Canada’s Propane Industry Helping Fuel the Economy

From extraction to end use, Canada’s propane industry supports a significant level of economic activity, concludes a new Conference Board of Canada report. The report also finds that the nation’s propane production is expected to increase by more than 20% over the next seven years, and so will the industry’s economic footprint.

The report, Fueled Up: An Updated Overview and Outlook of Canada’s Propane Market and Industry, estimates that the propane industry accounted for C$3.5 billion in economic activity in 2016. Between 2017 and 2025, this figure is expected to increase to an average of C$4.4 billion a year. The industry’s activities are also estimated to support close to 21,000 jobs annually across the country and to generate roughly C$1 billion a year in government revenues in this timeframe.

Highlights of the Conference Board report include: Canada’s propane industry will support nearly C$4.4 billion in value-added GDP, with supplies set to increase by more than 20% between 2017 and 2025; and fuel-switching opportunities have the potential to boost domestic propane demand and sales significantly while helping to reduce Canada’s greenhouse gas emissions.

Canadian propane production is forecast to rise from just over 220,000 bbld in 2016 to more than 270,000 bbld by 2025. The increase will mainly be driven by steady natural gas production levels, increasing natural gas liquids availability, and ongoing investments in mid-stream infrastructure.

Meanwhile, domestic demand for propane will also see some significant upside. Wide availability of propane, competitive prices, and government incentives should provide a boost to propane use in Alberta’s petro-chemical sector. Demand for propane in Canada could rise by more than 50% by 2025.

Opportunities also exist for Canada’s propane industry to play a greater role in the country’s transition to a clean-energy economy, helping to reduce greenhouse gas (GHG) emissions. Increasing energy demand, innovations in technology, and environmental issues related to air quality and GHG emissions suggest that propane can offer fuel-switching options in market sectors like automotive fleets and power generation, among others.

Although Canada’s propane market outlook is mostly favorable, the industry faces stiff competition from other fuels in some sectors, and challenges in finding markets for its exports. “Historically, the U.S. has been the primary market for Canadian propane exports, but U.S. domestic competition and increasing transportation costs for Canadian product will continue to challenge Canadian propane in U.S. markets over the coming years,” said Carlos A. Murillo, senior research associate at the Conference Board of Canada. “The Canadian propane industry will need to continue to diversify its exports toward over- seas markets. A story that increasingly resonates with all our energy commodities, but one where propane is clearly taking the lead.”

(SOURCE: The Weekly Propane Newsletter, January 7, 2019)