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Last Updated: October 8, 2019
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Overview

  • Canada is one of the world’s top energy producers and is a principal source of U.S. energy imports.

  • Canada is a net exporter of most energy commodities and is a significant producer of natural gas, hydroelectricity, and crude oil and other liquids from oil sands. Energy exports to the United States account for most of Canada’s total energy exports.
  • Canada has abundant and varied natural resources, ranking fourth in 2018 among the top energy producers of petroleum and total liquids in the world, behind only the United States, Saudi Arabia, and Russia. Relatively energy intensive compared with other industrialized countries, Canada’s economy is fueled largely by petroleum and other liquids, natural gas, and hydroelectricity (Figure 1).

Figure 1. Total primary energy consumption in Canada by fuel type, 2018

# figure data


Petroleum and other liquids

Canada’s oil sands have significantly contributed to the recent and expected future growth in the world’s liquid fuel supply, and they comprise most of the country’s proved oil reserves, which rank third globally.

Reserves
  • The Oil & Gas Journal estimates that as of January 2019, Canada had 167 billion barrels of proved oil reserves, ranking third in the world.[1] Only Venezuela and Saudi Arabia hold higher reserves. In addition, Canada is one of only 3 countries among the top 10 proved reserves holders that is not a member of the Organization of the Petroleum Exporting Countries (OPEC).
Production and consumption
  • In 2018, Canada was the world’s fourth-largest petroleum and other liquids producer and was a net exporter of oil. Nearly all of its crude oil exports are destined for the United States because Canada lacks sufficient export capacity to send its liquids elsewhere.
  • Canada is a major producer of crude oil. Bitumen and upgraded synthetic crude oil produced from the oil sands of Alberta have driven recent growth in Canada’s liquid fuels production. Most of Canada’s proved oil reserves and the expected future growth in the country’s liquid fuels production will be derived from these resources.
  • Canada produced 5.3 million barrels per day (b/d) of petroleum and other liquid fuels in 2018, an increase of more than 300,000 b/d from the previous year. Crude oil (including condensate) accounted for 4.3 million b/d, and the remainder was produced as biofuels, natural gas, and other natural gas liquids (NGL) (Figure 2). Canada’s production is expected to grow modestly in 2019 and 2020 because of export capacity constraints and mandatory production curtailments set by the government of Alberta.

Figure 2. Canada liquid fuels production and consumption

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Refining
  • According to the Canadian Association for Petroleum Producers (CAPP), Canada has 17 refineries with a total crude oil processing capacity of 2.0 million b/d.[2] Eastern Canada’s eight refineries have 1.2 million b/d of capacity or about 60% of total crude oil refining capacity.[3] Because the eastern refineries are not as well connected to domestic crude oil production supplies, these refineries are more dependent on imported crude oil. Western Canada’s nine refineries have a total capacity of 748,000 b/d. In 2018, Phase One of the North West Redwater’s Sturgeon Refinery came online, which is the first refinery built in Canada since 1984.[4]
  • According to Natural Resources Canada, Canadian production of petroleum products reached 1.9 million b/d in 2018.[5] Most petroleum products are refined into motor gasoline (42%) and diesel fuel oil (30%).[6]
Exports and imports
  • Nearly all of Canada’s crude oil exports were sent to the United States in 2018 (see Figure 3). Currently, the largest regional market in the United States for Canadian crude oil exports is the Midwest where almost all Canadian crude oil exports originate from Western Canada.
  • Canada is the largest source of U.S. crude oil and refined products imports. Crude oil imports from Canada accounted for 48% of total U.S. crude oil imports in 2018, averaging 3.7 million b/d. Refined products imported from Canada accounted for 582,000 b/d, or 27% of total U.S. petroleum product imports.
  • Currently, producers face a complex set of market and logistical challenges. Oil supply in Western Canada exceeds the transport capacity of pipelines serving external markets. As export pipelines operate at full capacity and timing of new capacity remains uncertain, producers are increasingly relying on rail transportation to deliver incremental production to the market. The highest monthly volume imported to the United States from Canada was in January 2019 at 406,000 b/d, compared with a total average of 238,000 b/d in 2018.

Figure 3. Canada crude oil exports by destination, 2018

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Natural gas

Canada is one of the world’s largest producers of dry natural gas and is the source of most U.S. natural gas imports.

Reserves
  • The Oil & Gas Journal,[7] Canada held 72 trillion cubic feet (Tcf) of proved natural gas reserves at the end of 2018. Most of Canada’s natural gas reserves are traditional resources in the Western Canadian Sedimentary Basin (WCSB), including those associated with the region’s oil fields. Other areas with significant natural gas reserves include offshore fields near the eastern shore of Canada (primarily Newfoundland and Nova Scotia), the Arctic region, and the Pacific coast.
Production and consumption
  • In 2018, Canada produced 5.9 Tcf of dry natural gas and was the fourth-largest producer behind the United States, Russia, and Iran (see Figure 4). Most of Canada’s natural gas production occurs in the prolific WCSB. Although Canadian production of conventional natural gas has been declining, the production of Canadian unconventional natural gas has been rising.
Exports
  • Almost all of Canada’s natural gas exports go to the United States. In 2018, 97% of all U.S. natural gas imports came from Canada. Most of Canada’s natural gas exports to the United States originate in Western Canada and are shipped to U.S. markets in the West and Midwest regions.

