By Sue Kleemann

When Canada is mentioned to those of us in the United States, we see images of wide-open prairies, snow-covered mountain ranges, and modern cities. The phrase “energy powerhouse” does not usually come to mind. Yet Canadian energy resources can be described by three adjectives — abundant, diverse, and secure — words that define Canada’s position as one of the top energy producers in the world.
Canada is not the cheapest supplier of energy, but its oil, natural gas, and coal reserves, its developing industry in renewable resources, and its economic and political climate make it one of the world’s most desirable energy suppliers. The steadily expanding production from Canada’s huge reserves is fostered by a political climate that encourages sustained, responsible resource development. Canada has a long-standing, stable government with a mature legal system, a reasonable tax structure, a system of commerce built on a respect for contracts and property rights, and other protections that attract both energy buyers and foreign investors as they search for reliable future energy supplies.
Production from Canadian energy resources, even at anticipated expanded rates, is sustainable for decades. To meet demand for energy that is expected to increase by 50 percent worldwide in the next 25 years, Canada can draw from conventional gas reserves of as much as 350 trillion cubic feet (Tcf), an additional 200 Tcf of coalbed methane (natural gas from coal), and at least 200 billion barrels of oil, most of it extracted from oil sands. Add coal reserves of about 45 gigatonnes and a vibrant, environmentally conscious, renewable resource energy industry and Canada is unmatched in the size and variety of its energy products.
The United States and Canada have a history of sharing energy resources and investment. Canada is the largest foreign U.S. energy supplier, satisfying nearly one fifth of its natural gas demand and providing more than 15 percent of its oil imports. The electric grids of both countries are closely linked, and New England’s utilities rely on electricity from Quebec hydropower. The relationship is becoming even closer, especially in the Pacific Northwest, where tight supplies and growing demand have increased the need for Canadian energy.
While noting the potential of at least 175 billion barrels of economically recoverable resource, Greg Stringham, vice president of Markets and Fiscal Policy at the Canadian Association of Petroleum Producers (CAPP), emphasizes the close relationship: “Canada is the largest supplier of crude to the U.S. and wants to remain the most stable, friendly, reliable, and secure supplier of oil to North America. The close proximity to the U.S. market reduces transportation costs and increases reliability and security…[Our] free-trade agreements just enhance that relationship.”
Much of Canada’s recent emergence as a major energy player is the result of new technologies — many developed by Canadian firms — that permit the development of unconventional resources such as crude oil production from oil sands and the extraction of natural gas from coal beds. The investment by the Canadian energy industry in new technologies has revitalized some conventional energy resources and created new interest and investment in nontraditional resources.

Oil: New reserves are a powerful economic engine for Canada.
Canada became the world’s eighth-largest crude oil producer in 2005, and its ranking is expected to rise as oil is extracted from oil sands, a nontraditional source for oil. Oil sands are found primarily in northeastern Alberta in the Athabasca region, an area larger than the state of Florida. The oil sands contain bitumen, a viscous hydrocarbon mixture (once considered a sticky nuisance and used as a mosquito repellant) that is extracted by either mining or using in-situ technologies to produce a synthetic crude oil. Only 20 percent of the oil sands are relatively close to the surface and can be mined; the remaining 80 percent of the reserve must be extracted using in-situ technologies. Technology changes in the late 1990s were key to unlocking these deeper oil sands. In-situ techniques use injected steam to lower the viscosity of the bitumen, allowing it to be extracted by producing wells while the sand is left in place.
Canada also has abundant conventional oil reserves. Oil production in Atlantic Canada alone continues to be an important part of the Canadian supply picture producing about 300,000 barrels per day (b/d). However, crude from oil sands is becoming the dominant product. In 2005 Alberta’s oil sands were the source of about 58 percent of the province’s total crude oil production, and about 39 percent of all crude oil produced in Canada. Long-term projections suggest Canadian crude oil production will grow to 4.5 million b/d by 2015, with 3.4 million of that total from oil sands. CAPP’s Stringham describes the process:
“Canada’s conventional oil and natural gas resources are about 10–15 years less mature than the conventional basins of Texas and Oklahoma in the United States. While our conventional oil production is starting to decline, the investment anticipated in production from unconventional (well not really ‘un’ anymore) oil sands is growing rapidly,” Stringham says. “We currently produce about 1.1 million b/d from the oil sands (out of Canada’s total production of 2.5 million b/d) but $100 billion in oil sands projects both under way and announced will conservatively see the oil sands production double in five years and triple in about 10 years.”
The potential for new investment is enormous. At least 300 billion barrels of crude oil are estimated to be recoverable from Canadian oil sands, compared to about 260 billion barrels of proven reserves in Saudi Arabia. Foreign countries already have decided that energy production from Canadian resources is a sound long-term investment. According to CAPP, the share of foreign-owned production currently is close to 50 percent and is not expected to decline. This includes both 100 percent foreign-owned companies as well as the share of the Canadian companies that are foreign-held. While many countries participate, including France, Japan, China, and Norway, most of the foreign investment now comes from the United States.
Investment also is occurring in the United States to accommodate Canadian crude. U.S. refineries such as ConocoPhillips are banking on Canadian oil from oil sands and are making the long-term investment of retooling their plants to accommodate its different properties.

