Market Snapshot: Reliance of Canadian energy producers on U.S. markets varies by commodity

Release date: 2017-05-24

The United States (U.S.) is a key market for all Canadian energy producers, but the degree of U.S. reliance varies. In 2016, 79% of Canadian crude oil production was exported to the U.S. – the highest percentage in ten years. Most Canadian natural gas production is also sent south of the border, although this share dropped from 63% in 2007 to 55% in 2016. For natural gas liquids (NGLs), exports to the U.S. have fluctuated over the last decade, but typically accounted for about half of Canadian production. Finally, the share of Canadian electricity generation exported to the U.S. is the smallest of all commodity types, but grew from 8% in 2007 to 11% in 2016.Footnote 1

Source and Description

Source: Commodity exports, crude oil production, natural gas production, NGL production (internal data), electricity generation

Description: This line graph shows the share of Canadian production exported to the U.S. by commodity type from 2007 to 2016. In 2007, 65% of crude oil was exported to the U.S., rising to 79% by 2016. Similarly, 8% of electricity was exported to the U.S. in 2007, increasing to an estimated 11% in 2016. The share of Canadian natural gas production exported to the U.S. has decreased from 63% in 2007 to 55% in 2016. Approximately half of Canadian NGL production was exported to the U.S. during the same time frame, fluctuating between 53% in 2007 and an estimated 44% in 2016.

The growing share of Canadian crude oil production exported to the U.S. is due to several factors. Canadian oil production has been growing strongly while Canadian demand has grown at a much slower pace. This has resulted in overall Canadian crude exports growing significantly from 2007 to 2016. Further, U.S. refineries in the Midwest and Gulf Coast have reconfigured their facilities to process increasing Canadian production of heavier crudes.

For natural gas, the rapid growth in shale gas production commencing about a decade ago increased U.S. domestic production and decreased the need for Canadian imports to meet U.S. demand, especially in the U.S. northeast. Similarly, rapid development of liquids-rich shale gas in the U.S. has also reduced U.S. demand for Canadian NGLs. As a result, the percentage of Canadian natural gas and NGL production exported to the U.S. has declined over the last decade.

The percentage of Canadian-generated electricity being exported to the U.S. increased slightly in the last 10 years in part due to slow growth in Canadian demand. In addition, Canadian sales of electricity to the US rose to satisfy U.S. state and federal policies to increase electricity consumption from renewable sources. However, electricity remains by far the most domestically-oriented energy sector within Canada.

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