1. No category

BRIEFING PAPER
November 2014
Volume (bbls/day x1000)
CANADIAN
ENERGY
RESEARCH
INSTITUTE
CANADIAN ECONOMIC IMPACTS OF
NEW AND EXISTING OIL SANDS
DEVELOPMENT IN ALBERTA
(2014-2038)
8000
8000
7500
7500
7000
7000
6500
6500
6000
6000
5500
5500
5000
5000
4500
4500
4000
4000
3500
3500
3000
3000
2500
2500
2000
2000
1500
1500
1000
1000
500
500
0
0
Existing Production(*)
Under Construction
Approved
Awaiting Approval
Announced
Existing Export Capacity
Rail Systems
AB Clipper Exp I
AB Clipper Exp II
TCPL Keystone XL
Kinder Morgan TMX Exp
Northern Gateway
TCPL Energy East
* Includes existing Bitumen + Diluent + WCSB Conventional + Cold Bitumen production - Domestic Refinery needs (AB,SK)
CERI July 2014
Canadian Energy Research Institute | Relevant • Independent • Objective
CANADIAN ECONOMIC IMPACTS OF NEW AND EXISTING
OIL SANDS DEVELOPMENT IN ALBERTA (2014-2038)
Canadian Economic Impacts of New and Existing Oil Sands
Development in Alberta (2014-2038)
Copyright © Canadian Energy Research Institute, 2014
Sections of this study may be reproduced in magazines and newspapers with
acknowledgement to the Canadian Energy Research Institute
CANADIAN ENERGY RESEARCH INSTITUTE
150, 3512 – 33 Street NW
Calgary, Alberta T2L 2A6
Canada
www.ceri.ca
November 2014
Printed in Canada
Canadian Economic Impacts of New and Existing Oil Sands
Development in Alberta (2014-2038)
iii
Table of Contents
LIST OF FIGURES ..............................................................................................................
LIST OF TABLES ................................................................................................................
EXECUTIVE SUMMARY .....................................................................................................
CHAPTER 1 CANADIAN IMPACTS .................................................................................
Total Investment and Employment Perspective.................................................................
Tax Perspective ...................................................................................................................
Royalty Perspective .............................................................................................................
v
vii
ix
1
2
6
9
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Canadian Energy Research Institute
Canadian Economic Impacts of New and Existing Oil Sands
Development in Alberta (2014-2038)
v
List of Figures
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Mining, In Situ (SAGD) and Cold Bitumen Production Realistic Forecast .....................
Initial and Sustaining Capital Requirements .................................................................
Total Cash Requirements – Reference Case .................................................................
Total Canadian Jobs Created and Preserved, 2014-2038 – Reference Case ................
Oil Sands Direct Employment Forecast – Reference Case ............................................
Oil Sands Indirect and Induced Employment Forecast by Selected Provinces –
Reference Case .............................................................................................................
Bitumen Royalties Collected by Type – Reference Case...............................................
1
2
3
3
5
6
9
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Canadian Energy Research Institute
Canadian Economic Impacts of New and Existing Oil Sands
Development in Alberta (2014-2038)
vii
List of Tables
1.1
1.2
1.3
1.4
1.5
Economic Impacts of Oil Sands Development in Alberta, 2014-2038 –
Reference Case .............................................................................................................
Tax Receipts as a Result of Alberta Oil Sands Investment and Operation
Federal, Provincial and Municipal – Reference Case ....................................................
Tax Receipts as a Result of Alberta Oil Sands Investment and Operation
Federal – Reference Case..............................................................................................
Tax Receipts as a Result of Alberta Oil Sands Investment and Operation
Provincial – Reference Case ..........................................................................................
Tax Receipts as a Result of Alberta Oil Sands Investment and Operation
Municipal – Reference Case..........................................................................................
4
7
7
8
8
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Canadian Energy Research Institute
Canadian Economic Impacts of New and Existing Oil Sands
Development in Alberta (2014-2038)
ix
Executive Summary
Canadian oil and oil equivalent production averaged 3.5 million barrels per day in 2013. Oil sands
related production accounted for 56 percent of this total or 1.98 million barrels per day and of
that number 51 percent was non-upgraded, raw bitumen, while 49 percent was upgraded to
synthetic crude oil. During the same year Canada exported on average 2.57 million barrels per
day with 97 percent of those exports going to the United States.
For the period 2014 to 2038:

Oil sands production (upgraded and non-upgraded) is forecasted to grow from
the current level of 1.98 million barrels per day (2013) to 3.7 million barrels
per day by 2020 and 5.2 million barrels per day by 2030.

