Atlantic Canada missing out on potential oil and gas boom

Ven Venkatachalam
and Lennie Kaplan
Troy Media

Next year will mark 30 years of offshore oil and natural gas production in Atlantic Canada. In that time, Atlantic Canada has been the primary source of human capital for the oil and gas industry in other parts of Canada, while being a significant recipient of the benefits from oil and gas activity.

The recent energy crisis in Europe, fuelled by the high cost of natural gas and increasing demand for it in Europe and Asia, has magnified the role natural gas will play in reducing global emissions.

When previous governments implemented bans on hydraulic fracturing in search of onshore natural gas in New Brunswick and Nova Scotia, those decisions prevented the development of sizable provincial industries that could provide more jobs for workers and revenues to governments.

The current increase in natural gas prices shows how much Atlantic provinces could reap in business investment, royalties and taxes if they chose to increase exploration activities within their borders.

As of 2017 (the latest year for which detailed Statistics Canada data about the region is available), oil and gas spending in Atlantic Canada had a direct impact of more than $8.4 billion and another nearly $2.9 billion in indirect impact, for a total of about $11.4 billion.

That money contributed to the creation of more than 7,500 direct jobs and another 12,500 indirect jobs in the Maritimes and Newfoundland and Labrador. That’s more than 20,000 well-paying jobs and nearly $7 billion in gross domestic product. Wages and salaries paid to workers in the region amounted to around $1.36 billion in just 2017 – and that was when oil and gas spending was in a slump year.

Oil and gas spending in Atlantic Canada touches on a variety of local industries. In 2017, the sector purchased $447 million worth of services from Atlantic Canada’s finance and insurance sectors. It also paid $618 million into what Statistics Canada labels the “professional, scientific and technical” sector – think of engineers working on Newfoundland’s offshore rigs or Halifax accountants providing expertise to energy companies.

Manufacturing in Atlantic Canada was a major beneficiary. It received more than $2 billion in orders as a result of oil and gas spending. And, at over $3.7 billion in direct spending, oil and gas in Atlantic Canada is very significant.

Canada’s oil and gas sector also has significant direct and indirect impact on Atlantic Canada’s interprovincial export sectors, as does the purchase of goods and services in Atlantic Canada by citizens, businesses and governments in such provinces as Alberta.

In 2017, Atlantic Canada’s interprovincial trade with Alberta was $1.8 billion, behind the region’s trade with the United States (nearly $21.6 billion), Ontario ($7.6 billion), and Quebec ($6.7 billion), but ahead of trade with markets such as China ($1.6 billion), the United Kingdom ($800 million), and the Netherlands and Japan ($600 million each).

The Atlantic provinces should take steps to take greater advantage of the benefits of higher oil and gas prices. At more than $11 billion in direct spending in 2017 alone, oil and gas spending in the region is impactful.

But it could also be even more economically meaningful if additional reserves – especially onshore natural gas in New Brunswick and Nova Scotia – were tapped.

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