Petroleum production in Canada

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Petroleum in Canada
This article is part of a series.
1. Early history
2. Story of natural gas
3. Oil sands and heavy oil
4. The frontiers
5. Gas liquids
Resources and producers
Oil reserves
Petroleum companies
Categories
Oil fields
Oil refineries
Oil companies
Economy of Canada
Energy policy of Canada
Canadian oil production: conventional crude oil in red, and total petroleum liquids, including from oil sands, in black

Petroleum production in Canada is a major industry which is important to the economy of North America. Canada is the fifth largest oil producing country in the world. In 2008 it produced an average of 438,000 cubic metres per day (2,750,000 bbl/d) of crude oil, bitumen and natural gas condensate. Of that amount, 45% was conventional crude oil, 49.5% was bitumen from oil sands, and 5.5% was condensate from natural gas wells.[1] Most of Canadian petroleum production, approximately 283,000 cubic metres per day (1,780,000 bbl/d), is exported.[2] Canada is the largest single source of oil imports into the United States.

The petroleum industry in Canada is also referred to as the Canadian "Oil Patch"; the term refers especially to upstream operations (exploration and production of oil and gas), and to a lesser degree to downstream operations (refining, distribution, and selling of oil and gas products). In 2005, almost 25,000 new oil wells were spudded (drilled) in Canada. Daily, over 100 new wells are spudded in the province of Alberta alone.[3] "Canada is the fifth-largest producer of natural gas and crude oil in the world with extensive oil and natural gas reserves across the country" (http://www.capp.ca)..

History

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Main article: History of the petroleum industry in Canada

The Canadian petroleum industry developed in parallel with that one of the United States. The first oil well in Canada was dug by hand (rather than drilled) in 1858 by James Miller Williams near his asphalt plant at Oil Springs, Ontario. At a depth of 20 metres (66 ft) he struck oil, one year before "Colonel" Edwin Drake drilled the first oil well in the United States.[4] Williams later went on to found "The Canadian Oil Company" which qualified as the world’s first integrated oil company.

Petroleum production in Ontario expanded rapidly, and practically every significant producer became his own refiner. By 1864, 20 refineries were operating in Oil Springs and seven in Petrolia, Ontario. However, Ontario's status as an important oil producer did not last long. By 1880 Canada was a net importer of oil from the United States.

Canada's unique geography, geology, resources and patterns of settlement have been key factors in the history of Canada. The development of the petroleum sector helps illustrate how they have helped make the nation quite distinct from the United States.

The potential of Alberta as an oil-producing province long went unrecognized because it was quite different from American oil producing regions. The first oil well in western Canada was drilled in southern Alberta in 1902, but did not produce for long and served to mislead geologists about the true nature of Alberta's subsurface geology. The Turner Valley oil field was discovered in 1914, and for a time was the biggest oil field in the British Empire, but again it misled geologists about the nature of Alberta's geology. In Turner Valley, the mistakes oil companies made led to billions of dollars in damage to the oil field by gas flaring which not only burned billions of dollars worth of gas with no immediate market, but destroyed the field's gas drive that enabled the oil to be produced. The gas flares in Turner Valley were visible in the sky from Calgary, Lua error in Module:Convert at line 1851: attempt to index local 'en_value' (a nil value). away. As a result of the highly visible wastage, the Alberta government launched vigorous political and legal attacks on the Canadian Government and the oil companies that continued until 1938 when the province set up the Alberta Petroleum and Natural Gas Conservation Board and imposed strict conservation legislation.

The status of Canada as an oil importer from the US suddenly changed in 1947 when the Leduc No. 1 well was drilled a short distance south of Edmonton. Geologists realized that they had completely misunderstood the geology of Alberta, and the highly prolific Leduc oil field, which has since produced over 50,000,000 m3 (310,000,000 bbl) of oil was not a unique formation. There were hundreds more Devonian reef formations like it underneath Alberta, many of them full of oil. There was no surface indication of their presence, so they had to be found using reflection seismology. The main problem for oil companies became how to sell all the oil they had found rather than buying oil for their refineries. Pipelines were built from Alberta through the midwestern United States to Ontario and to the west coast of British Columbia. Exports to the U.S. increased dramatically.

