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A Complete Guide to Oil Production in Canada

As a country with the world’s third-largest oil reserves, oil production in Canada is massive. With advanced technologies and an ever-growing global economy, Canada is


Canada Cross Border Freight
October 14, 2019
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As a country with the world’s third-largest oil reserves, oil production in Canada is massive. With advanced technologies and an ever-growing global economy, Canada is moving to the forefront of the oil industry. From Western Canada to the Atlantic Coast the country known for moose, maple syrup, and hockey may be the next big player in the world’s list of oil-producing countries. Understanding the oil industry in Canada and its complex interactions with other countries will help you have a better grasp on the trajectory of oil production in the area. 

The four modes of transporting oil in the U.S. and Canada are rail, truck, pipeline, and ship. Oil production in Canada increases each year, producing more than the country can consume. Most of the oil comes from the Alberta Oil Sands and Sedimentary Basin. But, Canada still imports oil from foreign countries and exports a majority of its oil to the United States. 

There are many aspects to the oil industry in Canada. Our complete guide below will take you through all of these details, helping you gain a comprehensive awareness of Canada’s oil production.  

How Much Oil Does Canada Produce?

Canada produces a surprisingly large amount of crude oil. While one generally thinks of the Middle East when talking about oil production, Canada is actually the fourth-largest producer and exporter of crude oil. Additionally, according to the Canadian Association of Petroleum Products, the country’s overall crude oil production will grow over the next several years. Canada is considered one of the top ten oil-producing countries on a list that contains big players such as China, Russia, and Saudi Arabia. With an output of 5.27 million barrels per day, it’s no wonder Canada is counted among the key players. 

In fact, Canada shared 5% of the total world oil production in 2018. That is a significant increase from 2016 when the country’s output was only 2.47 million barrels per day. Crude oil is produced across the country from coast to coast. Melting of the Arctic ice may also reveal more deposits of oil that Canada will have access to. With this rate of growth and increasingly more adept technologies, oil production in Canada is likely to continue increasing. 

But where is oil produced in Canada and how is the industry growing so quickly? 

Where is Oil Produced in Canada?Where Is Oil Produced In Canada

As mentioned earlier, Canada extracts oil across the country. But, the greatest reserves of crude oil are found in Alberta’s oil sands. Alberta is a region of Canada located right next to British Columbia above Montana and Idaho in the United States. Other places oil reserves are located are the Western Canada Sedimentary Basin and off-shore oil fields in the Atlantic Ocean. 

The oil sands contain the third-largest proven oil reserve in the world. They represent 97% of Canada’s proven oil reserves and are an important part of the country’s economy. What exactly are oil sands? Oil sands are a naturally occurring mixture of sand, clay, water, and bitumen. Bitumen is the component that’s extracted and processed into crude oil.  Similarly, shale oil and light tight oil are found in sedimentary rock and are another way Canada produces crude oil. 

How Is Oil Extracted in Canada?

There’s no right or wrong way to extract oil, it simply depends where you’re getting it from. There are different methods for extracting oil from the oil sands versus the sedimentary basin. Don’t forget about the refining process after it’s been extracted either. Here is a short list of several different methods of extraction and refining. 

  • Horizontal Drilling 
  • Multi-Stage Hydraulic Fracturing 
  • The Mining Method
  • The In-Situ Method 
  • Upgrading

Horizontal drilling and multi-stage hydraulic fracturing are used when extracting shale oil and light tight oil. The mining method and in-situ method are used for extracting oil from oil sands. Finally, upgrading is how bitumen extracted from oil sands is turned into synthetic crude oil. With 97% of the country’s oil reserves found in oil sands, the mining method and in-situ method are most widely used. 

The mining method is just like it sounds, it employs traditional mineral mining operations and is used when oil sand reserves are closer to the surface. To start, the oil sand is scooped into trucks that move to crushers where the earth is processed. The oil sand is then crushed and hot water is added while it’s pumped to the extraction plant. At the plant, more hot water is added and the mixture of sand is allowed settling time. As the sand settles, various components separate and bitumen froth rises to the surface. This is then removed, diluted, and refined into crude oil. 