Total investment in new Alberta oil sands projects and re-investment
(sustaining capital) in existing oil sands projects will exceed $514 billion (2013
Canadian dollars). Revenues from all existing and new projects will exceed
$2,484 billion (2013 Canadian dollars).

The sum of initial capital for new projects, sustaining capital for existing
projects and operating and maintenance expenses for all projects is expected
to average $55 billion per year (2013 Canadian dollars).

Total GDP impacts of all oil sands investment, re-investment and operating
revenues is estimated to be $3,865 billion for Canada.

Oil sands related total Canadian employment (direct, indirect and induced), as
a result of construction of new projects and the operation of new and existing
projects, is expected to continue growing from the current level (2014) of
514,000 jobs to a peak of 802,000 jobs in 2028.

Oil sands related direct employment in Alberta, including on-site construction,
ongoing and turnaround maintenance, off-site prefabrication and modular
construction, steam assisted gravity drainage (SAGD) well development and
cold bitumen well development, is expected to continue growing from the
current level (2014) of 146,000 jobs to a peak of 256,000 jobs in 2024.

Oil sands related taxes directed to the Canadian Federal Government will total
$574 billion (2013 Canadian dollars).
(Continued)
November 2014
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Canadian Energy Research Institute

Oil sands related taxes (excluding royalties) directed to the Province of Alberta
will total $302 billion (2013 Canadian dollars).

Oil sands royalties are forecasted to grow from the current level (2013) of $4.4
billion to $18.2 billion by 2023. The cumulative total of royalties that will be
collected by the Alberta Government will exceed $600 billion over the next 25
years (2013 Canadian dollars).

For every direct job (1) generated in the Alberta oil sands, 1 additional job is
generated by indirect association and 1.5 jobs by induced association, in
Canada.
This Briefing Paper updates CASE 4 of a study CERI generated in 2011 titled “Economic Impacts
of Staged Development of Oil Sands Projects in Alberta (2010-2035)”.1 The economic impacts
presented in this update are lower than the previous report for the following reasons:
1

Projects that were under construction in 2010 are now in operation reflecting that the
construction contributions have been accounted for.

The oil price forecast used is reflective of a long run $85 oil price whereas the previous
report suggested a $100/bbl market price

This update utilizes the latest (2009) StatsCan balanced symmetrical Input-Output (I/0)
tables and includes a disaggregation of the oil sands sector from the “Mining and Oil and
Gas Extraction”.

The oil sands sector in 2009 is considered more indicative as a result of the accounting for
in-situ (SAGD and others) projects that were in their infancy in 2006, the previous base
year.

