according to U.S. EIA, 2017
First fields In 1858 James Miller Williams dug the first oil well in North America at Oil Springs, Ontario, preceding Edwin Drake who drilled the first one in the United States one year later. By 1870 Canada had 100 refineries in operation and was exporting oil to Europe. However, the oil fields of Ontario were shallow and small, and oil production peaked and started to decline around 1900. In contrast, oil production in the United States grew rapidly in the first part of the 20th century after huge discoveries were made in Texas, Oklahoma, California and elsewhere.
Turner Valley era In 1914,
Turner Valley became the first significant field found in Alberta. Eastern Canadian investors and the federal government showed little interest and the field was developed primarily by subsidiaries of U.S. companies. It was originally believed to be a gas field with a small amount of
naptha condensed in the gas, but due to the lack of regulations, about 90% of the gas was
flared off to extract the small amount of petroleum liquids, an amount of gas that today would be worth billions of dollars. In 1930, crude oil was discovered in the Turner Valley field, below and to the west of the gas cap. This came as a shock to geologists because the free gas cap, which could have provided the reservoir drive to produce the oil, had largely been produced and flared off by that time. As a result, less than 12% of the original oil in place at Turner Valley will ever be recovered. The Alberta provincial government became upset by the conspicuous waste so in 1931 it passed the Oil and Gas Wells Act, followed in 1932 by the Turner Valley Conservation Act. However, the federal government declared both Acts unconstitutional, and the wasteful burning of natural gas continued. However, in 1938 the provincial government established the Alberta Petroleum and Natural Gas Conservation Board (today known as the
Energy Resources Conservation Board) to initiate conservation measures, and this time was successful in implementing it. This body was the regulator of oil and gas production in Alberta, and therefore of most production in Canada. As the provincial regulatory authority with the most experience in the industry, it became a model for the other oil and gas producing provinces - indeed, it has been used as a model by many national petroleum industries around the world.
Post-war discoveries and development At the end of World War II, Canada was importing 90% of its oil from the U.S. The situation changed dramatically in 1947 when
Imperial Oil drilled into a peculiar anomaly on its newly developed
seismic recordings near the then-village of
Leduc, Alberta. The
Leduc No. 1 well identified a
large oil field, and provided the geological key for other important discoveries within Alberta. Geologists soon began to identify and drill other
Devonian reefs, mostly in the north-central portion of the province. The Alberta oil rush began, and drillers quickly began to identify other important oil-bearing formations like the one hosting the giant Pembina oilfield. The Leduc discovery and the string of even bigger ones that followed rapidly backed imported oil out of the Canadian prairies and produced a huge oil surplus which had no immediate market. In 1949, Imperial Oil applied to the federal government to build the
Interprovincial Pipeline (IPL) to
Lake Superior, and in 1950 it was completed to the port of
Superior, Wisconsin. Many people questioned why it was built to an American port rather than a Canadian one, but the federal government was more interested in the fact that oil exports completely erased the country's trade deficit. In 1950 the federal government approved a western pipeline, and in 1953 the
Transmountain Pipeline was built from Edmonton to the port of
Vancouver,
British Columbia, with an extension to
Seattle,
Washington. The IPL was extended via
Sarnia,
Ontario, to
Toronto by 1956 and became, at , the world's longest oil pipeline at that time. Extensions were built to
Chicago and other refinery locations in the
Midwestern United States during the 1960s, which improved US energy security.
National Oil Policy (1964) Alberta oil producers found that they were receiving better treatment from the US government than from the Canadian government. US energy policy during the Cold War gave preference to Canadian oil and treated Alberta as if it were a US state, as the location of Alberta's vast oil fields made them more secure from attack than the major US oil fields in Alaska, California and Texas. The Alberta producers asked the federal government for exclusive access to the Eastern Canadian oil market, although they calculated that they could not deliver Alberta oil to Montreal for less than the price of imported oil. The Montreal-area refineries and the Quebec government balked at this, resulting in the National Oil Policy of 1961. This drew a dividing line at the Ottawa River and gave Canadian producers exclusive rights to sell oil to the west of the line. Only the refineries east of the line could continue to process imported oil. Not everyone was happy with the arrangement. The aim of the National Oil Policy was to promote the Alberta oil industry by securing for it a protected share of the domestic market. Under the policy, Canada was divided into two oil markets. The market east of the Ottawa Valley (the Borden Line) would use imported oil, while west of the Borden Line, consumers would use the more expensive Alberta supplies. For most of the 1961–1973 period, consumers to the west paid between $1.00 and $1.50 per barrel above the world price, which, just before the 1973 OPEC oil embargo and price increase, stood at around $3.00. They also paid proportionately higher prices at the pump than Canadians east of the Borden line.
