SEPAC

Industry FAQ

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Below are some commonly asked questions about the oil and gas industry in Canada. To reveal the answers, you must click each question individually. If you have a question that has not been addressed below, please feel free to contact us.

What is the size of Canada’s oil and gas industry and what kind of contribution does it make to the economy?

As of 2006, Canada had 0.5 percent of the world’s population, yet was the third largest producer of natural gas and the seventh largest producer of crude oil in the world (Foreign Affairs and International Trade Canada).
Sales
Statistics Canada reports that the value of marketable production from crude oil, natural gas and natural gas liquids was $109.3 billion in 2007. According to the Petroleum Services Association of Canada, the oil and gas service and supply sector generates a further $65 billion per year in sales of materials, equipment and services to the producers.
Investment
The oil and gas industry is the largest private sector investor in the country, with approximately $50 billion dollars invested each year in capital projects.
Government Contributions
In 2008, the oil and gas industry paid approximately $26 billion to all levels of government in taxes, royalties and drilling rights sale proceeds (land “bonus payments”), according to the Canadian Association of Petroleum Producers. In addition, the Petroleum Services Association of Canada estimates that the service and supply sector paid another $9 billion dollars in personal and corporate taxes to federal and provincial governments in 2010.
Jobs
It is estimated by the Canadian Association of Petroleum Producers that the oil and gas industry employs half a million Canadians in every region of the country, directly and indirectly. In 2010, the Petroleum Services Association of Canada estimated the industry’s employment impact is considerably larger, since its research indicates that the oil and gas service and supply sector alone employed, directly and indirectly, 800,000 Canadians.
What is the contribution and role of the junior- and mid-sized oil and gas producers to Canada’s energy industry?

Smaller oil and gas companies – started, owned and based in Canada – have been a strong presence in the Western Canadian oil and gas industry since the first major field was discovered nearly a century ago at Turner Valley, Alberta. None of those pioneer start-ups survive today; but they have left an indelible mark of risk taking and entrepreneurship that endures among the junior- and mid-sized producers in the Canadian industry. Today, Canada is home to 35 percent of the world’s publicly traded oil and gas production companies, and most of these are junior- and mid-sized producers. (Toronto Stock Exchange/TSX Venture Exchange)
SEPAC member companies comprise 33 of the ”Top One Hundred” oil and gas production companies in Canada as tabulated by Oilweek Magazine (July 2010 edition). However this statistic actually understates the contribution of the junior- and mid-sized producers, because not all these producers are members of our Association.
SEPAC estimates that the junior- and mid-sized producers drill up to 40 percent of the conventional oil and gas wells in Canada, and half or more of higher risk ”exploration” wells and are among the leaders in new resource development plays such as in situ bitumen recovery and development of oil and gas from shale formations.
What is the industry’s impact on the environment, and what is being done to reduce this impact?

No form of energy production is without some impact on the environment, whether the energy produced is nuclear, hydro, wind or oil and gas. The goal for oil and gas producers is to minimize and mitigate, wherever possible, their impact on air, water and land.

Surface disturbance
In the last few years, the industry has taken a number of important steps to minimize and reduce the surface ”footprint” from oil and gas development. For example, new regulations and guidelines require smaller cut lines in forests for seismic data acquisition. Integrated land management procedures are being adopted to avoid multiple road and pipeline corridors, where one will do. And horizontal drilling allows many wells to be drilled from a single surface site, thus, reducing the need for multiple surface drilling locations. Many areas in the northern parts of Western Canada are accessible by permit only during the winter months when the ground surface is frozen, to mitigate impact to wetland areas. And in oilsands areas, the in situ method of recovery will not have the surface impact that the mining operations have today.
The development of oil and gas resources is tightly regulated over the full life cycle of the wells and related production and transportation facilities. When an oil or gas well reaches the end of its economic life, the well is capped underground and plugged with cement. Then, the disturbed surface site must undergo reclamation and remediation work to restore the site as near as possible to its prior use. When the landowner and the government are satisfied with the result, a reclamation certification is issued.
In Alberta, industry pays into an ”Orphan Well Fund” to ensure that the public does not have to foot the bill for this type of clean-up work if an individual oil and gas company becomes insolvent. Similar programs operate in British Columbia and Saskatchewan as well.