The 2009 I/O tables were adjusted by Statistics Canada to represent changes between the
now disaggregated oil sands sector and other economic sectors and provinces. The
sectorial and provincial links were improved in order to reflect the interaction of various
sectors/provinces with the oil sands sector with more precision. In fact, the model
suggests that the percentage share of total economic impacts from oil sands development
for Alberta dropped from 94.6 percent to 88.7 percent while other provinces’ share has
increased from 5.4 percent to 11.3 percent.
CERI Study 125, June 2011. Available at http://ceri.ca/images/stories/2011-08-24_CERI_Study_125_Section_1.pdf
November 2014
Canadian Economic Impacts of New and Existing Oil Sands
Development in Alberta (2014-2038)
1
Chapter 1: Canadian Impacts
Oil sands production projections are based on the summation of all announced projects, with a
variety of assumptions pertaining to the project schedule and delays, technology and state of
development. The methodology and assumptions developed by CERI to establish a realistic
bitumen future forecast is described in the CERI report “Canadian Oil Sands Supply Costs and
Development Projects: 2014-2048”1 (Chapter 4). The methodology and assumptions developed
by CERI to establish a realistic future forecast for cold bitumen production is described in the CERI
report “Canadian Oil Pathways”2 (Appendix D). Illustrated in Figure 1.1 is the raw bitumen
production forecast from Alberta oil sands mining projects, in-situ (thermal projects) and
conventional well type cold bitumen production projects. Oil sands bitumen production is
forecasted to grow from the current level of 1.98 million barrels per day (2013) to 3.7 million
barrels per day by 2020 and 5.2 million barrels per day by 2030. Note that some of this raw
bitumen will be upgraded to synthetic crude oil with the remainder being mixed with diluent
(condensate) to facilitate pipeline or rail transportation to market.
Raw Bitumen Production (1000 bbls/day)
Figure 1.1: Mining, In Situ (SAGD) and Cold Bitumen Production Realistic Forecast
8,000
7,500
7,000
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Includes Mining, In Situ and Cold Bitumen Production
Source: CERI
1
CERI Study 141, July 2014. Available at http://ceri.ca/images/stories/2014-0717_CERI_Study_141_Oil_Sands_Supply_Cost_Update_2014-2048.pdf
2 CERI Study 144, July 2014. Available at http://ceri.ca/images/stories/2014-08-21_CERI_Study_144.pdf
November 2014
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Canadian Energy Research Institute
Relying on the production methodology, which uses as input all announced projects broken down
by process type (mining, SAGD, etc.) earliest possible on stream date, size and other parameters,
the associated capital to construct new and sustain existing projects is determined and presented
in Figure 1.2.
Initial and Sustaining Capital (million Cdn$)
Figure 1.2: Initial and Sustaining Capital Requirements
$45,000
$42,500
$40,000
$37,500
$35,000
$32,500
$30,000
$27,500
$25,000
$22,500
$20,000
$17,500
$15,000
$12,500
$10,000
$7,500
$5,000
$2,500
$0
Source: CERI
The decline in new investment dollars post-2018 should not be taken as a slowdown in oil sands,
merely the fact that CERI uses only projects that have been announced up to the cut-off date of
August 2014. This relates back to CERI’s assumptions for project start dates and announcements
from oil sands proponents.
Total Investment and Employment Perspective
Figure 1.3 demonstrates that, after accounting for annual operating and maintenance costs on
top of new and sustaining capital, total cost requirements for the oil sands industry will grow to
a high point of $67 billion in 2017 with an average of $55 billion per year for the duration of the
forecast.
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Canadian Economic Impacts of New and Existing Oil Sands
Development in Alberta (2014-2038)
3
Figure 1.3: Total Cash Requirements – Reference Case
Total Capital Costs
Total Operating Costs
(Million CDN$)
75,000
70,000
65,000
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Source: CERI
Canadian Employment
Figure 1.4: Total Canadian Jobs Created and Preserved, 2014-2038 – Reference Case
900,000
850,000
800,000
750,000
700,000
650,000
600,000
550,000
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Direct Employment
Indirect Employment
Induced Employment
Source: CERI
November 2014
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Canadian Energy Research Institute
Table 1.1 presents the total impacts associated with both investment and operation of projects
