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In a low cost environment for both oil and natural gas, the future of Canada’s conventional oil and gas development is being questioned. The last two years have seen significant declines in drilling and production as Canadian supply costs are high relative to the commodity prices.
CERI’s “Canadian Crude Oil and Natural Gas Production and Supply Costs Outlook (2016 – 2036)” breaks down drilling and production forecasts as well as supply costs across the various producing regions in Canada. Total natural gas production is expected to start to rise by 2019 as the price of gas increases and drilling rates overcome well decline rates. The rise in the gas production is totally dependent on whether LNG projects will be constructed. While oil prices are expected to rise as well, conventional crude production is expected to drop slightly and remain stable throughout the study period, as growth is concentrated in the oil sands. The Western Canadian Sedimentary Basin will see the vast majority of both natural gas production and conventional crude oil production, however, offshore Newfoundland will contribute approximately one-tenth of the crude oil over the study period.
Briefing Paper Released June 2016
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The economy and energy supply system of any jurisdiction are linked in a complex way, forming direct and indirect connections among different sectors of the economy. The objective of this research project is to develop a hybrid energy input output (EIO) model of the Canadian economy to provide a systematic framework to estimate the embodied energy of products and also to understand the structural relationship between energy systems and the general economy.
The EIO model was developed by extending the economic input-output model of the Canadian economy developed and maintained by Statistics Canada. The model is capable of producing useful information to answer energy policy questions such as estimation of embodied energy of goods and services, energy intensity of consumption decisions, and energy intensity of trade. This paper presents the EIO framework and details of implementing an EIO model of the Canadian economy. Some illustrative results, a scenario forecast based on current greenhouse gas policies and a discussion of the strengths and limitations of the model are also presented.
Study Released June 2016
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The Canadian natural gas market has been heavily impacted by the shale boom out of the United States, leaving many in the industry to wonder what is ahead for producers. With current depressed natural gas prices, many drilling areas that were previously profitable are no longer economically attractive. Canadian drilling and production, particularly in the Western Canadian Sedimentary Basin, has dropped off significantly since 2012.
CERI’s “Canadian Natural Gas Market Review” shows that despite the current reduction in Canadian activity, the Canadian industry will see growth from its current levels due to the advances in horizontal drilling that enabled the shale boom, rebounding prices and growing demand for natural gas in both Canada and the United States. While the market for natural gas from Western Canada will remain impacted by the high levels of growth out of American shale plays, Canada will remain a net exporter of natural gas throughout the duration of the 20-year study period.
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Market access for oil production includes available refinery capacity for Canadian heavy oil exports to the US. Canadian heavy crude oil competes for market share in the US Gulf Coast (USGC) with heavy crude oil from Latin American producers, mainly Mexico and Venezuela. Over the past 10 years, heavy crude imports from Mexico and Venezuela have decreased leaving space for Canadian producers to establish a new market share in the Gulf. If oil sands could displace most of the Mexican and Venezuelan imports, the opportunity for bitumen blends and heavy oil would be about 1.5 MMbpd.
CERI’s latest study reveals the dynamics of the US Gulf Coast refining sector and how much Canadian heavy crude oil can be exported to the USGC. Success in this competition is important for the long term economic health of the Canadian heavy oil industry.
Released February 2016
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The decline in crude oil prices over the last year and a half is one of the most complex shocks for any economy and one that is important to measure and understand. This report measures potential impacts on the Canadian economy if low oil prices persist into the future. At the global macro level, the positive effects of a decrease in crude oil price on energy-importing countries will likely more than offset the negative effects on exporting countries resulting in a net positive impact on global growth. For exporting countries, like Canada, however, the real complexity appears beneath the surface, where the drop in commodity prices mobilizes sectoral and regional forces that can take years to play out. These include higher consumer spending in response to lower energy costs, lower spending due to higher prices on imported goods and services (as a result of the falling Canadian dollar), falling investment and employment in the economy’s resource sector, and rising investment and employment in the non-resource sectors.
The purpose of this report is to present economic impacts on the Canadian economy stemming from two short-term scenarios, spanning 7 years: a Reference Case, where the oil prices are forecasted to grow from current levels to almost $73.00 per barrel (in 2014 dollars) and a Low Case, where oil prices reach only $51.00 per barrel by 2021. The modelling of these impacts is done using CERI’s Input-Output model to measure the impacts on major macroeconomic variables such as GDP, employment and tax revenues. The modelling results indicate that the net effect of low crude oil prices on Canada is negative. And as a rule of thumb, for every Canadian dollar gain in WTI price, Canadian GDP would gain almost $1.7 billion, on average.