Canada’s Love/Hate with Shale

By The Bakken magazine staff | May 24, 2013

Unconventional oil or gas produced from shale formations like the Bakken, are helping and hindering Canada’s economy. Oil production in the Saskatchewan portion of the Bakken will create roughly 7,000 new jobs in Regina by 2016, according to a report by the Bank of Montreal. Because of investment by local businesses and new operations to purchase new equipment, expand or hire, John MacAulay, senior vice president of BMO, says, “The best is yet to come,” for the southern Saskatchewan cities of Regina and Saskatoon. The 170,000 barrels of oil produced per day in the region is also helping to increase construction activity. According to the report, the value of nonresidential permits in the two cities was $836 million in the 12-month period through January, near the highest on record.

A report issued from CIBC World Markets Inc., paints a different picture of the impact of shale-based oil on the Canadian economy and energy industry. Avery Shenfeld, chief economist for CIBC, said growth in U.S. shale output has put America’s net import requirements on a collision course with Canadian plans to ramp up its output of oil. More production in the U.S. is coming at a time when Canada hopes to export more product into the U.S.

Product from plays like the Bakken is also putting a strain on infrastructure typically used for Canadian-based crude. Because of that, Shenfeld says it is increasingly important that Canada move on one or more of the alternative pipelines that would help transport Canadian-based crude to Asia. And the rising prowess of China as the world’s No. 1 importer of crude helps to illustrate this.According to the CIBC report, China will overtake the U.S. this year as the world’s largest net importer of oil.

In addition to it’s ability to shift part of its crude supply focus to China, Shenfeld also says building and leveraging the use of the Keystone XL pipeline will help attract investment to the country. “Three key trends—rising shale oil prospects stateside, the shift in consumption growth to Asia, and a growing list of oil producing countries open to foreign participation—all pose challenges if Canada is to maximize the value of its resource base,” he says.