coal were produced.

Exports and Imports

  • Coal exports are vital to the Canadian coal industry, with more than 40 per cent of production being exported. In 2007, Canada exported 31 million tonnes of coal valued at $2.9 billion. While Canada is a mid-size coal producer, it is a significant exporter of metallurgical coal, which accounts for about 90% of Canada's coal exports.
  • Canada exports coal to many countries. Asia is Canada's primary export area, accounting for more than half of its exports, and Japan is the country that imports the most coal. Canada also exports significant volumes of coal to a number of European countries, the United States, Mexico and Latin American countries.
  • Canadian coal exports are mainly from Elk Valley Coal's five coal mines in British Columbia, with smaller volumes from mines in Alberta. About 90% of exports were shipped by sea through coal terminals in Vancouver while the rest was shipped through terminals in Prince Rupert in northern British Columbia.
  • While Canada is an exporter of coal, it also imports coal into central and eastern Canada. This is mainly due to geography since it is cheaper to obtain coal from the east and central regions of the United States than from the western provinces. Canada imported 19 million tonnes of coal in 2007, of which about 80 per cent was thermal coal for electricity generation in Ontario, Nova Scotia and New Brunswick. The largest imports were from the United States, with smaller volumes from Colombia, Venezuela and Russia.
  • This graph illustrates, in millions of tons, the amount of coal that Canada exports and imports. Canada exports coal to many countries. Asia is Canada's primary export area, accounting for more than half of its exports. Canada also imports coal into central and eastern Canada. This is mainly due to geography since it is cheaper to obtain coal from the east and central regions of the United States than from the western provinces. Canada imported 19 million tonnes of coal and exported approximately 30 million tons in 2007.

Domestic Consumption

  • Canada consumed 58 million tonnes of coal in 2006. Most of this coal (51 million tonnes) was used to generate electricity. Coal's availability and low cost make it the main fuel for electricity production in many provinces. Coal is used to produce about 74 per cent of the electricity used in Alberta, 63 per cent in Saskatchewan, 60 per cent in Nova Scotia, and 18 per cent in Ontario. The coal not used to generate electricity is consumed by Canada's steel, cement and other industries.
  • Canadian Coal Consumption
  • This graph illustrates Canada's coal consumption between 1990 and 2006. Canada consumed 58 million tonnes of coal in 2006. Most of this coal (51 million tonnes) was used to generate electricity.

Price

  • On the export market, Canadian coking-coal exporters have benefited from strong price increases in recent years. These increases were the result of continuing demand increases and tight supply on global coal markets. In 2007, Canadian producers were paid about $100 per tonne for metallurgical coal.
  • About 70 per cent of domestic coal production is consumed by electricity-generation plants adjacent to coal mines, commonly referred to as "mine mouth" operations. Where production and consumption operations are integrated, coal is not priced as if on the market. Its price is merely the cost of mining the coal.
  • The remaining volumes of coal consumed in Canada are imported and purchased at the prevailing global market price. It is estimated that the global coking-coal market price was around $100 per tonne and the thermal-coal price was around $60 in 2007.

Outlook

  • Canada is the world's second largest metallurgical coal supplier. Canada's metallurgical coal production and exports will benefit from the growing global demand for metallurgical coal in the short to medium term, as global demand is forecasted to exceed supply. Long-term growth will depend on the global economy and steel-industry development because Canada's metallurgical coal is export oriented. Thermal coal production is expected to be stable.
  • Canada's coal consumption could eventually decline as a result of measures to reduce greenhouse gas emissions, such as the closure or retrofitting of existing coal-fired generation facilities. The development and implementation of new technologies such as carbon capture and storage and clean coal could, however, help sustain the use of coal for electricity generation in a carbon-constrained future.

Mineral Exploration

  • Mineral Exploration and Deposit Appraisal Expenditures in Canada: Spending Continues Its Record-Breaking Trend With More Than $4 Billion Expected in 2012
  • 2011 and 2012 – Focus on Advanced Projects Helps Break the $4 Billion Barrier
  • Exploration and deposit appraisal expenditures(1) in Canada are expected to surpass the $4 billion mark in 2012. This record amount stems from a continuation of the upward trend that began in 2004. This trend was briefly interrupted by the economic crisis in 2009 before it resumed in 2010 due to an improving market outlook.
  • Although temporary, the 2009 downturn, which resulted in a 40% expenditure decline from the 2008 peak of $3.3 billion, had a profound impact on the Canadian mineral exploration and mining sector. Both equity-market-dependent junior companies and revenue-generating senior companies had to adopt defensive measures ranging from project delays and cutbacks to curtailing operations and deferring expansion plans. Fortunately, this situation proved to be temporary and activity intensified in both 2010 and 2011 with expenditures of $2.8 billion and $3.9 billion, respectively. Company spending intentions for 2012 indicate another banner year with a total of $4.2 billion.
  • Two important sub-trends have been underpinning the strong expenditure levels recorded in recent years: increasing spending in the deposit appraisal work phase and higher average spending per company. For example, spending for the off-mine-site deposit appraisal work phase, which includes advanced projects in the pre-feasibility and feasibility stages, accounted for about 25%, or close to $1 billion, of total expenditures in 2011. Projects entering deposit appraisal require large budgets for costly technical studies. An indication of company success in marshalling such financial resources is reflected in the record number of companies that intend to spend more than $10 million each on exploration and deposit appraisal in 2012. A total of 103 companies (project operators only) out of 783 are expected to account for 71% of total expenditures. Their advanced projects are part of a cohort that has emerged from all of the activity recorded during the nine-year upward-trending period of 2004-12.

