Alberta may be the king of Canada's oil and gas industry, but other resource rich provinces are stepping up the pace of development. While that's good news for he economy, Canada's ascent among the world's top energy producing nations is presenting new challenges for both the industry and the communities at the forefront of Canada's energy resource boom.
COAST TO COAST
With so much attention focused on the oil and gas boom in Alberta, it’s easy to overlook the significant contributions that several other regions make to Canada’s energy resource sector.
Saskatchewan for example, ranks second to Alberta in terms of production and is believed to have vast untapped reserves in the province’s southern region. British Columbia is Canada’s second largest producer of natural gas, and Atlantic Canada’s offshore oil production now exceeds 300,000 barrels a day.
According to the Canadian Association of Petroleum Producers (CAPP), which represents Canada’s upstream oil and gas industries – a group of about 140 companies that explore for, develop and produce oil and gas resources throughout Canada – capital spending on oil and gas projects outside of Alberta in 2006 totalled close to $12 billion compared to $27.2 billion for conventional projects in Alberta and another $14.3 billion on oil sands alone.
Oil and gas industry revenue in B.C., Saskatchewan, and Newfoundland and Labrador totalled nearly $25 billion in 2006 on production of 760,000 barrels a day of oil and 3.5 billion cubic feet a day of natural gas. By comparison, industry revenue in Alberta in 2006 was $79.6 billion on production of 1.84 million barrels a day of crude oil and equivalents and 13.2 billion cubic feet a day of natural gas.
With oil and gas prices skyrocketing, such data underscores the growing importance of the industry to regional economies outside of Alberta and highlights the opportunity for further exploration and development. But increased interest means new challenges for both the industry and the communities at the cutting edge of the energy resources boom.
Joseph Doucet, the Enbridge Professor of Energy Policy at the University of Alberta’s School of Business, says higher prices are making the other oil and gas-rich provinces more attractive to investors.
“To some extent, we are seeing a levelling of the playing field,” says Prof. Doucet. “For example, compared to Alberta, living costs in Saskatchewan are much lower, so people are moving to Saskatchewan to work in oil and gas – or moving back to that province if they had originally come to Alberta to work.”
Nevertheless, provinces such as Saskatchewan and B.C. still face significant shortterm challenges, such as competition from Alberta for resources including capital, construction material and labour.
In the longer term, Alberta’s trump card may be the oil sands, which Prof. Doucet points out is an industrial manufacturing process and not conventional oil production.
“When oil prices drop – as they will some day – we will see a decline in conventional activity as some of it becomes marginal, but that won’t happen with oil sands because it is being built for the long-term and price fluctuations will not have such an impact. The manufacturing process will go on independent of price variation. That will not happen with all conventional activities,” says Prof. Doucet.
Atlantic Canada on the other hand is in a different situation and faces challenges of its own.
“Managing relatively large projects in a small region can be a big challenge, especially when it comes to finding the expertise required in government, industry and on the environmental front to manage the development process.
Unlike the majors, local government and small firms do not necessarily have worldwide networks to draw upon.”
If there is one area of concern ubiquitous across all regions, it is the environment. “No oil and gas-related development can proceed in isolation without taking account of the environmental impact,” says Prof. Doucet.
Perhaps one of the best illustrations of how the industry is balancing environmental and economic interests is told in an article in CAPP’s 2007 Stewardship Report. It tells the story of how EnCana, one of Canada’s largest oil and gas producers, is sequestering carbon dioxide by injecting it under pressure into the company's aging Weyburn oilfield in Saskatchewan to displace the remaining oil in the reservoir.
The initiative not only got rid of unwanted CO2 from other producers by securing it underground for the next 5,000 years, but also added 30 years to the life of the field.
EnCana’s CO2 storage project in Weyburn is the world’s largest, full-scale scientific field study of its kind. It has become a global collaborative research and development project, attracting 15 industry sponsors and 25 research organizations from around the world, each contributing to the advancement of technologies to mitigate climate change.
While the project at Weyburn has been hailed an international success, with new federal regulations calling for the oil and gas sector to adopt carbon capture and sequestration technologies in the future, what remains to be seen is whether these systems may be viably deployed across Canada’s vast expanse.
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