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2007 Canadian Energy Overview - Questions and Answers

Canadian Energy Overview 2007 - Energy Market Assessment - May 2008

1. Why did the NEB prepare this report?

The report was undertaken as part of the Board's regulatory mandate. Ensuring that Canadians have timely and relevant energy information so they can make informed energy choices is part of the National Energy Board's strategic plan. The NEB monitors energy markets to objectively analyze energy commodities and inform Canadians about trends, events and issues.

2. What is the content of the report?

This report is a summary of major developments related to energy in Canada in 2007. It brings together data from publicly available information, Statistics Canada, NRCan, National Energy Board and provincial governments and agencies. Major developments related to energy included:

  • There was continuing volatility in global energy markets - rising crude oil prices and lower natural gas prices;
  • In 2007, the energy industry accounted for 5.6 per cent of Canada's Gross Domestic Product and 19.7 per cent ($90.0 billion) of the total value of Canadian exports;
  • Total oil and gas capital expenditures fell by 10 per cent to an estimated $48 billion;
  • Oil sands spending is estimated to have jumped by 17 per cent to $18 billion;
  • Average crude oil production increased by seven per cent to 448 128 m3/d (2.8 MMb/d);
  • The value of crude oil exports surpassed the value of natural gas exports. Net crude oil export revenue which is estimated at roughly C$26 billion exceeded the value of net natural gas export revenue of C$24 billion;
  • Total Canadian natural gas production averaged 475 million m3/d (16.8 Bcf/d) or roughly 2 per cent less than 2006 production levels; and,
  • Canada exported approximately $3.1 billion of electricity and imported a total of $1.0 billion in 2007. Favourable water conditions in hydro-generation provinces contributed to strong electricity trade.

3. Why was the price of oil so volatile in 2007?

A number of key events shaped the crude oil market in 2007. Geopolitical risks in Iraq, Nigeria, Iran and other producing regions; robust oil demand growth; increasing finding and development costs; continuing tight production and refining capacity; and the depreciating American dollar all contributed to the rising cost of crude throughout 2007.

By November crude oil hit a record $99.29 per barrel on the New York Mercantile Exchange, a 72 per cent jump over prices at the beginning of 2007. By the end of year, oil was trading at just over $95 per barrel. The average price in 2007 was around $72 per barrel.

4. Why does the price of natural gas fluctuate so much?

The price of natural gas is particularly sensitive to real and anticipated weather conditions which can cause large price swings. Requirements for natural gas to provide residential heating in the winter, and natural gas used to generate electricity for light, heat and in the summer to run air conditioners are directly related to the severity of the weather. Canadian and U.S. natural gas markets operate as one large integrated market, with Canadian gas production connected to the North American market through a network of pipelines stretching across the continent. This means that events in any region, such as a bitterly cold day in Montreal or Boston, can affect the price of gas in other regions. As well, natural gas prices are generally influenced by the price of crude oil. Therefore, as crude oil prices increase, natural gas prices can be expected to climb.

5. What's ahead for the natural gas market in Canada?

In the coming years, North American demand for natural gas is expected to outpace the growth in domestic supplies. Much of this growth in Canadian demand for natural gas will come from oil sands development in Alberta and new gas-fired electrical generation in Ontario. To meet the growing North American demand for natural gas, it is expected that liquefied natural gas (LNG) will become an increasingly important component of the supply mix. LNG import capacity into North America is being significantly increased, including the construction of the first Canadian import terminal in New Brunswick.

6. How much natural gas is headed for the oil sands?

One of the fastest growing sectors for natural gas consumption is the Alberta oil sands. Oil sands projects used nearly 32 million m3/d (1.13 Bcf/d) of natural gas in 2007; more than three times the amount of gas used in 2000.

Although the industry is a large natural gas user, efforts are under way to reduce its dependence on this fuel. While natural gas demand in oil sands applications is expected to increase, it does not increase at the same rate as oil sands production.

7. What are jurisdictions across Canada doing to develop renewable technologies?

In 2007, total Canadian electricity generation grew to 600 terawatt hours. More than 60 per cent of that electricity generation came from hydroelectric generation.

Wind generation capacity increased to 1,770 megawatts, an increase of more than 300 megawatts from 2006. According to the Canadian Wind Energy Association, this is enough energy to power 537,000 homes.

The environment continued to be at the forefront of government policy actions. For example, the Federal Government announced in January 2007 that it would invest $230 million over four years in the ecoEnergy Technology Initiative, a plan intended to promote the development of clean energy technologies.

Furthermore, many of the provinces released plans for conservation initiatives in 2007 as a means of managing their supply and demand balance.

 

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Date Modified:
2011-10-28