Similarly, for the in-situ method the bitumen is extracted using hot water, or in this case steam. This method is used for 80% of bitumen that is too far underground for regular mining. First, two wells are drilled, one higher than the other. Then steam is injected into the top well and as the temperature rises the bitumen becomes liquid and flows into the lower well. The bitumen is then pumped to the surface from the lower well. 

How Much Oil Does Canada Export?

Canada is in an interesting position where it produces more oil than it consumes. This allows the country to be a net exporter of crude oil. Also, it’s largest trading partner for oil is the United States. In 2018, Canada was the largest foreign supplier of oil to the United States. The country exported 3.5 million barrels of oil a day to its neighbor which accounted for 96% of total crude oil exports.

Moreover, crude oil can be separated into two categories: heavy crude oil and light crude oil. Of the total exports to the U.S. about 78% was heavy crude oil while the remaining 22% was light. This is significant because the majority of oil produced from oil sands is heavy crude oil. In addition, U.S. refineries have upgraded their technology that processes heavy crude oil and prefer that type of oil, boding well for the Canadian market. 

To further break down Canadian oil exports, the following list shows the U.S. regions that received crude oil in 2018:

  • Midwest received 61%
  • Gulf Coast received 20%
  • East Coast received 6% 
  • The Rockies received 8%
  • West Coast received 6%

Where Does Canadian Oil Go?

As mentioned above, Canadian oil largely goes to the United States. The reason for that is because the United States has a higher capacity to deal with heavy crude oil than Canada does. The U.S. has 142 refineries and is in the process of building two more in Michigan and Illinois whereas Canada only has 19. The refining capacity of the U.S. ensures that oil will continue to flow south. 

Likewise, Canada produces more oil than it has the ability to consume, even while only refining a quarter of the oil it produces. This means any new refineries would be refining oil for exportation, not internal use by Canadians. For this reason, it’s much easier to simply export the oil to U.S. operations. 

Why Does Canada Import Oil?

In spite of the fact that Canada produces more oil than it can consume, the country still finds itself importing a large amount. The country supplying them is the oil-producing mogul Saudi Arabia and their relationship is not likely to end anytime soon. From 2008 to 2018, Canada imported $20.9 billion of Saudia Arabia’s petroleum oils. The Middle Eastern country supplies about 10% of Canada’s total oil imports. As of 2017, Saudia Arabia is its second-largest supplier of foreign oil, second only to the United States. 

But if Canada possesses nearly the third-largest oil reserve in the world, why are they dependent on Saudi Arabian oil? It has to do with the type of oil reserves the country has and the refining process. The Alberta oil sands, which is where the majority of Canadian oil is found, produce bitumen. This mineral is extremely hard to refine and produces a very heavy crude oil. In fact, it’s so heavy that it must be refined before it can even pass through a pipeline. Canada doesn’t have the infrastructure or the means to refine such a heavy crude oil. Meanwhile, anyone can process Saudia Arabian crude oil. Compared to the thick tar-like hydrocarbon that comes from the oil sands, Saudi Arabia’s oil is like gold. 

Additionally, to get Canadian oil to the eastern side of the country it would have to be shipped overland as there is no east-west pipeline in existence. This would increase the total cost of the oil. Rather, Saudia Arabia utilizes tanker shipment which is cheaper than overland shipment even though the country is farther away. Ultimately, Canadian oil is of lesser quality in some aspects than Saudia Arabia’s and is considered further from customers in terms of the refining process. 

Finally, as its closest neighbor and trading partner, the U.S. is Canada’s second-largest importer of crude oil. In fact, in 2018 the country’s imports of U.S. crude oil actually increased. Crude oil from both Saudia Arabia and the United States goes to refineries in Ontario, Québec, New Brunswick, and Newfoundland and Labrador. 

Price of Canadian OilPrice Of Canadian Oil

The price of crude oil is determined by the global market. Oil moves from one market to another by ship, barge, or pipeline and is traded globally, making its price dependent on the supply and demand balance. Prices of oil will change based on the cost of transporting it and the difference in quality between the varying types of oil. There are two types of markets for buying crude oil. 