Impact on the air
Canada is the source of about 2 percent of the world’s greenhouse gas emissions. Not surprisingly – as in a large, cold climate country – Canadian’s are among the world’s largest per capita consumers of energy for power, heat and transportation. About 80 percent of greenhouse gas emissions from using oil and gas are actually emitted by the consumers of the energy. For example, it comes out the tailpipe of your car. The production of oil and gas itself consumes energy too. The industry is constantly working to reduce the energy consumed, and reduce emissions to the atmosphere.
Alberta is a leader among jurisdictions in North America in the regulation of greenhouse gas emissions and imposes targets and penalties on large emitters of greenhouse gases. These large emitters are mostly large coal-fired power plants, oilsands facilities and petrochemical plants. You can learn more about this program through Alberta Environment.
Greenhouse gas emissions include those from flaring and venting of solution gas. Flaring is the burning of natural gas that cannot be conserved, and venting is the release of natural gas into the atmosphere. Solution gas is natural gas produced in association with crude oil and bitumen production.
In Alberta, solution gas flaring by our industry has been reduced by 80 percent since 1996, and solution gas venting has been reduced by 53 percent since 2000 (Energy Resources Conservation Board). In British Columbia, the government and industry plan to eliminate all routine flaring at wells by 2016, with an interim goal to reduce flaring by 50 percent in 2011. The BC Oil & Gas Commission has a target of 97 percent conservation of solution gas in 2011 and 98 percent by 2016. For the past few years, oil and gas producers in BC have consistently achieved a target of 96 percent conservation of solution gas. The Province of Saskatchewan has also introduced new regulations to further improve conservation of solution gas consistent with the other Western provinces.
Another related topic is sour gas (natural gas with elevated levels of highly toxic hydrogen sulphide). Sour gas development is tightly regulated to protect the public, and Canadian companies are world leaders in operating sour gas production facilities safely. You can learn more about sour gas regulation in Alberta through the Energy Resources Conservation Board.

Impact on water
Water is a key factor in oil and gas production in Canada. First, a lot of underground water is often produced with oil and gas brought to the surface. It must be separated from the oil or gas and safely disposed of by reinjection into the earth. Second, water is used in drilling and well completions, hydraulic fracturing of rock formations, enhanced oil recovery, steam generation for in situ bitumen recovery and more. The water used by our industry for these purposes is usually sourced from surface water (rivers and lakes) or groundwater (produced from wells drilled underground). Much of the groundwater used is saline (salt) water, which is not suitable for human consumption.
The industry is allocated relatively small amounts of surface water and fresh underground water for its activities. For example, in Southern Alberta, our industry is licensed to use only 0.3 percent of the total allocated water in the South Saskatchewan River Basin (which includes the Bow, Oldman and Red Deer as well as the South Saskatchewan River). Much larger users are the agriculture industry and urban areas. In Northern Alberta, the industry is allocated only 2.8 percent of the Athabasca River’s average annual flow; but the actual water use by industry is lower still.
The industry is constantly developing new methods to reduce its use of fresh water in oil and gas production, and has to follow federal and provincial laws and regulations on its use of water. Find out more through the links below:
Alberta Environment: Water for Life Strategy
Alberta Environment and Fisheries and Oceans Canada: Water Management Framework: Instream Flow Needs And Water Management System For The Lower Athabasca River
Government of Saskatchewan: Conserving our Water: A Water Conservation Plan for Saskatchewan
B.C.’s Water Plan: Living Water Smart

Spill Protection
The industry also employs a unique ”co-op” business model to ensure fast emergency response, in case there is ever a spill into rivers or lakes in Western Canada. Hundreds of companies have joined the Western Canada Spill Services organization, which strategically places equipment, boats, berms and other materials in key locations in British Columbia, Alberta and Saskatchewan. Volunteers trained in emergency response measures stand ready to respond quickly in case of a spill.

Impact on wildlife
In Alberta, the industry annually contributes significant funding, along with other stakeholders, to caribou and grizzly bear research. The goal of this research is to understand better the impact of human and industrial activity on populations, and seek ways to mitigate that impact. The information influences decisions taken by oil and gas companies such as relocating activity away from critical habitat.
What can you tell me about “hydraulic fracturing”? Is it safe?

