The Ontario oil and natural gas industry is committed to the development of public policy under a mutual mandate accepted by government and industry – the protection of Ontario’s natural resources – and focus on looking ahead to determine what regulations and operating standards are necessary for the industry to continue to be a viable contributor to the energy needs of consumers and the economy of Ontario.
Market for Ontario Oil
Ontario oil producers have supplied Ontario consumers through the sale of all commercial oil production to Imperial Oil since the 1870’s. While the published price of oil has been above $90 a barrel for some time the increase in North American production has seen prices to producers, at times, discounted considerably. The challenge, today, for producers is to obtain the best price possible in an effort to counter discounting. While the industry has a good relationship with Imperial Oil as the single buyer of Ontario’s commercial production companies recognize that it is prudent to seek out alternatives markets to maximize return on current production and to stimulate exploration and development of existing reserves. The alternatives for Ontario crude oil include other Ontario refineries such as Shell Oil and Sunoco, markets in Eastern Canada made possible by the reversal of Enbridge’s Line 9 between Sarnia, Ontario and Montreal, Quebec, Trans-Canada Pipelines Energy East line to New Brunswick, and selling into the U.S. market.
Natural Gas Development
Ontario natural gas producers have supplied Ontario consumers with natural gas since the 1890’s.
The challenge for commercial producers is how to sustain production to deal with price fluctuations that have, in recent years, seen prices fall below the cost of production. A significant factor affecting natural gas pricing has been the substantial increase in the volume of production brought on by the development of shale gas. The increase has come from the advent of horizontal drilling and the use of multi-stage hydraulic fracturing techniques.
When prices fall rendering producing wells unprofitable there is a tendency to want to suspend production until prices recover. The difficulty with suspending production is that in Ontario Regulation 245-97 which falls under the Ontario Oil, Gas and Salt Resources Act a well can only be suspended for one year then must be brought back into production or abandoned. Once a well is abandoned the resource is gone. While extensions are available in certain circumstances the remedy is to review the suspended well policy and provide producers with a longer time period to react to the volatility that occurs with natural gas prices and preserve the like of a producing well.
Currently prices for natural gas are in the range of $5.16 per mcf (million cubic feet) making production profitable.
Future Exploration and Development
One of the most significant challenges facing Ontario’s oil and natural gas industry is declining production. Since 2000 a downward trend has seen oil decline by 70% and natural gas by 50%. As a result the industry is committed to promoting exploration and development opportunities throughout North America that shows the Ontario energy patch as a “potential profitable business opportunity”. It will require a collaborative effort that involves the Ontario’s oil and natural gas industry, government, and the financial community to attract exploration companies to that will stimulate drilling starts in the province.
In Ontario, 50% of the potentially recoverable oil and natural gas remains to be developed.
Raising the Profile of the Oil and Natural Gas Industry
The Ontario Petroleum Institute communicates on behalf of the industry in many ways to:
Government of Ontario: Office of the Premier, Ministry of Natural Resources, Ministry of Energy, Ministry of Economic Development, Ministry of Finance, Ministry of Consumer Service, Ministry of Labour, Ministry of Rural Affairs, MPP’s in Southwestern Ontario, Ontario 1Call, Thames Sydenham Source Water Protection Committee; and Municipal Governments
Associations: Oil and Natural Gas Associations in Canada and the United States, Ontario Federation of Agriculture, Southwest Economic Alliance, Ontario Groundwater Association, Ontario Geothermal Association, Exempt Market Dealers Association
Refineries: Imperial Oil, Shell Oil and American Refining Group
Pipelines: Enbridge Pipelines and Trans-Canada Pipeline
First Nations Communities
Education: Western University, Fanshawe College, University of Waterloo, University of Toronto, Ontario Centre of Excellence
North American Prospect Expo, Calgary Dealmakers Prospect and Property Expo, Eastern Oil and Gas Conference and Trade Show
National Post, Toronto Globe and Mail, London Free Press, Sarnia Observer, Energy Digital Newspaper