Government energy companies In 1970, Quebec created a provincially owned petroleum company called SOQUIP. A year later, the
Gordon Commission's nationalist flavour found practical expression with the creation of the
Canada Development Corporation, to "buy back" Canadian industries and resources with deals that included a takeover of the Western operations of France's Aquitaine and their conversion into Canterra Energy. Also in 1971, the federal government blocked a proposed purchase of Canadian-controlled Home Oil by American-based Ashland Oil. The wave of direct action spread to Alberta when Premier
Peter Lougheed and his Conservatives won power in 1971, ending 36 years of
Social Credit rule. Lougheed's elaborate election platform, titled New Directions, sounded themes common among OPEC countries by pledging to create provincial resources and oil growth companies, collect a greater share of energy revenues, and foster economic diversification to prepare for the day when petroleum reserves ran out. The idea of limited resources emerged from the realm of theory into hard facts of policy when the NEB rejected natural-gas export applications in 1970 and 1971, on grounds that there was no surplus and Canada needed the supplies. The strength of the new conservationist sentiment was underlined when the NEB held its position despite a 1971 declaration by the federal
Department of Energy that it thought Canada had a 392-year supply of
natural gas and enough oil for 923 years.
Energy crises (1973 and 1979) In 1973, this situation changed abruptly. The Canadian government had already begun to change its energy policy. Inflation had become a national problem and oil prices were rising, and on 4 September 1973 Pierre Trudeau asked the western provinces to agree to a voluntary freeze on oil prices. Nine days later, his government imposed a 40-cent tax on every barrel of exported Canadian oil. The tax equalled the difference between domestic and international oil prices, and the revenues were used to subsidize imports for eastern refiners. At a stroke, Ottawa began subsidizing eastern consumers while reducing the revenues available to producing provinces and the petroleum industry. Alberta premier Peter Lougheed soon announced that his government would revise its royalty policy in favour of a system linked to international oil prices. Two days later, on 6 October, the Yom Kippur War broke out. OPEC used the conflict to double the posted price for a barrel of Saudi Arabian light oil, to US$5.14. Saudi and the other Arab states then imposed embargoes on countries supporting Israel, and oil prices rose to $12. These events aggravated tensions among provincial, federal and industry leaders. The rest of the 1970s were marked by rapid-fire, escalating moves and counter-moves by Ottawa, Western provinces and even Newfoundland. The atmosphere was one of urgency, alarm and crisis, with global conflicts adding gravity to the federal-provincial quarrelling. In 1979–1980, further crises in the Middle East led to panic-driven pricing. The
Iranian Revolution came first. War between that country and Iraq soon followed. Oil prices more than doubled, to US$36 per barrel.
