Last week, Michael Holden highlighted some of the information and key findings of the Canada West Foundation’s recently released publication, State of the West: Energy – 2012: Western Canadian Energy Trends, in a blog focusing on energy production in the region. This week, he continues his summary of those findings with a discussion of energy trade and transportation in Part 2 of the “State of the West: Energy” blog series.
Western Canada produces energy far in excess of the region’s needs. While some of this surplus energy is shipped to other provinces, most is exported abroad. As a group, the western provinces exported $88.9 billion in energy products in 2011, accounting for 77.5% of Canada’s overall energy exports that year. A full 100% of Canada’s coal exports, 95.4% of its natural gas exports and 91.6% of its crude oil exports came from the West that year. However, the region contributes a relatively small share of Canada’s refined petroleum and electricity exports—31.4% of the former and 9.6% of the latter in 2011. Most of Canada’s refined petroleum exports originate in New Brunswick, while most electricity sales come from Quebec and Ontario.
Not only is western Canada the source of most of the country’s energy exports, but energy itself makes up a large and growing share of the region’s total export mix. In 2001, energy products accounted for 44.8% of total merchandise exports from the western provinces. By 2011, this share had risen to 52.7%.
Unsurprisingly, Alberta accounts for the vast majority of western Canada’s energy exports. Of the region’s $88.9 billion in energy exports last year, $67.2 billion came from Alberta. Saskatchewan and BC are also major energy exporters. At $10.5 billion in exports in 2011, Saskatchewan is Canada’s third largest provincial exporter (behind Alberta and New Brunswick), while BC sits in fourth position at $10.0 billion. For its part, Manitoba’s energy exports totalled $1.2 billion in 2011.
Energy exports from each of the western provinces tend to be dominated by one or two specific products, which vary across the region. In BC, coal is by far the province’s largest energy export, although most of that coal is used in smelting operations and not to generate electricity. Coal and natural gas—BC’s second largest energy export—together made up 90.1% of the province’s energy exports in 2011.
In Alberta, crude oil and natural gas are the largest energy exports, together making up 93.5% of total energy sales abroad. For its part, Saskatchewan’s energy exports are almost exclusively comprised of crude oil (95.4% of energy exports) while in Manitoba, crude oil and electricity are the largest exported energy commodities. Crude oil and electricity made up 90.7% of Manitoba’s energy exports in 2011.
The overwhelming majority of the region’s energy exports go to US markets. The US accounts for 100% of the West’s natural gas and electricity exports and more than 99% of international crude oil sales. Coal is the only form of energy produced in western Canada that is exported largely to non-US destinations. The relative ease of shipping coal compared to other fuels, in combination with abundant coal reserves in the US, means that only about 5.3% of western Canadian coal exports went to the US in 2011. Most went to Japan, South Korea and China. It is also worth noting that, while not a direct energy product itself, uranium from Saskatchewan is also largely sold outside the US.
Western Canada’s energy-related transportation infrastructure has been developed almost entirely to serve the US market. In the case of electricity, most major electricity transmission lines across Canada, including in the West, run north-south and not east-west. Because of this lack of infrastructure, as well as barriers associated with provincially-regulated electricity markets, there is relatively little interprovincial trade in electricity in western Canada.
Similarly, most natural gas pipelines in the western provinces are directly linked to the main distribution hubs in the US. The same is true of virtually all oil pipelines; the only crude oil pipeline directly linking western Canadian crude oil to Ontario, Quebec or the Atlantic provinces runs through the US. At present, eastern provinces consume imported petroleum products while western Canadian oil is piped almost exclusively to the US. However, price differentials between western Canadian and foreign crude oil may trigger pipeline reversals at some point in the near future, sending western Canadian oil to eastern provinces.
There is only very limited capacity to export western Canadian energy to non-US markets. It is impractical to export electricity to any other country; there are no pipelines to deliver natural gas to the West Coast (or facilities in place to convert natural gas into liquid form for overseas transport); and there is only very modest pipeline capacity in place linking Alberta and Saskatchewan oil producers to BC shipping terminals.
It’s important to note that energy trade in western Canada is not simply about exports. Each of the western provinces also imports energy, and in some cases they import more than they export. In particular, the region is a net importer of refined petroleum, in spite of its large production volumes and exports of crude oil. In 2011, western Canada imported a record $5.9 billion in refined petroleum products, compared to exports of $1.7 billion. BC was by far the largest importer in the region, with purchases totalling $3.6 billion. Alberta accounted for most of the remainder, with imports of $1.9 billion. Alberta and Saskatchewan are also net importers of electricity, although for the region as a whole, those imports are balanced out by net exports from Manitoba and BC.
– By Michael Holden