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The contrasting paths of oil and gas exports

The contrasting paths of oil and gas exports

Posted on: 11/14/2018 | Author: ATB Financial's Economics + Research Team

The natural gas sector is an extremely valuable part of Alberta’s economy, but its importance has decreased while the importance of crude oil has increased. This is highlighted by the different trajectories of natural gas and crude oil exports.

As recently as 2005, natural gas accounted for 42 per cent of Alberta’s international merchandise exports compared to 27 per cent for crude oil. Fast forward to 2017, and it was 9 per cent for natural gas versus 59 per cent for crude oil.

High prices pushed the value of Alberta’s international (which in this case really means the U.S.) natural gas exports to $32.5 billion in 2005. Low prices and reduced production resulted in just $9.4 billion worth of exports last year. The rise of hydraulic fracturing and horizontal drilling in the latter part of the aughts unlocked a large amount of shale gas in the U.S., drove down prices and changed the game in the North American natural gas market.

Crude oil has taken a different path. Although conventional oil production is down compared to the 1980s, oil sands production has increased more than tenfold. Despite price fluctuations, the rise in oil sands production has kept the value of crude exports above that of natural gas since 2006. The gap shrank during the recent crude oil price collapse but was still almost $36 billion in 2016.

Although the price differential and pipeline constraints are major challenges for our oil patch, recent increases in crude oil production south of the border have not reduced the volume of Alberta oil exported to the U.S. At the same time, a better balance between global oil consumption (which continues to rise) and global supply bodes well for Alberta’s oil industry—assuming, of course, we can get our product to the markets that need it.

Oil and gas exports, graph​​​

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