Irrefutable impact

The strategic economic importance
of refining in Ontario

Stewart Dudley

Stewart Dudley is a freelance writer and regular contributor to Canadian Fuels Association publications.

Ask Canadians to rank Ontario as a petroleum refining province and they’re likely to identify it as more of an energy consumer than a producer. It’s true: Ontario is the largest market in Canada for refined petroleum products (RPPs). But the province also accounts for more than 20 percent of total national refinery capacity. Four refineries are key: three in Sarnia (Imperial, Shell and Suncor) and one at Nanticoke (Imperial). In fact, Canadian oil refining began in Ontario. The country’s first refineries opened in Petrolia, near Sarnia, in the 1860s.

Spend a bit of time in the Sarnia area today and you’ll quickly learn how connected its citizens are to the refining sector. Sarnia-Lambton is a small, close-knit community of just over 71,000. Yet more than 3,600 people work in or with the refining sector.

But what about the petroleum refining industry’s contribution to Ontario as a whole? What is the true economic impact of this industry? In 2018, the Canadian Fuels Association commissioned Aviseo Consulting to find out. Aviseo’s report provides a portrait of the refining industry in Ontario, describes the many benefits of refineries for the province’s economy, and examines the role of refineries in the petrochemical industry in Sarnia.[1]

 

A major investor in the province

The petroleum refining sector generates $4.8 billion in added value each year and accounts for 0.6% of the entire Ontario economy. The industry’s capital expenditures are substantial. Over the last 10 years, Ontario refiners have invested close to $2 billion in machinery and equipment, construction and engineering, environmental and facility services capital expenditures—a figure that is expected to jump to $2.4 billion between 2018 and 2027.

The sector’s operational expenditures (OPEX) topped $1.5 billion in 2017, not counting crude oil purchases that constitute more than 80 percent of refinery expenses. More than 20 percent of OPEX goes to human resources and training. That’s roughly $320 million spent on wages, salaries and training for Ontario workers.

 

An important source of jobs

Province-wide, the sector accounts for more than 12,000 direct, indirect and induced jobs.[2] Nearly 5,000 of those direct and indirect jobs are in the regions where the plants are located. Yet the benefits of employment are felt far beyond, as more than 6,000 indirect jobs are located elsewhere in Ontario.

This underscores the impact of the sector on service jobs, contractors and trades. Indeed, Ontario’s refiners count on an integrated supply system that includes nearly 1,600 firms—almost 1,000 of which are based in Ontario.

Hypothetical closure

Aviseo’s study includes a scenario in which all four refineries are shuttered. The resulting impacts to Ontario would be profound: a permanent loss of more than 2,000 jobs, billion in GDP and million in government tax revenues. In addition, the loss of this critical energy infrastructure would have implications for the security of Ontario’s transportation energy supply and the closely linked petrochemical industry.

Summary of the economic impacts and fiscal revenues of the Southwest Ontario refining industry

Ontario, 2017; in number of full time equivalent jobs

table showing summary of the economic impacts and fiscal revenues of the Southwest Ontario refining industry

 

Keeping tax revenues flowing

Governments also reap considerable benefits from the refining industry. Just over $144 million in taxes flowed from the sector into Ontario’s coffers in 2017. The federal government’s take amounted to $156.4 million. Including induced tax revenues, governments collect nearly $330 million from the refining industry each year.

Municipalities in Sarnia and Nanticoke raise $4.2 million in property taxes from the industry each year. In Sarnia, this revenue represents six percent of the total property tax take and 83.5 percent of all industry taxes collected.

 

Strengthening the value chain

Ontario’s refiners supply downstream industries with $550 million worth of petrochemical feedstocks. Canada’s petrochemical companies are highly concentrated in Ontario, and rank among the province’s largest manufacturers. Chemical, plastic and rubber product manufacturers represent 3,800 Ontario businesses, employ nearly 80,000 people and account for more than $10 billion of Ontario’s GDP.

 

Supporting communities

Ontario’s petroleum refining industry delivers more than economic impact. Refiners make important social contributions in their roles as members of the communities in which they operate and employ Ontarians. This community link includes close ties to academia, supporting vital research and the development of tomorrow’s industry professionals. For example, the sector partners with Lambton College to support the institution’s Chemical Production and Power Engineering Co-op program.

Suncor, Imperial and Shell also fund numerous charities. In 2017, these companies invested $1.3 million to support various community activities, including sporting and cultural events, and health, educational and environmental projects.

How vital is the petroleum refining industry to Ontario? Let’s not forget that this industry is the energy source Ontario counts on to fuel air travel, personal transportation and the movement of goods and services we count on. It is no exaggeration to say that Ontario’s petroleum refiners fuel the economy, delivering profound impact with ongoing contributions that sustain and enrich communities throughout the province. 

  1. Economic Impact Study of Southwestern Ontario Refineries. Aviseo Consulting. Montreal, 2019.
  2. “Induced jobs” are created by the expenditures in the community by workers directly or indirectly employed by the petroleum refining sector.
  3. Fiscal revenues include revenues for the government of Ontario, the federal government and municipalities. References: CFA, Aviseo Consulting.