Junior and Senior Companies

  • Canada is recognized for its large contingent of junior mining companies. These companies were instrumental in maintaining the strong upward trend in exploration and deposit appraisal investment that was recorded from 2004 to 2008. However, their dependence on equity financing and lack of internally generated revenue left them more exposed than senior companies to deteriorating financial and economic conditions. Continued market volatility, which affected access to financing, and the acquisition of flagship projects by senior companies and foreign entities drove their share of total spending from a peak of 67% in 2007 to 49% in 2011. However, the 52% share of expenditures anticipated for junior companies in 2012 still translates into more than $2 billion and attests to their continued importance in discovering and developing mineral deposits to feed Canada's pipeline of mineral projects.
  • With expenditures reaching almost $2 billion in 2011 and exceeding that level in 2012, senior companies have increased their overall exploration and deposit appraisal spending in Canada. This increased level of activity by financially and technically strong companies should result in jobs and economic development linked to mineral production.

Provinces and Territories

  • After the dramatic downturn of 2009, expenditures increased significantly in 2010 and again in 2011. During the latter year, historically high levels of spending were reached in a number of jurisdictions, including Ontario, which broke through the $1 billion threshold.
  • Overall spending is forecast to continue trending upward in 2012. Although company spending intentions point to decreases in Ontario, Saskatchewan, the Yukon, Alberta, and New Brunswick, British Columbia appears to be headed for a major increase of $245 million (+43%). In dollar terms, Nunavut, Newfoundland and Labrador, and Quebec should also record significant increases in spending. Despite a forecast drop of 10%, Ontario will still rank first in Canada with anticipated expenditures of $916 million. Other jurisdictions with spending of more than $500 million will include British Columbia ($812 million), Quebec ($764 million), and Nunavut ($569 million).

Mineral Commodities

  • Minerals and metals prices are the main driver of exploration and deposit appraisal investment as shown by the relationship between spending and the Natural Resources Canada (NRCan) Metals Price Index. While strong prices across a range of commodities have supported the latest record levels of spending, the rising price of gold has helped sustain the significant share of overall activity that precious metals have attracted in recent years. With the price of gold currently hovering above US$1700/oz, precious metals, with 45% of total spending, are expected to remain the main target for Canadian explorationists in 2012. The base-metals grouping, with 18% of total spending, will rank a distant second.
  • While economic uncertainty in the United States and Europe continues to put upward pressure on the price of gold, strong demand from emerging economies continues to support the search for and development of other commodities. For example, renewed interest in iron ore has resulted in billions of dollars of actual and potential investment in developing mines and related infrastructure in Quebec, Newfoundland and Labrador, and Nunavut. Exploration and deposit appraisal spending related to iron ore increased by $215 million in 2011 (+195%) with a further $137 million (+42%) increase expected in 2012. With a forecast spending total of $463 million, iron ore will secure its third-place ranking for 2012 with 11% of total spending.
  • The "other metals" group (chromium, molybdenum, rare earths, lithium, etc.), nonmetals (mainly potash), and coal will combine for another 19% of total spending. Coal in particular is experiencing a boom in activity in British Columbia and Alberta with a combined spending forecast of $209 million in 2012. Uranium (4%) and diamonds (3%) are the other main mineral and metal commodities that will be sought in 2012.

Forests in Canada

  • Canada's forested, other wooded land and other land with tree cover extend over about half of the country's total land surface-early 400 million hectares-from coast to coast.
  • To appreciate the importance of this natural resource, one need only look at the extraordinary range of roles that forests perform.
  • Canada's forests purify water, stabilize soil and cycle nutrients. They moderate climate and store carbon. They create habitat for wildlife and they nurture environments rich in biological diversity. They sustain a nation-wide forest products industry that supports hundreds of thousands of jobs and contributes billions of dollars to the country's economic wealth.
  • And, as if that weren't enough, Canada's forests provide landscapes and resources essential to a host of recreational, cultural, traditional and spiritual pursuits that Canadians hold in high value.
  • For all these reasons, taking care of the country's forests and ensuring their ongoing health is a key priority of the federal government. To that end, the Canadian Forest Service of Natural Resources Canada works closely with the provinces and territories to see that the nation's forest resources are managed sustainably and in a way that optimizes benefits for all.

Forest types and inventory

  • Forests in Canada are classified according to three main types of classification: ecozones, forest regions and plant hardiness zones. Together these classifications provide a science-based foundation for forest management decision-making at the national level.
  • The National Forest Inventory, a collaborative effort between the federal, provincial and territorial governments, compiles detailed information for each of Canada's forested ecozones. This information includes data on tree ages, volume of wood, dominant species and land use. The provinces and territories collect data using consistent standards and procedures. The Canadian Forest Service maintains the database and leads data analysis and reporting. The provinces and territories have also developed their own ecological and land classification systems to further classify the characteristics of their forest landscapes.

Forest ecosystem products and services

  • Forests play a vital role in Canada's economic health, with the forest industry accounting for some 600 000 direct and indirect jobs.
    At the same time, forests also store carbon, preserve soils and nurture a diversity of species. These non-timber benefits are known as "ecosystem services." Accounting for ecosystem services accurately in policy- and decision-making is a difficult task, especially when some have clearer dollar values than others. However, Canadians increasingly recognize the many ecosystem services that forests provide, and resource agencies are starting to assess and estimate forests' economic, social and environmental values.
    The benefits provided by forest ecosystems include:
  • The benefits provided by forest ecosystems include:
  • ecological functions such as carbon storage, nutrient cycling, water and air purification, and maintenance of wildlife habitat
  • social and cultural benefits such as recreation, traditional resource uses and spirituality
  • The primary challenge for sustainable forest management is finding ways to continue to benefit from ecological services without compromising the forest's ability to provide those services.