  1. Spot Markets – This is where oil is bought and sold for cash and the delivery of it is immediate. The price of oil in the spot market is dependent upon the price of it in the second market.
  2. Futures Markets – This market trades barrels of oil on paper. It means that oil is traded based on a perceived monetary value and there is yet to be a physical exchange of the product. Paper contracts are bought and sold based on the expected market conditions for the future. 

In the futures market, there are two types of buyers and sellers. The first type is the producers of oil themselves or refineries. Refineries will buy paper contracts of oil to lock in the purchasing price of that oil. It ensures they will receive a profit and protect themselves from price volatility. The second type is investors who don’t produce or consume oil themselves. They purchase paper contracts as an investment and can make money by correctly guessing if the price of oil will increase or decrease in the future. 

Newspapers and other news media usually report the futures market price of oil for the nearest month as a representation of the current price of oil. In Canada, the average price per barrel of oil was $43.10 in August of 2019

Who Owns Oil in Canada?Who Owns Oil In Canada

The Canadian oil industry is dominated by a few big players. While there are smaller oil extracting and processing businesses out there, the majority of oil is controlled by a select few. Those few large corporations are owned by multiple different shareholders. For example, less than 20 of all the operating companies in Canada handle the majority of oil production, refining, and marketing.   

Currently, the Canadian stock market is dominated by energy companies, some who have become giants. It’s no surprise with Canada’s oil reserves projected to supply the country’s energy needs for the next 140 years. Also, it’s not just Canadians who hold the shares to Canada’s big oil companies. Investors, wealthy families, and banks are just some of the shareholders. Other entities that hold part of the companies are even foreign countries such as Norway, Japan, and the United States. 

No matter your perspective, oil production in Canada is an industry that will most likely flourish for years and years to come. 

Notable Canadian Oil and Gas Companies

Not all Canadian oil and gas companies are created equal. Here is a list of the top five companies and a few quick facts about each one. 

  1. Suncor Energy The largest company in the country is Suncor Energy, operating out of Calgary, Alberta. Suncor produces synthetic crude oil from mining and drilling in the oil sands. After merging with Petro Canada in 2009, Suncor became the leading petroleum producing company in the nation. It’s been named the fourth most valuable business in the country and produces an average of 346,000 barrels of oil a day. The company boasts four high-capacity refineries and has 1,500 gas stations around Canada. 
  2. Canadian Natural Resources The second-largest Canadian petroleum company, CNR is considered the seventh most important company in the nation. It’s one of the only fully Canadian companies and was started in 1973. It also happens to be Canada’s second-largest producer of natural gas. Similarly headquartered in Calgary, Alberta, CNR has field operations located in Western Canada, the North Sea, and West Africa. 
  3. Imperial Oil This is the third-largest petroleum producing company in Canada. Founded in 1880, it’s currently headquartered in Calgary, Alberta. Exxon Mobile controls about 70% of the shares of Imperial Oil. Their production largely occurs in the Norman Wells oil field of the Northwest Territories and the Alberta Oil Sands. They produce oil, petrochemicals, and manage retail stores.
  4. Enbridge Fourth largest petroleum company, Enbridge started in interprovincial pipelines in the 1940s. They focus mainly on energy transportation, distribution, and generation. Interestingly, this company transports crude oil and liquid hydrocarbons via the longest pipelines in the world. It is also a natural gas distributor for Canada. Some of its’ projects include the Alberta Clipper Pipeline and the Northern Gateway Pipeline. 
  5. Syncrude Canada Ltd. – Not one of the largest companies, Syncrude Canada is unique for different reasons. As its name suggests, Syncrude is owned by seven major oil and gas stakeholders. It’s largest partners are Canadian Oil Sands Ltd., Imperial Oil, and Suncor. The rest of the company is owned by two Chinese state-owned enterprises, a Japanese firm, and an American firm. Syncrude doesn’t trade publicly, for this reason, it’s not a stand-alone company but a consortium. Its focus is on synthetic crude oil, or bitumen that’s been uncovered and upgraded but is still not refined. The company actually produces enough low-sulfur oil to supply 20% of Canadians. 

How Many Oil Refineries Does Canada Have?