Natural Gas: Technology is increasing reserves and boosting production.
Canada is the third-largest producer of natural gas, behind Russia and the United States. Canada’s natural gas reserves are a little more evenly distributed than its oil reserves but most reserves are still found in the West, primarily in Alberta, British Columbia, and Saskatchewan in the Western Canada Sedimentary Basin. Smaller amounts are found in Manitoba, the Northwest Territories, and the Yukon. Eastern Canada also has some resources, primarily offshore.
According to Eric Cline, Saskatchewan’s Minister of Industry and Resources, the province “is endowed not just with a wealth of natural and manmade assets, but equipped with the people, skills, and ideas to make the very most of them.”
The new technology driving the exploration of natural gas resources is one that extracts natural gas from coal, also called coalbed methane. Keeping up with world demand for natural gas depends on further developing these unconventional resources. In 2006, about 4,000 coalbed methane wells were drilled. However, record land sales in Alberta last year suggest that future well development is imminent.
The pace of exploration and development will be further accelerated by future technology improvements. The Alberta Research Council currently is developing an enhanced natural gas recovery process that can pump carbon dioxide into coal beds, simultaneously reducing greenhouse gas emissions and forcing out more natural gas. At current production rates of 6.3 Tcf per year, current known reserves now contain enough natural gas for at least 75 years of domestic demand and exports. The United States depends on these natural gas exports, with 85 percent coming from Canada.

Coal: This is the old reliable energy standby with new possibilities.
Canada is ranked tenth in the world in total proven coal reserves with Alberta’s 33.6 gigatonnes representing 70 percent of Canada’s total 45-gigatonne reserves. Because of its association with greenhouse gas emissions and other pollutants, coal has fallen into disfavor as source of energy. However, Alberta coal is generally considered to be a low-sulfur coal, and new technologies now being implemented — such as coal gasification and coal liquefaction — could reduce the coal emissions levels to those of other fossil fuels.

Renewable resources are enhancing Canadian energy supply security.
Canada’s energy resources extend beyond fossil fuels. It has made large investments in the development of renewable resources both for their environmental benefits and to intelligently conserve its large, but still limited, fossil fuel reserves. Although Canada has made investments in most types of renewable resources, including solar, tidal energy, and geothermal, most of the development is occurring in wind energy, hydropower, and biofuels.

Hydropower: Abundant hydropower can be found in most provinces across Canada; in some it is the principal source of electric power. Manitoba has nearly 5,000 megawatts (MW) of developed capacity and generates sufficient power to meet its own needs and export about a half billion dollars of electricity to Ontario, Saskatchewan, and the United States.
Ontario Power Generation (OPG) provides about 70 percent of Ontario’s electric generation and is investing, on its own and with partners, an average of $95 million per year to maintain and enhance hydroelectric capability. OPG has at least 18 hydro projects in various stages of development from concept to execution. This development is part of a 20-year plan to increase Ontario’s energy production from renewable resources.
The potential for investment in this mature technology is huge. The Ontario Ministry of Energy estimates that in the past three years alone, Ontario’s additions to its renewable energy generation capacity brought in $3 billion in new investment. Paul Norris, president of the Ontario Waterpower Association, is enthusiastic: “Hydropower has been and continues to be a key component of Ontario’s generation mix… Each new opportunity builds industry and investment confidence.”
Wind: By 2012, it is estimated that there will be about 5,600 MW of installed wind capacity at a total investment of more than $8 billion, a tenfold increase over the current 590 MW. Six provinces and the Yukon have wind energy production facilities. While Canada now imports most of the large turbines for wind generation, which comprise about 70 percent of the cost of producing wind energy, it has begun to invest in facilities, such as one for a Quebec firm that manufactures rotor blades, to produce these necessary components.

Bioenergy: With five bio-gas plants already commissioned and potentially 10 more on the way, Alberta is a leader in Canadian bioenergy production. Bio-gas is the production of methane from animal waste and plant residues and is important not only to meet future fuel requirements in a sustainable and environmentally friendly manner, but also as a way to recycle farm wastes and provide income for rural communities.
Other provinces are recognizing the multiple benefits of bioenergy production such as Ontario, where projects using landfill methane are encouraged. The Keele Valley Landfill Site, located in Vaughan, Ontario, is one of the world’s largest gas-to-energy projects, providing nearly 33 MW of sustained energy to the Ontario grid.

It isn’t just the huge array of Canadian resources that makes Canada such a sought-after energy supplier, but also its worldwide reputation for being a good trading partner and its careful attention to responsible resource production. Add to that an openness to foreign investment and Canadian energy production is also a choice investment opportunity, now and in the future.