Why Trade Matters
Trade and the Canadian Economy
Bursting with Energy: Canadian Oil and Gas Companies a Global Success
Stories of the Week - June 23, 2004
Most Canadians would assume that the first commercial oil well in North America was drilled in oil-rich Texas—the land of "black gold"— but, in fact, it was drilled in Ontario in 1858.
Today, Canada is the world's ninth-largest producer of crude oil and the third-largest producer of natural gas. Canada produces more than 20 percent of North America's crude oil and natural gas, but accounts for only 10 percent of its consumption. In 2003, Canada had over 17,000 oil and natural gas wells in production, and produced almost 3 million barrels of crude oil (on a par with Venezuela) and 18.5 billion cubic feet of natural gas per day. The latest figures from 2002 indicate that oil and gas industry revenues were $57.4 billion and the industry employed around 500,000 people.
As of May, 2004, the top six oil producers in the world were Russia, at 9.12 million barrels per day, Saudi Arabia, the United States, Iran, Mexico and China.
Canada also has the second-largest petroleum reserves in the world, after Saudi Arabia—larger than those of well-known oil producers like Iran and Venezuela.
Canada exports about 1.6 million barrels of crude oil per day, primarily to refineries in the central and western United States, and 9.5 million cubic feet of natural gas per day. Annually, we export about 3.5 trillion cubic feet of natural gas to the U.S. The total value of our oil and gas exports to the U.S. in 2003 was $46.5 billion.
The "upstream" sector of the oil and gas industry, the companies that explore for and produce Canada's petroleum resources, is the largest single private-sector investor in Canada. This multi-billion dollar industry is now in the midst of a major growth trend. Huge, undeveloped natural gas deposits lie offshore, and great crude oil deposits are still to be explored in many regions, including the Yukon, the Northwest Territories, Nunavut and Atlantic Canada.
Western Canada's petroleum wealth
Western Canada (British Columbia, Alberta and Saskatchewan) has some of the world's largest deposits of oil and natural gas. Canada became oil-rich overnight in 1947 when, after drilling 133 dry holes across western Canada, Imperial Oil finally struck oil at Leduc, near Edmonton, Alberta.
Rich in natural gas, oil sands and conventional oil, Alberta now produces 70 percent of Canada's crude oil and 80 percent of its natural gas. The province continues to be the epicentre of the industry, with about 75 percent of total industry spending taking place there.
In 2002-2003, revenues from crude oil and natural gas accounted for more than 30 percent, or $7.1 billion, of Alberta's total revenues. Oil, gas and by-products accounted for 60 percent of Alberta's exports.
Canada's largest petroleum resource is the Athabasca oil sands in northern Alberta. Aboriginals were using the tar-like bitumen (a more solid form than crude oil) to caulk their canoes when the first European explorers arrived in the 18th century. Oil sands now comprise approximately 31 percent of Canada's total production, at one million barrels per day. By 2010, they are expected to make up more than 60 percent of western Canada's production.
British Columbia is one of Canada's largest producers of natural gas, representing around 16 percent of Canadian production. The discovery of a world-class natural gas field in northeastern British Columbia is having a significant impact on the province's economy. In 2001-2002, the provincial government collected revenues from the oil and natural gas industry that exceeded those from the forestry industry for the second year in a row.
The east coast's offshore resources
Exploration for oil and natural gas began off Canada's east coast nearly a half-century ago. While Canada's first offshore oil well was drilled off Prince Edward Island in 1943, natural gas and oil were found off the coast of Nova Scotia in the 1970s. Sable Island in Nova Scotia is Canada's first offshore natural gas project, and is currently averaging an output of just over 600 million cubic feet of natural gas per day.
The major offshore Hibernia and Terra Nova projects in Newfoundland and Labrador are huge producers of oil. The province now produces about 37 percent of Canadian conventional crude oil, making it Canada's second-largest petroleum producer after Alberta. It is expected that when the third offshore project, White Rose, begins producing, almost half of Canada's conventional crude oil will come from Newfoundland and Labrador.
Oil from Hibernia is shipped across Canada and to the United States. Ontario is one of Canada's major oil and gas consumers, accounting for one third of total Canadian oil consumption and close to 40 percent of all gas consumption.
