Propane production in Canada is expected to increase by more than 20 per cent over the next seven years, according to a new report released on Friday by the Conference Board of Canada.
The report, Fuelled Up: An Updated Overview and Outlook of Canada’s Propane Market and Industry, said the industry accounted for $3.5 billion in economic activity in 2016. That is expected to rise to $4.4 billion a year between 2017 and 2025.
The report said the industry is expected to support close to 21,000 jobs annually across the country, and to generate about $1 billion per year in government revenues.
“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 for the Conference Board of Canada. “The Canadian propane industry will need to continue diversifying its exports towards overseas markets. A story that increasingly resonates with all our energy commodities, but one where propane is clearly taking the lead.”
The report said Canadian propane production is expected to increase from just over 220 thousand barrels per day (kb/d) in 2016, to more than 270 kb/d by 2025.
“The increase will mainly be driven by steady gas production levels, increasing natural gas liquids availability, and ongoing investments in midstream infrastructure,” it said.
“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 petrochemical sector. Demand for propane in Canada could increase by more than 50 per cent 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 reduce greenhouse gas 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 domestic propane market outlook is mostly favourable, the industry faces stiff competition from other fuels in some sectors, and challenges in finding markets for its exports.”