in the Alberta oil sands and direct staging and assembling facilities in Edmonton, Leduc and other
Alberta communities for the period 2014 to 2038. The total Canadian GDP impacts amount to
$3,865 billion (2013 Canadian dollars) and employment (direct, indirect, induced) is projected to
grow from the current level of 514,000 jobs to a peak of 802,000 (see Figure 1.4). Approximately
88 percent of the GDP impacts and 80 percent of the employment impacts occur in Alberta.
Ontario and Quebec account for 7.2 percent of the GDP impacts and 11.5 percent of the
employment impacts. The other provincial impacts are detailed in Table 1.1.
Table 1.1: Economic Impacts of Oil Sands Development in Alberta, 2014-2038 –
Reference Case
Economic Impacts as a Result of a Shock to Alberta's Economy 2014-2038
Investments and Operations
$CAD Million
Thousand
Person Years
2014-2038
Output
GDP
Compensation
of Employees
Employment
5,843,423
3,428,010
1,519,867
15,366
183,244
100,841
61,654
920
Manitoba
34,848
17,010
9,766
170
New Brunswick
11,102
5,055
2,823
51
Newfoundland & Labrador
4,315
2,370
1,075
17
Northwest Territories
1,612
800
495
8
Nova Scotia
8,033
4,035
2,502
41
Alberta
British Columbia
Nunavut
Ontario
Prince Edward Island
Quebec
Saskatchewan
Yukon Territory
Gabd*
Total Canada
Total US
*Government abroad
Source: CERI
605
349
249
4
407,200
211,566
128,110
1,569
731
348
201
4
134,389
66,948
37,906
633
56,096
27,766
12,158
200
640
368
229
3
2
1
1
0
6,686,239
3,865,467
1,777,036
18,987
933,021
473,684
230,393
3,787
Direct employment effects are considered jobs created or preserved in the Province of Alberta
and are considered as construction or operation jobs in the oil sands projects, manufacturing jobs
in the oil sands staging areas (Edmonton, Leduc, etc.) and drilling related jobs in the cold bitumen
production (CBP) area. Oil sands direct employment is projected to grow from the current level
of 146,000 jobs (132,000 oil sands, 14,000 CBP drilling) to a peak of 256,000 jobs (243,000 oil
sands, 13,000 CBP drilling) by 2024. Post-2024, as investment in new oil sands projects decreases,
operational jobs continue to increase as projects ramp up and optimize production levels. Figure
1.5 illustrates these changes over the forecast period
November 2014
Canadian Economic Impacts of New and Existing Oil Sands
Development in Alberta (2014-2038)
5
Figure 1.5: Oil Sands Direct Employment Forecast – Reference Case
250,000
200,000
150,000
100,000
50,000
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
0
Oil Sands Project (Oil Sands Sector)
Cold Bitumen Production Wells (conventional Oil Sector)
Source: CERI
Indirect job effects account for the potential of jobs created in the many industries across Canada
that service the oil industry including manufacturing in Ontario, pipeline mills in Saskatchewan
and Alberta, and electronic components in British Columbia, Ontario and Quebec.3
Induced job effects account for workers in the oil sands sector spending their additional income
on consumer goods and services. This additional income is stimulated by direct and indirect
impacts.
Figure 1.6 illustrates the non-direct impacts (indirect, induced) on the provinces of British
Columbia (BC), Ontario and Quebec (ON+QC) and Saskatchewan and Manitoba (SK+MB).
3
Canadian Association of Petroleum Producers, “What Does Oil and Gas Development Mean to Ontario’s
Economy?” July 2013. Available at
http://www.capp.ca/library/publications/CAPPNewsletters/pages/pubInfo.aspx?DocId=229073
November 2014
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Canadian Energy Research Institute
Figure 1.6: Oil Sands Indirect and Induced Employment Forecast by Selected Provinces –
Reference Case
120,000
Employment by type by Year
110,000
100,000
90,000
Others Induced
80,000
Others Indirect
70,000
SK+MB Induced
60,000
50,000
SK+MB Indirect
40,000
ON+QC Induced
30,000
ON+QC Indirect
20,000
BC Induced
10,000
BC Indirect
0
2014
2020
2025
2030
2035
Note: Others includes New Brunswick, Newfoundland and Labrador, Northwest Territories,
Nova Scotia, Nunavut, Prince Edward Island and Yukon
Source: CERI
Tax Perspective
Generally speaking, taxes on income are considered direct taxes, while taxes on expenditures
(GST, PST, HST, etc.) and all taxes deductible by corporations for income tax purposes (such as
property taxes) are considered indirect taxes. The tax impact on a corporation includes taxes
generated by economic activity within a province payable to federal, provincial and municipal
governments.
Over the forecast period, oil sands related taxes (indirect, personal and corporate) directed to all
levels of government will total $988 billion (Cdn $). The Canadian Federal government will receive