Most of the oil companies exploring for oil in Alberta were of U.S. origin, and at its peak in 1973, over 78 per cent of Canadian oil and gas production was under foreign ownership and over 90 per cent of oil and gas production companies were under foreign control, mostly American. This foreign ownership spurred the National Energy Program under the Trudeau government.[5]

Major players

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Main article: Canadian petroleum companies

The country's three largest integrated refiners are Imperial Oil, Husky Energy, and Suncor Energy. While Petro Canada is considered by some as its own entity and fourth key refiner, it's actually owned by Suncor Energy. In 2007 Canada's three biggest oil companies brought in record profits of $11.75 billion, up 10 percent from $10.72 billion in 2006. Revenues for the Big Three climbed to $80 billion from about $72 billion in 2006. The numbers exclude Shell Canada and ConocoPhillips Canada, two private subsidiaries that produced almost 500,000 barrels per day in 2006.[6]

Divisions

Most exploration and production occurs in Alberta, with a significant number of operations in British Columbia—particularly in winter—and consistent activity in Saskatchewan. Drilling from large offshore platforms occurs on the Newfoundland continental shelf.

Alberta accounts for 47% of the country's light crude oil production, followed by Saskatchewan at 23%, and Newfoundland at 21%. Combined these three provinces produce 91% of Canada's light crude oil, with the remaining provinces producing only fractional amounts. [7]

Alberta

Drilling rig in northern Alberta
Oil extraction near Drayton Valley

Alberta is the largest producer of conventional crude oil, synthetic crude, natural gas and gas products in Canada. Two of the largest producers of petrochemicals in North America are located in central and north central Alberta. In both Red Deer and Edmonton, world class polyethylene and vinyl manufacturers produce products shipped all over the world, and Edmonton's oil refineries provide the raw materials for a large petrochemical industry to the east of Edmonton. There are hundreds of small companies in Alberta dedicated to providing various services to this industry—from drilling to well maintenance, pipeline maintenance to seismic exploration.

The Athabasca Oil Sands have estimated oil reserves in excess of that of the rest of the world, estimated to be 1.6 trillion barrels (250×10^9 m3). With the advancement of extraction methods, bitumen and economical synthetic crude are produced at costs nearing that of conventional crude. This technology grew and developed in Alberta. Many companies employ both conventional strip mining and non-conventional methods to extract the bitumen from the Athabasca deposit. With current technology, only 315 billion barrels (50.1×10^9 m3) are recoverable. Entire towns, like Fort McMurray, have developed because large multinational corporations have taken on the task of oil production.

While Edmonton is considered the pipeline junction, manufacturing, chemical processing, research and refining centre of the province, Calgary is known for its senior and junior oil company head offices.

Major oil fields are found in southeast Alberta (Brooks, Medicine Hat, Lethbridge), northwest (Grande Prairie, High Level, Rainbow Lake, Zama), central (Caroline, Red Deer), and northeast (Athabasca Oil Sands)

Structural regions include: Foothills, Greater Arch, Deep Basin.

  • Oil and gas activity is regulated by the Alberta Energy Regulator (AER) (Formerly the Alberta Energy Resources Conservation Board (ERCB)and the Energy and Utility Board (EUB)).[8]

British Columbia

Drilling rig in northern British Columbia

Drilling for gas and oil takes place in Peace Country of north-eastern British Columbia, around Fort Nelson (Greater Sierra oil field), Fort St. John (Pink Mountain, Ring Border) and Dawson Creek

  • Oil and gas activity is regulated by the Oil and Gas Commission (OGC).[9]

Manitoba

  • A few rigs drilling for oil in South western Manitoba

Saskatchewan

  • Mostly shallow gas wells in southwestern Saskatchewan (Hatton, Cypress Hill) and the southeast (Lougheed, Weir Hill), heavy oil extraction around Lloydminster, oil wells around Weyburn.
  • Oil and gas activity is regulated by the Saskatchewan Industry and Resources (SIR).[10]

Northern Canada (onshore)

Northern Canada (offshore)

  • Production in the Beaufort Sea off the Mackenzie Delta.
  • Sporadic drilling along the continental shelf of the Beaufort Sea.

Eastern Canada (onshore)

Eastern Canada (offshore)

Long-term outlook

  • Oil Production In North America

  • Canadian conventional oil production peaked in 1973, but oil sands production is forecast to increase to at least 2020

  • US oil production (crude oil only) and Hubbert high estimate.

  • Mexican production peaked in 2004 and is now in decline

Broadly speaking Canadian conventional oil production (via standard deep drilling) peaked in the mid-1970s, but East Coast offshore basins being exploited in Atlantic Canada did not peak until 2007 and are still producing at relatively high rates.[11]

Production from the Alberta oil sands is still in its early stages and will not peak for several generations in the future. Because of the enormous size of the known oil sands deposits, economic, labor, environmental, and government policy considerations are the constraints on production rather than finding new deposits.