National Energy Program (1980–1985) Introduced by the Liberal government under
Pierre Trudeau on 28 October 1980, the controversial
National Energy Program (NEP) had three objectives: energy self-sufficiency; redistributing wealth from a non-sustainable resource to benefit the country as a whole; and increased ownership of the oil industry by Canadians. where oil and gas production are concentrated. The second problem was that provincial governments, rather than the federal government, have constitutional jurisdiction over natural resources. The Government of Alberta actually owned most of the oil in Canada. This provoked a confrontation with the government of Alberta, since any reduction in oil prices came directly out of Alberta government revenues. The conflict was made worse by the fact that the Alberta government had constitutional mechanisms available to it by which it could remove oil from federal taxation and shift the costs of oil subsidies onto the federal government. This increased the federal government deficit. The National Energy Program had a number of other flaws. It was based on a world price steadily increasing to $100 per barrel. The world oil price declined to as little as $10 per barrel in the years following. Since the federal government based its spending on the larger figure, the result was that it spent a great deal of money on subsidies that could not be recovered in taxes on production. Furthermore, due to proximity to the U.S. market companies had opportunities to make money by playing differentials in prices. For instance, refiners in Eastern Canada would import oil subsidized down to half the world price, refine it into products, and export the products to the U.S. at full world price. Airlines flying between Europe and the U.S. via the polar route would take off with as little fuel as possible, and stop briefly in Canada to fill up before continuing on to their destination. Trucking companies operating between locations in the Northern U.S. would detour their trucks through Canada to refuel. None of these transactions was illegal, or even unusual considering the integrated nature of the economies, but all had the effect of transferring billions of Canadian tax dollars to the balance sheets of (mostly foreign owned) companies. A third flaw was that the NEP assumed that future oil discoveries would be made in areas under federal jurisdiction, such as the Arctic and offshore. As it turned out, most of the major oil discoveries in Canada had already been made, and the subsidies given by the federal government to companies exploring in federal jurisdiction were not productive. All of these flaws resulted in large, and unexpected, increases in the federal budget deficit. The final result of the NEP was that the federal government failed to keep fuel prices low while incurring financial losses. In the subsequent election in 1984, the governing Liberal party was defeated. The winning Progressive Conservative party dismantled the policy a year after its election.
Petro-Canada In 1975 the Liberal government reacted to the 1973 oil crisis by creating a federally owned oil company,
Petro-Canada. The
Crown corporation was originally developed to be an "eye on the petroleum industry" during a period of perceived
energy crisis. Initially, its assets consisted only of the federal government's share of the
oil sands company
Syncrude and the Arctic oil explorer
Panarctic Oils. However, the government quickly expanded it by buying the Canadian assets of foreign-owned oil companies, such as
Atlantic Richfield in 1976,
Pacific Petroleums in 1979,
Petrofina in 1981, the refining and marketing assets of
BP in 1983 and of
Gulf Oil in 1985. Federal ownership brought Petro-Canada into conflict with the provincial governments which had control over the largest and lowest cost oil production in the country. They objected to federal intrusion into their constitutional jurisdiction, and tried to block federal incursions. For instance, when Petro-Canada attempted to buy
Husky Oil in 1978, the Alberta government surreptitiously got control of Husky stock through
Alberta Gas Trunk Line, and successfully blocked the takeover. In 1979 Petro-Canada acquired
Westcoast Transmission Co. Ltd. and Pacific Petroleums Ltd., its parent company, as a fully integrated oil company for the then-record purchase price of $1.5 billion. Petro-Canada overestimated the future price of oil, and consequently paid high prices for the oil assets it acquired, which subsequently fell considerably in value. Its assumption that big new oil discoveries would be made in the Arctic and off the Atlantic coast turned out to be incorrect. Petro-Canada has since abandoned all the wells Panarctic drilled, and the discoveries it did make off the Atlantic coast were fewer, more expensive, and took longer to develop than expected.
Hibernia did not produce oil until 1997 and
Terra Nova until 2002. The government also expected Petro-Canada to force down what it considered the high price of gasoline to consumers, but Petro-Canada's oil production was more expensive and its oil refineries less efficient than those of the competing multi-national companies, and it found itself losing money on all aspects of the oil industry. When the
Conservatives replaced the
Liberals in power in 1984, they began to reverse the nationalization process. In 1991, they passed legislation allowing privatization and began selling shares to the public. The Liberals returned to power in 1993, but had lost interest in having a
national oil company, and continued the privatization process. In 1995 the federal government reduced its interest to 20 percent, and in 2004 sold the remaining shares. Petro-Canada has done better since privatization because
oil price increases since 2003 make its high-cost production profitable, and consolidation of its refining operations to fewer but larger refineries reduced its downstream costs even as prices increased. On 23 March 2009, Petro-Canada and
Suncor Energy announced they would merge to create Canada's largest oil company. At the time of the announcement, combined
market capitalization of the two corporations was $43 billion. The merged organization would operate under the Suncor name, but would use the Petro-Canada brand in its retail operations. The companies estimated that the merger would save $1.3 billion per year in capital and operating costs, and said that the larger company will have the financial resources to move ahead with the most promising oilsands projects. ==Non-conventional oil==