Hydraulic fracturing is a method that has been employed for over sixty years in North America to improve the recovery of oil and natural gas from reservoir rock. Over one million oil or gas wells have been hydraulically fractured or “fracked” in North America using this method of well completion since first invented. Today the vast majority of oil and gas wells in Canada are completed with hydraulic fracturing and the activity, like all oil and gas drilling operations, is subject to a variety of government regulations.
Oil and gas wells are drilled into rock and then the well bore is sealed off from the surrounding rock by steel casing cemented in place. A well is designed and constructed so that the flow of produced liquids (oil, natural gas, water, etc.) will only enter the well bore from targeted producing formations. The targeted producing zones can be fractured by pumping special fluids at high pressure to convey a “proppant” which is usually quartz sand particles. The material pumped into the rock formations is approximately 99.5% water and sand, and the remainder is chemical addititives. These sand particles are pushed out into fractures in the rock that are created by the high pressure fluid volumes being pumped down the well bore from the surface. When the pressure pumping fracturing treatment is completed the sand particles remain behind to prop open the fractures thus creating additional small cracks in the rock for oil and gas to flow to the well bore. The chemical additives in the fracturing fluids are designed to keep the sand particles in suspension and act as a lubricant for improved fluid dispersal into the formation.
In Alberta, the Energy Resources Conservation Board has issued Directive 059: Well Drilling and Completion Data Filing Requirements that requires information about the chemical additives in fracturing fluids to be disclosed. Some companies which supply these chemicals are working on developing “food grade” additives to further reduce any potential environmental impact.
Natural gas producers have in recent years developed new horizontal drilling techniques which have been combined with “multi-stage” hydraulic fracturing completions which provide access to more natural gas saturated rock along the length of a horizontal well bore. In particular this has opened up the opportunity to produce natural gas from shale rock which is an abundant source of natural gas.

Could hydraulic fracturing affect underground water supplies?
There have been concerns expressed that the chemicals used in “fracking” could contaminate underground water or that natural gas could leak from gas wells into underground water sources used for human consumption. In addition to the protection afforded by cemented steel casing for well bores it is useful to understand that the rock formations from which natural gas is produced lie at depths typically hundreds, if not thousands, of meters of solid rock below the depth of water wells drilled for human use while the vertical distance that a hydraulically induced fracture will travel is typically only 30 to 100 meters.
To date there is no evidence that chemicals or natural gas have entered underground water supplies used for human consumption from hydraulic fracturing. In Alberta the matter of protecting undergroud water supplies from the possibility of contamination was considered several years ago in the context of fracturing used in shallower coal bed methane wells (i.e. natural gas produced from coal formations). A regulatory framework to protect underground water supplies was established by the Alberta Energy Resources Conservation Board i.e. Directive 027: Shallow Fracturing/Restricted Operations. The United States Environmental Protection Agency in a 2004 study concluded that there was little to no risk of fracturing fluid contaminating underground sources of drinking water during hydraulic fracturing of coalbed methane production wells. The EPA is embarking on a comprehensive study in 2011-12 to study the potential impact of hydraulic fracturing on water and the environment.
To learn more about hydraulic fracturing you can read a booklet published by The Canadian Society of Unconventional Gas or read this summary published by the Alberta Energy Resources Conservation Board.
How does the industry protect its employees?

The oil and gas industry has dangers and hazards. While zero injuries is a goal all employers desire, it is clear that accidents can be reduced through better trained workers and supervisors. Our association is a member of Enform, the upstream industry safety organization. We are joined by associations from the drilling, seismic, service and supply and pipeline sectors, as well as the large producers association. Enform offers numerous training programs with a focus on safety. It issues regular safety alerts to industry and facilitates the development of industry recommended practices with a goal of providing a safer work environment.
Industry has made tremendous strides in the last 20 years to decrease the number of work-related incidents and injuries. Enform reports that lost-time claim rates for drilling rig workers have fallen from 12.5 for every 100 person-years in 1988 to 3.84 in 2003 to 1.09 in 2009. Similarly, rates for service rig workers dropped from 12.1 in 1988 to 2.83 in 2003 to 1.01 in 2009. The services and trucking segments of the oilfield industry also had similar decreases; while rates for geophysical employees declined from 18.8 in 1988 to 1.9 in 2007.
What is the future of the hydrocarbon energy industry?

The International Energy Agency forecasts that global energy demand is going to grow by over 50 percent from today to 2030, and hydrocarbon energy (oil, natural gas and coal) will supply 84 percent of the increase in energy demand. The world’s energy needs will be so large that all forms of energy – including hydrocarbons, nuclear, hydro, wind and solar – will be required. Fossil fuels will remain dominant at about 80 percent of total global energy demand in 2030, exactly the same percentage as today.
Canada is one of only a handful of reliable, democratic nations with the ability to export surplus energy to an energy hungry world. Our industry has a bright future.
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