Oil fields of Canada

These oil fields are or were economically important to the Canadian economy:

Upstream, midstream and downstream components of Canadian petroleum industry

There are three components of the Canadian petroleum industry: upstream, midstream and downstream.

Upstream

The upstream oil sector is also commonly known as the exploration and production (E&P) sector.[12][13][14]

The upstream sector includes the searching for potential underground or underwater crude oil and natural gas fields, drilling of exploratory wells, and subsequently drilling and operating the wells that recover and bring the crude oil and/or raw natural gas to the surface. With the development of methods for extracting methane from coal seams,[15] there has been a significant shift toward including unconventional gas as a part of the upstream sector, and corresponding developments in liquified natural gas (LNG) processing and transport. The upstream sector of the petroleum industry includes Extraction of petroleum, Oil production plant, Oil refinery and Oil well.

Midstream

The midstream sector involves the transportation (by pipeline, rail, barge, or truck), storage, and wholesale marketing of crude or refined petroleum products. Pipelines and other transport systems can be used to move crude oil from production sites to refineries and deliver the various refined products to downstream distributors.[12][13][14] Natural gas pipeline networks aggregate gas from natural gas purification plants and deliver it to downstream customers, such as local utilities. The midstream operations are often taken to include some elements of the upstream and downstream sectors. For example, the midstream sector may include natural gas processing plants which purify the raw natural gas as well as removing and producing elemental sulfur and natural gas liquids (NGL) as finished end-products. Midstream service providers in Canada refer to Barge companies, Railroad companies, Trucking and hauling companies, Pipeline transport companies, Logistics and technology companies, Transloading companies and Terminal developers and operators. Development of the massive oil sand reserves in Alberta would be facilitated by development of a North American pipeline network which would transport dilbit to refineries or export facilities.[16]

Getting to tidewater

Canada's oil sands for example are landlocked and it is crucial to the petroleum industry that transportation of petroleum products keep pace with production. Currently landlocked Canadian oil sands petroleum products suffer huge losses on price differentials. Until Canadian crude oil, Western Canadian Select, accesses international prices like LLS or Maya crude oil by getting to tidewater (south to the US Gulf ports via Keystone XL for example, west to the BC Pacific coast via the proposed Northern Gateway line to ports at Kitimat, BC or north via the northern hamlet of Tuktoyaktuk, near the Beaufort Sea.,[17] the Alberta government (and to some extent, the Canadian government) loses from $4 billion to $30 billion [18] in tax and royalty revenues, because the primary product of the oil sands, Western Canadian Select (WCS), the bitumen crude oil basket, is discounted so heavily against West Texas Intermediate (WTI) while Maya crude oil, a similar product close to tidewater, is reaching peak prices.[18] Calgary-based Canada West Foundation warned in April 2013, that Alberta is "running up against a [pipeline capacity] wall around 2016, when we will have barrels of oil we can’t move."[17]

Frustrated by delays in getting approval for Keystone XL (via the US Gulf of Mexico), the Enbridge Northern Gateway Pipelines (via Kitimat, BC) and the expansion of the existing TransMountain line to Vancouver, British Columbia, Alberta has intensified exploration of two northern projects "to help the province get its oil to tidewater, making it available for export to overseas markets." [17] Under Prime Minister Stephen Harper, the Canadian government spent $9 million by May, 2012, and $16.5 million by May, 2013, to promote Keystone XL.[19]

In the United States, Democrats are concerned that Keystone XL would simply facilitate getting Alberta oil sands products to tidewater for export to China and other countries via the American Gulf Coast of Mexico.[19]

Port Metro Vancouver has a number of petroleum terminals, including: Suncor's Burrard Products Terminal, Imperial Oil Limited'a Ioco in Burrard Inlet East, Kinder Morgan Westridge Kinder Morgan Westridge in Burnaby, Shell Canada's Shellburn, Chevron Canada Ltd.'s Stanovan in Burnaby.[20]

Downstream

The downstream sector commonly refers to the refining of petroleum crude oil and the processing and purifying of raw natural gas,[12][13][14] as well as the marketing and distribution of products derived from crude oil and natural gas. The downstream sector touches consumers through products such as gasoline or petrol, kerosene, jet fuel, diesel oil, heating oil, fuel oils, lubricants, waxes, asphalt, natural gas, and liquified petroleum gas (LPG) as well as hundreds of petrochemicals. Midstream operations are often included in the downstream category and considered to be a part of the downstream sector.