Canada’s refining industry is ranked 11th in the world in capacity, even though they process only a small fraction of their own crude oil. This is because Canadian refineries were built to process light crude oil, not the heavy crude oil that’s currently coming out of Western Canada. Much of Canada’s crude oil is transported to other countries, but some remains. That which remains goes to one of Canada’s 14 full refineries or their 2 asphalt refineries. 

Refineries are located near major waterways, crude oil production, or near major population centers. The location helps a refinery determine where it sources its crude oil and the type it processes. Canada’s total refining capacity is 1.9 million barrels per day. In fact, Québec and Atlantic Canada has the largest refining capacity, second only to Western Canada which is then followed by Ontario. 

Refineries in Canada produce refined petroleum products (RPP’s). This includes things like gasoline, diesel fuel, jet fuel, and heating oil. These products are largely for domestic use, but some of them do become exports. 

Canada Oil ConsumptionCanada Oil Consumption

Demand for oil is growing, in spite of the rise of many countries becoming energy conscientious. Canada is a country with a good international reputation for safety and innovation. They are set to take full advantage of this rise in demand.

Currently, Canada’s consumption of oil makes up 3% of the world share. Even though Canada is a huge country, it only makes up 0.5% of the world’s 7 billion inhabitants. The country consumed 110 billion liters of refined petroleum products in 2018. In spite of this, it’s a widely spread out country. Many people and goods have to travel long distances, they also have to use oil for heating and cooling with the varied weather patterns in Canada. 

Conversely, it’s close neighbor the United States is the world’s biggest consumer of oil and natural gas. The U.S. consumes 20% of the world’s total share, which is 19.69 million barrels of oil a day. If Canada’s oil consumption is considered low one only has to look towards its neighbor. 

Is Canada Energy Independent?Is Canada Energy Independent

As discussed earlier, Canada imports oil from foreign countries. It is not an energy independent country, but it certainly has the capacity to be. There’s even a shift in government thinking that is pushing for energy independence. Both the Conservative Party and the Green Party in Canada want to stop depending on foreign countries for oil, but both for different reasons. 

The Conservative party in Canada wants to rely solely on domestically produced oil in order to stop supporting rogue states and invest inside Canada instead. Their goal is to cut off all foreign oil imports by 2030. In order to do that, they want to spearhead several new pipeline projects. One of the main issues Canada has in using its own oil is the inability to transport heavy crude oil through pipelines and its lack of a west-east pipeline. 

On the other hand, the Green party wants to become energy independent for more intrinsic reasons. First, they want to stop climate change by refusing to use foreign oil imports. Rather, they would ensure that Canadians only use Canadian oil if they have to use it at all. The Green party also disagrees with all new pipeline projects. 

But, to become energy independent as these groups desire, Canada may have to upset some of its close trade partners. First, the United States is one of its main importers of oil as well as its biggest export partner. Canada would also have to say no to Saudi Arabia, Kazakhstan, and Venezuela. 

The idea of becoming energy independent is appealing but most likely not going to happen anytime soon. But, that doesn’t mean that Canada’s vast oil sands and sedimentary basin won’t be producing much of the world’s oil. As the country with the third-largest oil reserve, the world will surely rely on Canada for it in the future. 

How is Oil Transported in Canada?How Is Oil Transported In Canada

Transporting oil involves a complex network of pipelines, railways, trucks, and ships. Currently, almost all of Canada’s exported oil goes to the U.S., although they are looking to diversify that to stabilize the industry’s future. For example, Canada has incredible access to India, China, and Southwest Asia from the west coast. Asian markets are only an 8 to 11-day sail from Canada’s coast. But, transporting oil isn’t as easy as it may first appear. 

Pipelines are the number one way oil is transported, not to mention one of the most efficient ways. In Canada, however, many argue that the pipeline infrastructure is severely lacking. There is no existing pipeline from east to west in the country, which makes it even harder to trade on a global scale. Canada is looking to meet the growing capacity and enter into new markets with the creation of several new pipelines, such as the TransCanada Keystone XL Pipeline and the Trans Mountain Expansion Project. 

