What is the Economic Contribution of Refineries in Ontario?

What is the Economic Contribution of Refineries in Ontario?

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Did you know that 4 of Ontario’s oil refineries make up about 20 per cent of Canada’s total refining capacity, and that about 80 per cent of their feedstock comes from the western part of the country?

When it comes to refinery output and the economy, the larger the numbers, the better the economic contribution typically is. Twenty per cent of a nation’s total refining capacity is no joke.

So, the question remains: How much do Ontario’s refineries contribute to the provincial economy?

To give you an idea, we should probably identify what refineries are in Ontario in the first place, along with their type and output per day. Five refineries currently exist in Ontario, all located in the southwestern part of the province. They include:

Sarnia Refinery – Imperial Oil – 121,000 bbl/day

Nanticoke Refinery – Imperial Oil – 112,000 bbl/day

Sarnia Refinery – Suncor Energy – 85,000 bbl/day

Corunna Refinery – Shell Canada – 75,000 bbl/day

Clarkson Refinery – Hollyfrontier – 15,600 bbl/day

Canadian Fuels Association: Report Economic Highlights

ontario refineries economic contribution tax revenues

As shown in a report recently released by the Canadian Fuels Association (CFA), Canada’s refining sector – in Ontario and the rest of the provinces – are a vital part of the lives of many Canadians.

They also just happen to be a critical part of Canada’s energy security and transport infrastructure while also being incredibly valuable to regional and national economies.

Ontario in particular reaps huge benefits from the refining industry. Some of the highlights of the report by the Canadian Fuels Association:

GDP Contribution - $4.7 billion

It’s no small number. In fact, the economic activity spurred by Ontario’s refining industry is equal to almost two-thirds of the direct GDP contribution of the non-residential construction sector (see chart below - Canadian Fuels Association):

Think of all those multi-million dollar / billion-dollar skyscrapers in downtown Toronto.

Wages and salaries for thousands of related-jobs accounted for $769 million of that $4.7 billion - or more than 16 per cent of the industry’s total economic contribution in 2017.

Ontario Refinery Contribution to Gross Domestic Product - Canadian Fuels AssociationMass Employment – 12,000 Jobs

The refining industry supports or contributes to more than 12,000 direct, indirect or induced jobs across Ontario. A supply chain of 1,600 other businesses are also involved with the industry in a wide variety of sectors such as trades, goods manufacturing and distribution services to name a few.

It’s not just Nanticoke or Sarnia that benefit from Ontario’s refining industry either. County’s across Southwestern Ontario are home to jobs as a result of the province’s refineries (Canadian Fuels Association):

Tax Revenues - $320 million per annum

Give or take, that is. In 2017, about $327 million of federal and provincial tax revenues were generated by Ontario’s refineries (Canadian Fuels Association):

Ontario Refineries Tax Revenues Chart 2017

Examining the numbers more closely, for just the province in 2017:

  • $98.9 million – direct tax revenues from refineries
  • $45.4 million – indirect tax revenues from supplier activities (does not include corporate or property taxes)
  • $13.9 million – induced tax revenues as a result of consumption of refinery products

Provincial Investment

Over the past decade, Ontario’s refining industry invested almost $2 billion in capital expenditures and plans to invest $2.4 billion more in the next 10 years (2018-2027).

Apart from crude oil purchases, which make up over 80% of capital expenses annually, Ontario’s refineries spent over $1.5 billion in 2017 – including more than $320 million on salaries, wages and training of workers in the province.

Petrochemical Supply

Ontario Refined Petroleum Products (RPP) 2017 Chart

About $550 million worth of petrochemical feedstock is delivered to downstream petrochemical companies by Ontario’s refineries.

  • The petrochemical industry is one of Ontario’s top manufacturers, contributing more than $10 billion to the provincial GDP per year and employing about 80,000 people
  • Sarnia-Lambton is home to 6 of the world’s top 15 chemical producers and about 70 per cent of the province’s refining capacity

Canada’s Third Largest Crude Oil Refiner

But I thought Alberta was Canada’s largest crude oil refiner by a long shot? Crude oil refining capacity by province in 2016 shows Ontario isn’t that far behind Quebec and Alberta in terms of capacity (Canadian Fuels Association): 

canadian provincial reifning capacity canadian fuels association

Among all provinces, Ontario is the largest market for refined petroleum products (RPP) in Canada. More than 80 per cent of RPPs from Ontario are used to make products that make air travel, transit and other forms of transportation reality which are then consumed within the province.

What if Ontario Refineries Closed Tomorrow?

From all this, it’s easy to see how Ontario’s refineries play an integral role in the province. So what would happen if they were shut down tomorrow?

  • The economy would be halted almost immediately but the loss of investment and related activities
  • GDP would drop by nearly $4 billion, while 50 per cent of GDP would be lost as a result of increased imports of refined petroleum products from other jurisdictions into the province
  • Permanent job losses of 2,000 workers, felt most by service industry companies who are dependent on refinery employees as customers
  • Federal and provincial governments would lose out on $400 million in tax revenues per year, 40 per cent of which would be lost corporate tax revenues from suppliers and refiners
  • Imports to meet demand for refined petroleum products would substantially increase the cost of fuels for consumers and businesses, which would result in higher prices for fuels, services and other related goods

*Sourced from the Canadian Fuels Association – Southwest Ontario Economic Impact Study

Join the Movement!

World's Top 5 Oil Exporters - Who Would You Choose to Buy Oil From?It’s easy to see just how important the refineries are to Ontario and Ontarians. They, along with several other refineries across the country, are an integral part of Canada’s energy security and infrastructure and play an instrumental role in providing Canadians with the products and services they use on a daily basis.

If you support the responsible development of Canada’s natural resources that supply refineries such as these ones in Ontario, we invite you to join us at Canada Action or Ontario Action on Facebook, Instagram and Twitter today!