$574 billion (Cdn $) with 89 percent or $515 billion (Cdn $) sourced from Alberta-based
companies. Canadian provincial governments will receive $353 billion (Cdn $) with 85 percent or
$303 billion (Cdn $) attributable to the Alberta government. Municipalities across the country
will be the beneficiary of $60 billion (Cdn $) with Alberta municipalities accounting for 80 percent
or $48 billion (Cdn $). Tables 1.2 through 1.5 detail the breakdown by province and by total,
federal, provincial and municipal interests.
November 2014
Canadian Economic Impacts of New and Existing Oil Sands
Development in Alberta (2014-2038)
7
Table 1.2: Tax Receipts as a Result of Alberta Oil Sands Investment and Operation
Federal, Provincial and Municipal – Reference Case
Economic Impacts as a Result of a Shock to Alberta's Economy 2014-2038
Federal, Provincial and Municipal - Investments and Operations
Indirect Tax Personal Income Tax Corporate Tax
CAD Million
Alberta
161,568
467,520
237,950
British Columbia
8,554
12,562
3,512
Manitoba
1,610
2,322
462
New Brunswick
368
682
142
Newfoundland & Labrador
128
263
144
Northwest Territories
64
64
37
Nova Scotia
323
617
141
Nunavut
12
32
7
Ontario
22,339
31,028
7,614
Prince Edward Island
33
49
9
Quebec
7,374
10,945
2,678
Saskatchewan
2,389
2,826
1,340
Yukon Territory
26
34
6
Sum
867,038
24,628
4,393
1,192
535
164
1,081
50
60,981
91
20,997
6,555
66
Source: CERI
Table 1.3: Tax Receipts as a Result of Alberta Oil Sands Investment and Operation
Federal – Reference Case
Economic Impacts as a Result of a Shock to Alberta's Economy 2014-2038
Federal - Investments and Operations
Indirect Tax Personal Income Tax Corporate Tax
CAD Million
Alberta
54,034
303,687
157,952
British Columbia
2,232
8,762
2,568
Manitoba
381
1,290
343
New Brunswick
93
386
98
Newfoundland & Labrador
35
154
60
Northwest Territories
23
45
23
Nova Scotia
85
336
91
Nunavut
6
24
5
Ontario
5,081
19,403
4,990
Prince Edward Island
9
26
6
Quebec
1,524
5,680
1,575
Saskatchewan
514
1,762
800
Yukon Territory
11
23
5
Sum
515,674
13,562
2,013
577
249
91
512
35
29,474
40
8,778
3,076
39
Source: CERI
November 2014
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Canadian Energy Research Institute
Table 1.4: Tax Receipts as a Result of Alberta Oil Sands Investment and Operation
Provincial – Reference Case
Economic Impacts as a Result of a Shock to Alberta's Economy 2014-2038
Provincial - Investments and Operations
Indirect Tax Personal Income Tax Corporate Tax
CAD Million
Alberta
59,060
163,834
79,998
British Columbia
4,713
3,800
944
Manitoba
893
1,032
119
New Brunswick
218
296
44
Newfoundland & Labrador
76
109
84
Northwest Territories
26
19
14
Nova Scotia
162
281
50
Nunavut
4
8
2
Ontario
9,961
11,626
2,624
Prince Edward Island
22
23
3
Quebec
4,010
5,265
1,104
Saskatchewan
1,249
1,063
540
Yukon Territory
9
11
1
Sum
302,891
9,458
2,044
558
269
59
493
14
24,210
48
10,378
2,852
21
Source: CERI
Table 1.5: Tax Receipts as a Result of Alberta Oil Sands Investment and Operation
Municipal – Reference Case
Economic Impacts as a Result of a Shock to
Alberta's Economy 2014-2038
Municipal - Investments and Operations
Indirect Tax
CAD Million
Alberta
48,473
British Columbia
1,608
Manitoba
336
New Brunswick
57
Newfoundland & Labrador
17
Northwest Territories
14
Nova Scotia
77
Nunavut
2
Ontario
7,297
Prince Edward Island
2
Quebec
1,841
Saskatchewan
626
Yukon Territory
6
Source: CERI
November 2014
Canadian Economic Impacts of New and Existing Oil Sands
Development in Alberta (2014-2038)
9
Royalty Perspective
Given the production projection as stated earlier, bitumen royalties from existing and new
projects collected by the Province of Alberta will grow from the current level of $4.4 billion (2013)
to $18.2 billion over the next 10 years (2023). Figure 1.7 illustrates the annual royalty payments
to the government over the next 10 years. The cumulative total of royalties collected by the
Alberta Government will exceed $600 billion over the next 25 years.
Figure 1.7: Bitumen Royalties Collected by Type – Reference Case
Annual ($MM)
Cumulative ($MM)
$11,632
$10,005
$8,573
$7,343
$6,633
$5,581
$4,948
$4,442
$3,350
$4,049
$3,637
$2,069
$3,718
$3,009
In Situ
$14,222
$19,588
Mining
$16,603
Primary/ EOR
$18,242
$130,000
$120,000
$110,000
$100,000
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
$0
2007
$26,000
$25,000
$24,000
$23,000
$22,000
$21,000
$20,000
$19,000
$18,000
$17,000
$16,000
$15,000
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$-
Historical/ Actual
Source: CERI
November 2014
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November 2014
Canadian Energy Research Institute