As one of the world's top ten oil and gas producers, with a long history of petroleum exploration and development, Canada has become a leader in this international industry. Canadian companies—mostly small and medium-size enterprises—export energy-related expertise, products and services, including environmental protection technology and safety training, to other oil- and gas-producing regions and countries, such as Asia, the Middle East, South America, the Caspian Sea area, Kazakhstan, Russia and Ukraine.
This issue of Stories of the Week features three such companies.
Stories of the Week - June 23, 2004
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Getting Heavy Oil to Flow
Hycal Energy Research Laboratories Ltd., Calgary, Alberta
Companies around the world call on Hycal Energy Research Laboratories Ltd. to get heavy oil to move from deep within reservoirs to surface facilities. "In countries where crude can be as thick as molasses, steam injection is one of the common methods of increasing oil mobility," explains Rick Bunowicz, Hycal's Area Manager for Europe, Africa and the Middle East. "Even conventional reservoirs often have large volumes of oil that adhere to the reservoir rock, in which case we may recover it using natural gas or carbon dioxide."
The Calgary-based company is currently bidding on a project in Kuwait, which, says Bunowicz, it has a reasonable chance of winning due to Hycal's extensive experience with extracting Alberta's and Venezuela's heavy oil.
Bunowicz recently returned from a trade mission to Kazakhstan, where Hycal is working on major studies with PetroKazakhstan and Milan-based Agip KCO. The company is also very busy in the Middle East, where Canada's Trade Commissioner Service has been hard at work on Hycal's behalf. "The embassy in Abu Dhabi was instrumental in finding us a great agent and landing a joint venture, and has helped bring people to Calgary for tours of the lab. We also consult regularly with trade staff in Libya and Algeria and work closely with EDC," Bunowicz says.
With a third of its work carried out overseas—a share that's growing—Hycal has an office in Houston, Texas, and is negotiating with partners to build a laboratory in Abu Dhabi.
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Pumping Out Canadian Expertise
Kudu Industries Inc., Calgary, Alberta
In the late 1970s, Kudu Industries introduced a much more efficient tool to pump heavy, sand-laden oil in Alberta's petroleum patch: the progressing cavity pump (PCP). Developed largely in Canada, this hardware is capable of maintaining the tremendous pressure necessary to keep this kind of oil flowing, while resisting clogging and other problems that plague conventional equipment. Moreover, the PCP can do the job for about one quarter of the price, using only about half the power.
The Calgary-based company has since become the world's second-biggest supplier of this technology, for which it currently holds 17 patents. Outside of North America, Kudu has clients in more than a dozen countries in Asia, South America, the Middle East and the former Soviet Union—where Canada's trade commissioner service has been very helpful. "The Trade Office in Kazakstan maintain an excellent database of contacts," says Monique Klein, Marketing Director of Kudu Industries. "The staff is always available and have a good feel for what's going on in local business, industry and politics." The company has also benefited from the National Research Council's Industrial Research Assistance Program (IRAP), which helps small and medium-sized enterprises increase their competitiveness and enhance their impact in the marketplace.
With some 150 installations, Venezuela represents the largest export market for Kudu's pumps, which are also hard at work in other exacting sites, such as a 3,000-metre deep oil well in Ecuador and one in Argentina where temperatures reach 127°C.
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Converting Crude Oil into Clean Energy
North Atlantic Refining, Come By Chance, Newfoundland and Labrador
Strategically situated on Newfoundland and Labrador's southeast coast, North Atlantic Refining processes 105,000 barrels of crude per day and exports more than a billion dollars in petroleum products a year to 30 countries worldwide.
"Our location on major North Atlantic shipping routes facilitates our imports of crude oil from the North Sea, West Africa, and the Arabian Gulf, as well as our exports of refined products to the United States, Europe and Asia," says Gunther Baumgartner, President of North Atlantic Refining. "Because there are no duties levied on Canadian refined products entering the United States, we ship economically to that entire market, from Maine to California."
North Atlantic Refining's products include the new ultra-low sulphur fuels that are increasingly required in markets around the world. By removing the sulphur, the company has developed another valuable export product, thereby generating spin-off jobs. "We truck the sulphur to a plant about a quarter mile down the road where it is transformed into pellets used in the production of such things as medications and fertilizer in markets around the world," says Baumgartner.
With the province's only oil refinery and some 700 people employees on site, North Atlantic Refining is a major contributor to the local economy. In 2003, it earned the Premier's Award from the Mount Pearl Chamber of Commerce. In recognition of its international achievements, the company took second place for a Newfoundland and Labrador Exporter of the Year award.
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