Crude oil

Crude oil, for example, Western Canadian Select (WCS) is a mixture of many varieties of hydrocarbons and most usually has many sulfur-containing compounds. The refining process converts most of that sulfur into gaseous hydrogen sulfide. Raw natural gas also may contain gaseous hydrogen sulfide and sulfur-containing mercaptans, which are removed in natural gas processing plants before the gas is distributed to consumers. The hydrogen sulfide removed in the refining and processing of crude oil and natural gas is subsequently converted into byproduct elemental sulfur. In fact, the vast majority of the 64,000,000 metric tons of sulfur produced worldwide in 2005 was byproduct sulfur from refineries and natural gas processing plants.[21][22]

Regulatory agencies in Canada

See also Energy policy of Canada

The jurisdiction over the petroleum industry in Canada, which includes energy policies regulating the petroleum industry, is shared between the federal and provincial and territorial governments. Provincial governments have jurisdiction over the exploration, development, conservation, and management of non-renewable resources such as petroleum products. Federal jurisdiction in energy is primarily concerned with regulation of inter-provincial and international trade (which included pipelines) and commerce, and the management of non-renewable resources such as petroleum products on federal lands.[23]

Natural Resources Canada (NRCan)

Oil and Gas Policy and Regulatory Affairs Division (Oil and Gas Division) of Natural Resources Canada (NRCan) provides an annual review of and summaries of trending of crude oil, natural gas and petroleum product industry in Canada and the United States (US)[24]

National Energy Board

The petroleum industry is also regulated by the National Energy Board (NEB), an independent federal regulatory agency. The NEB regulates inter-provincial and international oil and gas pipelines and power lines; the export and import of natural gas under long-term licenses and short-term orders, oil exports under long-term licenses and short-term orders (no applications for long-term exports have been filed in recent years), and frontier lands and offshore areas not covered by provincial/federal management agreements.

In 1985, the federal government and the provincial governments in Alberta, British Columbia and Saskatchewan agreed to deregulate the prices of crude oil and natural gas. Offshore oil Atlantic Canada is administered under joint federal and provincial responsibility in Nova Scotia and Newfoundland and Labrador.[23]

Provincial regulatory agencies

There were few regulations in the early years of the petroleum industry. In Turner Valley, Alberta for example, where the first significant field of petroleum was found in 1914, it was common to extract a small amount of petroleum liquids by flaring off about 90% of the natural gas. According to a 2001 report that amount of gas that would have been worth billions. In 1938 the Alberta provincial government responded to the conspicuous and wasteful burning of natural gas. By the time crude oil was discovered in the Turner Valley field, in 1930, most of the free gas cap had been flared off.[25] The Alberta Petroleum and Natural Gas Conservation Board (today known as the Energy Resources Conservation Board) was established in 1931 to initiate conservation measures but by that time the Depression caused a waning of interest in petroleum production in Turner Valley which was revived from 1939-1945.[26]

See also

References

  1. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  2. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  3. ↑ Canadian Rig Locator
  4. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  5. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  6. ↑ Vancouver Sun. Record Profits for Canada's big oil companies
  7. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  8. ↑ Alberta Energy Resources Conservation Board (ERCB)
  9. ↑ British Columbia Oil and Gas Commission (OGC)
  10. ↑ Saskatchewan Industry and Resources (SIR)
  11. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  12. ↑ 12.0 12.1 12.2 Petroleum industry
  13. ↑ 13.0 13.1 13.2 Upstream, midstream & downstream
  14. ↑ 14.0 14.1 14.2 Industry Overview from the website of the Petroleum Services Association of Canada (PSAC)
  15. ↑ Coalbed Methane Basic Information
  16. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  17. ↑ 17.0 17.1 17.2 Lua error in package.lua at line 80: module 'strict' not found.
  18. ↑ 18.0 18.1 Lua error in package.lua at line 80: module 'strict' not found.
  19. ↑ 19.0 19.1 Lua error in package.lua at line 80: module 'strict' not found.
  20. ↑ [1]
  21. ↑ Sulfur production report by the United States Geological Survey
  22. ↑ Discussion of recovered byproduct sulfur
  23. ↑ 23.0 23.1 Lua error in package.lua at line 80: module 'strict' not found.
  24. ↑ [2]
  25. ↑ Lua error in package.lua at line 80: module 'strict' not found.
  26. ↑ Lua error in package.lua at line 80: module 'strict' not found.

External links

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