Canada is a major oil producing country, with the vast majority of its production currently coming from the oil sands in Alberta. However, Canada also imports a substantial amount of crude oil and refined petroleum products to meet its energy needs. This raises the question of whether Canada’s domestic oil production is sufficient to meet national demand, or if the country will need to continue relying on imports.
Key Facts About Canada’s Oil Production and Consumption
- Canada produced around 5.1 million barrels per day (b/d) of crude oil in 2021. This made it the world’s 4th largest oil producer.
- The oil sands accounted for around 3.1 million b/d or 61% of Canada’s total oil production in 2021.
- Conventional oil production has been declining but still accounted for 2 million b/d in 2021.
- Alberta is by far the largest oil producing province, accounting for 81% of Canadian production.
- Canada consumed around 2.3 million b/d of oil in 2020. This is estimated to rise to 2.6 million b/d by 2030.
- Ontario and Quebec account for over 50% of Canada’s oil demand.
This shows that while Canada produces a significant amount of oil, it is still not enough to meet domestic demand. Canada needs to import oil to supplement its own production.
Canada’s Oil Imports
In 2020, Canada imported around 1 million b/d of crude oil and refined petroleum products:
- 661,000 b/d of crude oil imports, mostly from the United States.
- 383,000 b/d of refined product imports such as gasoline and diesel.
So even though Canada can supply around 60% of its own oil needs from domestic production, it imported 40% from foreign sources in 2020.
| Year | Oil Production (million b/d) | Oil Consumption (million b/d) | Imports (million b/d) |
|---|---|---|---|
| 2020 | 5.2 | 2.3 | 1.0 |
| 2030 (projected) | 5.6 | 2.6 | 1.2 |
This table summarizes Canada’s oil supply/demand balance and import requirements in recent years and projected for 2030. It shows how Canada’s oil imports are expected to increase as consumption grows faster than domestic production.
Factors Limiting Canada’s Oil Production Growth
There are several factors that constrain Canada’s ability to significantly expand its oil production:
High Production Costs
Extracting oil from the Alberta oil sands requires large upfront capital investments and has operating costs that are substantially higher than conventional oil production. Break-even costs for a new oil sands project are estimated at around $65-75 per barrel. This makes new oil sands developments less economically attractive in a lower oil price environment.
Environmental Opposition
Further expansion of the Alberta oil sands faces strong environmental opposition in Canada and abroad due to its high carbon footprint. Oil sands production emits 3-4 times more greenhouse gases per barrel than conventional oil. The Canadian government has enacted a carbon tax and other climate policies that constrain oil sands growth.
Lack of Pipeline Capacity
There is a lack of pipeline capacity to transport increased oil sands production to domestic refineries and export markets. Several major pipeline expansion projects have been cancelled or stalled due to regulatory delays and environmental protests. This creates a bottleneck limiting oil supply.
Access to Tidewater
Canada currently relies on the United States as its primary oil export market. There is strong interest in diversifying Canada’s oil exports to Asian markets. But proposed pipelines to carry oil from Alberta to tidewater ports in British Columbia face opposition. Lack of coastal access limits Canada’s oil export capacity.
Potential for Offshore Oil Production
While Canada’s conventional onshore oil production has declined, there is significant potential to develop undiscovered offshore oil resources, particularly in the eastern Atlantic region:
- The Canada-Newfoundland and Labrador Offshore Petroleum Board estimates there are over 12 billion barrels of undiscovered oil off the coast of Newfoundland.
- Exploration drilling indicates large oil resources off Nova Scotia as well.
- Developing offshore production could add several hundred thousand barrels per day of Canadian oil supply.
- However, offshore drilling faces technical challenges and some local opposition.
While offshore oil would help reduce Canada’s imports, it is unlikely to fully offset declining conventional production over the long-term.
Outlook for Oil Sands Growth
Oil sands production is projected to continue growing, but the pace of expansion is expected to slow:
- The Canadian Association of Petroleum Producers (CAPP) forecasts oil sands output will grow from 3.1 million b/d currently to 3.8 million b/d by 2030.
- Longer-term growth faces constraints from high costs, lack of new pipeline capacity and environmental regulations.
- CAPP expects total Canadian oil production to plateau around 5.6 million b/d over the next decade.
Slower oil sands growth and flat total production signal Canada will become increasingly dependent on foreign oil imports to meet rising consumption, unless new discoveries are made.
Can Demand Reduction and Efficiency Reduce Imports?
Rather than relying on increased domestic supply alone, reducing Canada’s oil consumption through fuel efficiency and alternatives could curb import growth. Steps Canada could take include:
- Increasing fuel economy standards for vehicles to lower gasoline demand.
- Electrifying more vehicle fleets, including passenger cars, transit and commercial vehicles.
- Promoting biofuels such as ethanol and biodiesel to displace petroleum fuels.
- Incentivizing efficient building design, smart thermostats and energy audits to cut heating oil use.
- Investing in public transit and Smart Growth urban planning to reduce driving.
More ambitious demand reduction policies could make a major dent in forecasted oil consumption growth of 300,000 b/d by 2030. This would significantly curb the need for increased oil imports.
Conclusion
Canada produces substantial amounts of oil, particularly from the Alberta oil sands. However, production costs and constraints on new pipelines limit the potential for massive supply increases. With Canada’s oil demand continuing to grow, especially in the transportation sector, the country will remain reliant on imported crude and refined products to close the gap between domestic supply and consumption.
While new offshore production could help stabilize imports, Canada will need to prioritize oil demand reduction through vehicle efficiency, biofuels and conservation measures in order to curb its dependence on foreign oil over the long term. A balanced strategy of modest supply increases plus aggressive demand management will provide the optimal path for Canadian energy security and emissions reductions.