Demystifying the Economy | Why export our oil instead of consuming it?

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Posted at 7:00 am

Delphine Belzile

Delphine Belzile
The press

Hi. How come Canada exports its oil and also imports oil?

Rene Masson

Canada is considered one of the largest oil producers. In 2021, the country exported more than 3.8 million barrels of crude oil per day, according to Canada’s Energy Regulatory Agency (REC).

Although Canada is a net oil exporter, some provinces rely on imports to meet regional demand. Canada’s oil exports come primarily from the west of the country, while oil imports dominate in the east.

According to Pierre-Olivier Pineau, energy policy expert at HEC Montréal, access to Canada’s oil infrastructure for Canada’s eastern provinces is limited: the existing pipeline network cannot transport enough oil to refineries in Ontario, Quebec and the Atlantic provinces. These provinces depend on foreign oil imports.

For example, New Brunswick, which is not connected to a pipeline, imported more than 260,000 barrels of crude oil per day in 2021. This represented more than 50% of the country’s total crude oil imports, according to the REC.

In addition to limited supply from existing pipelines to eastern Canada, the region doesn’t have the capacity to refine Alberta’s oil, says Jean-Thomas Bernard, a professor at the University of Ottawa who specializes in energy economics.

Canada had started to exploit the oil sands in the late 1960s, and the country increased its production out of concern about the oil shortage after the oil crises of the 1970s, according to the expert.

Tar sands oil is a heavy oil that requires special treatment. Jean-Thomas Bernard points out that refineries in Ontario, Quebec and the Atlantic provinces are not adequately equipped to process heavy fuel oil.


MAP PROVIDED BY THE CANADA ENERGY REGULATOR

Major oil pipelines regulated by Canada’s Energy Regulatory Agency

So did the refineries in the east of the country, including the Irving refinery in New Brunswick and the Jean Gaulin refinery of Valero in Quebec, rely on light oil imports, particularly from the United States and Saudi Arabia.

Exporting oil from Alberta to the United States is very easy: Jean-Thomas Bernard points out that refineries in the Gulf of Mexico have the capacity to process oil from the oil sands. In the past, these refiners sourced heavy oil from Venezuela, he adds.

In 2021, imports of refined petroleum products increased by 7% compared to the previous year. Alberta is the main importer: the province must import diluents, which are added to the heavy oil from the oil sands to make the solution “fluid enough to be transported by pipeline,” explains Jean-Denis Charlebois, the REC’s chief economist.

In Quebec, all oil now comes from the United States and Canada.

The commissioning of Enbridge’s Line 9B has enabled the province to source more local petroleum products, says The state of energy in Quebec 2022a report from the HEC Montréal Chair in Energy Sector Management.

According to Jean-Denis Charlebois, demand for gasoline in Canada peaked in 2019. There is a downward trend in oil imports, which is explained in particular by better access to oil facilities and a switch to renewable energy, he adds.

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