Figure 4. Canada's dry natural gas production and consumption

# figure data


Electricity
  • Canada generated an estimated 651 billion kilowatthours (kWh) of electricity in 2017, of which about 60% was hydroelectric. Only China and Brazil produce more hydroelectricity than Canada.[8] Fossil fuel and nuclear plants satisfy most of Canada’s electricity needs not met by hydroelectricity (see Figure 5).
Trade
  • The United States imported 52 million megawatthours (MWh) of electricity from Canada in 2018, primarily into the Northeast and Midwest, and exported 73 million MWh, nearly all of which was from the Pacific Northwest. Canada is a net exporter of electricity to the United States, which accounts for a small, although locally important, share of bilateral trade.

Figure 5. Electricity generation by fuel, 2018

# figure data


Coal

As government policy attempts to lower domestic coal consumption, up to 50% of Canada’s coal production is exported.

Reserves
  • Canada’s total proved coal reserves stood at about 6.6 billion short tons in 2018.[9] More than 60% of the reserves are anthracite and bituminous coal. The remaining reserves are subbituminous and lignite coal.[10] Coal resources are located across the country, but they are actively mined and produced in only Alberta, British Columbia, and Saskatchewan.
Production and consumption
  • In 2017, Canada produced 68 million short tons of coal, a slight increase compared with the previous year. About 50% of Canada’s coal production is consumed domestically, a significant departure from more than a decade ago when Canada consumed nearly all of its domestic coal production.
  • In 2018, 49% of coal consumed in Canada was metallurgical coal used for steel manufacturing, and 51% was thermal coal used for electricity generation. Coal generates 9% of total electricity in Canada. In 2018, the government of Canada announced regulations to phase out traditional coal-fired electricity by 2030.[11]
Trade
  • Canada exports about half of its coal production. In 2018, Canada was the world's third-largest exporter of metallurgical coal after Australia and the United States. [12] Most of Canada's coal exports go to Asia.

Canada EIA petroleum Reserves production consumption refining exports imports natural gas electricity coal
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The Growing Divergence In Energy

Two acquisitions in the energy sector were announced in the last week that illustrate the growing divergence in approaching the future of oil and gas between Europe and the USA. In France, Total announced that it had bought Fonroche Biogaz, the market leader in the production of renewable gas in France. In North America, ConocoPhillips completed its acquisition of Concho Resources, deepening the upstream major’s foothold into the lucrative Permian Basin and its shale riches. One is heading towards renewables, and the other is doubling down on conventional oil and gas.

What does this say about the direction of the energy industry?

Total’s move is unsurprising. Like almost all of its European peers operating in the oil and gas sector, Total has announced ambitious targets to become carbon-neutral by 2050. It is an ambition supported by the European population and pushed for by European governments, so in that sense, Total is following the wishes of its investors and stakeholders – just like BP, Shell, Repsol, Eni and others are doing. Fonroche Biogaz is therefore a canny acquisition. The company designs, builds and operates anaerobic digestion units that convert organic waste such as farming manure into biomethane to serve a gas feedstock for power generation. Fonroche Biogaz already has close to 500 GWh of installed capacity through seven power generation units with four in the pipeline. This feeds into Total’s recent moves to expand its renewable power generation capacity, with the stated intention of increasing the group’s biomethane capacity to 1.5 terawatts per hour (TWh) by 2025. Through this, Total vaults into a leading position within the renewable gas market in Europe, which is already active through affiliates such as Méthanergy, PitPoint and Clean Energy.

In parallel to this move, Total also announced that it has decided not to renew its membership in the American Petroleum Institute for 2021. Citing that it is only ‘partially aligned’ with the API on climate change issues in the past, Total has now decided that those positions have now ‘diverged’ particularly on rolling back methane emission regulations, carbon pricing and decarbonising transport. The French supermajor is not alone in its stance. BP, which has ditched the supermajor moniker in favour of turning itself into a clean energy giant, has also expressed reservations over the API’s stance over climate issues, and may very well choose to resign from the trade group as well. Other European upstream players might follow suit.

However, the core of the API will remain American energy firms. And the stance among these companies remains pro-oil and gas, despite shareholder pressure to bring climate issues and clean energy to the forefront. While the likes of ExxonMobil and Chevron have balanced significant investments into prolific shale patches in North America with public overtures to embrace renewables, no major US firm has made a public commitment to a carbon-neutral future as their European counterparts have. And so ConocoPhillips acquisition of Concho Resources, which boosts its value to some US$60 billion is not an outlier, but a preview of the ongoing consolidation happening in US shale as the free-for-all days give way to big boy acquisitions following the price-upheaval there since 2019.