The other way in which oil is transported is via oil tankers. These ships have been moving safely around Canada’s coast since the 1930s. An average of 580 million barrels of oil is transported along Canada’s coasts by oil tankers. All ships are regularly inspected against international standards, in fact, Canada outlawed all single-hulled ships in 2010. Now only double-hulled tankers are allowed to operate in Canadian waters. Additionally, in the event of a spill or other accident, the Western Canada Marine Response Corporation is certified by Canada to respond. 

Finally, railway systems allow oil to be transported to areas that could not otherwise be reached. They give producers greater flexibility to meet demand and get oil to areas where there is no pipeline infrastructure. U.S. and Canadian governments have worked together to increase safety standards for the rail system to ensure the industry continues to function appropriately.  

How Much Oil is Transported by Rail in Canada?

Without the necessary pipeline infrastructure, rail is the alternative mode of transportation for oil producers. In order to meet the rapid growth from new supply regions like the oil sands, producers are having to rely on rail or face a build-up of product. Without the pipelines, every new barrel of oil is moved by rail. 

For example, in 2016 the number of barrels moved per day by rail was only 100,000. In 2017 that number increased to 140,000 barrels per day, about three percent of all of Western Canada’s supply. Finally, in 2018 the number reached an incredible 200,000 barrels of oil per day that are being moved by Canada’s railways. It’s apparent that to meet this increased production, rail systems will continue to be important. 

In fact, many oil production companies, such as Suncor Energy and Imperial Oil, are actually appealing to the Alberta government to send more crude oil via rail. They’re seeking to increase monthly production of oil barrels, but they can only do it by committing to ship a certain amount through the railway. Similarly, their goal is to meet new market needs in places such as the U.S. Gulf Coast. 

In the economy of the industry, transporting oil by rail plays an important role. Pipelines are regulated by the federal government and oil-producing companies usually have to enter into long term contracts with the pipeline companies. Meanwhile, shipping oil by rail does not require long term contracts, making it more financially appealing. There is also no regulated rate of return for railroad companies. Transporting oil by rail also gives producers more options on where the oil will be picked up and delivered. 

When shipping by rail there are many safety and environmental concerns to take into consideration. For example, the Canadian railway system has enhanced its safety regulations and protocols to combat the risk of a derail, which could then cause an oil spill. Still, transporting oil via rail is a viable and generally safe way to move oil from one location to the next. 

Transporting Oil by TruckTransporting Oil By Truck

The other option available to oil producing companies is to transport oil by truck. Out of the four ways of transporting oil, truck is the least common. For example, in the United States, only 4% of oil shipments were done by truck, which is more than the 3% that was done by rail. But, in Canada, nearly all of the oil is transported via pipeline. 

Still, getting oil to market is a process and requires various transportation and storage means. Oil is often produced far away from where it is consumed, requiring lots of travel and storage to measure supply and demand. While trucks may not be used often for getting produced oil to refineries, they are helpful in delivering refined petroleum products. They have the greatest flexibility in destination, even in spite of their small storage capacity. Transporting oil by truck is usually the last step in the process. 

The advantage of utilizing trucks is that they provide direct travel from the source to the destination. Ultimately, these four methods of transporting oil will likely be used for the foreseeable future. Advancements and changes will occur in ways to reduce emissions, increase efficiency, and prevent spills and leaks.  

Need Help Transporting Oil?

If you are looking to transport oil between the United States and Canada, R+L Global Logistics can help with NAFTA Certificate of Origin and moving machinery questions. We are an international shipping company with expertise in a variety of industries that can help with everything from bonded warehouses to understanding duties on commercial products. Our experience ranges from technology and consumer goods to chemical products and business franchises. In house supply chain consultants will work with you to identify and solve all your logistical needs, from storage to business cycles. Our trained domestic ground and international certified employees understand how to handle high-risk cargo and will make sure your product safely gets from point A to point B. We also offer service along the border, including in convenient cities like Oroville and Derby Line and in states like Idaho and North Dakota

When transporting oil between the U.S. and Canada, be it via rail, truck, or ship, make sure you have the help you need. Fill out the form below or give us a call at 855-915-0573 and we’ll carefully arrange your next oil shipment.

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