That could change. In fact, it will change. The incoming Biden administration marks a significant break from the Trump administration’s embrace of oil and gas. Instead of opening of protected federal lands to exploration, especially in Alaska and sensitive coastal areas and loosening environmental regulations, the US will now pivot to putting climate change at the top of the agenda. Although political realities may water it down, the progressive faction of the Democrats are pushing for a Green New Deal embracing sustainability as the future for the US. Biden has already hinted that he may cancel the controversial and long-running Keystone XL pipeline via executive order on his first day in the office. His nominees for key positions including the Department of the Interior, Department of Energy, Environmental Protection Agency and Council on Environmental Quality suggest that there will be a major push on low-carbon and renewable initiatives, at least for the next 4 years. A pledge to reach net zero fossil fuel emissions from the power sector by 2035 has been mooted. More will come.

The landscape is changing. But the two approaches still apply, the aggressive acceleration adopted by European majors, and the slower movement favoured by US firms. Political changes in the USA might hasten the change, but it is unlikely that convergence will happen anytime soon. There is room in the world for both approaches for now, but the future seems inevitable. It just depends on how energy companies want to get there.

Market Outlook:

  • Crude price trading range: Brent – US$54-56/b, WTI – US$51-53/b
  • Global crude oil benchmarks retreated slightly, as concerns of rising supplies and coronavirus spread impact consumption anticipations; in particular, new Covid-19 outbreaks in key countries such as Japan and China are menacing demand
  • Mapped against the new OPEC+ supply quotas, there is a risk that demand will retreat more than anticipated, weakening prices; however, a leaking pipeline in Libya has reduced oil output there by about 200,000 b/d, which could provide some price support
  • However, the longer-term prognosis remains healthier for oil prices factoring out these short-term concerns; the US EIA has raised its predicted average prices for Brent and WTI to US$52.70 and US$49.70 for the whole of 2021

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January, 22 2021
EIA expects crude oil prices to average near $50 per barrel through 2022

In its January Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) expects global demand for petroleum liquids will be greater than global supply in 2021, especially during the first quarter, leading to inventory draws. As a result, EIA expects the price of Brent crude oil to increase from its December 2020 average of $50 per barrel (b) to an average of $56/b in the first quarter of 2021. The Brent price is then expected to average between $51/b and $54/b on a quarterly basis through 2022.

EIA expects that growth in crude oil production from members of the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+) will be limited because of a multilateral agreement to limit production. Saudi Arabia announced that it would voluntarily cut production by an additional 1.0 million b/d during February and March. Even with this cut, EIA expects OPEC to produce more oil than it did last year, forecasting that crude oil production from OPEC will average 27.2 million b/d in 2021, up from an estimated 25.6 million b/d in 2020.

EIA forecasts that U.S. crude oil production in the Lower 48 states—excluding the Gulf of Mexico—will decline in the first quarter of 2021 before increasing through the end of 2022. In 2021, EIA expects crude oil production in this region will average 8.9 million b/d and total U.S. crude oil production will average 11.1 million b/d, which is less than 2020 production.

EIA expects that responses to the recent rise in COVID-19 cases will continue to limit global oil demand in the first half of 2021. Based on global macroeconomic forecasts from Oxford Economics, however, EIA forecasts that global gross domestic product will grow by 5.4% in 2021 and by 4.3% in 2022, leading to energy consumption growth. EIA forecasts that global consumption of liquid fuels will average 97.8 million barrels per day (b/d) in 2021 and 101.1 million b/d in 2022, only slightly less than the 2019 average of 101.2 million b/d.

EIA expects global inventory draws will contribute to forecast rising crude oil prices in the first quarter of 2021. Despite rising forecast crude oil prices in early 2021, EIA expects upward price pressure will be limited through the forecast period because of high global oil inventory, surplus crude oil production capacity, and stock draws decreasing after the first quarter of 2021. EIA forecasts Brent crude oil prices will average $53/b in both 2021 and 2022.

quarterly global liquid fuels production and consumption

Source: U.S. Energy Information Administration, Short-Term Energy Outlook (STEO)

You can find more information on EIA’s expectations for changes in global petroleum liquids production, consumption, and crude oil prices in EIA’s latest This Week in Petroleum article and its January STEO.

January, 22 2021
Skullcandy Jib True Wireless Earbuds

The Skullcandy Jib True is a pair of well-built headphones that resemble its premium sibling Skullcandy Sesh Truly Wireless. They are low-profile Truly wireless headphones that look good and don't feel too cheap. They are definitely some of the smaller earbuds that we have tested and do not protrude too much from your ears.

Ratings > 7.6

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+ Use either bud solo

- No app support

- Average battery life

Skullcandy Jib True Wireless are perfect for commute and travel. They are portable and comfortable. We can confidently add them to the list of cable-free and economical in-ear headphones.

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January, 21 2021