December 05, 2025

On November 27, 2025, the Canadian federal government and the province of Alberta signed a Memorandum of Understanding focused on developing the energy industry, particularly increasing Canadian oil and gas production. The Memorandum specifically mentions a new pipeline that is expected to bring Alberta’s bitumen to the northern coast of British Columbia. Together with the expansion of the existing Trans Mountain pipeline, the new pipeline could deliver up to 1.4 MMBbl/d of bitumen to buyers in Asia. This would represent roughly a 27% increase in Canadian crude oil production.

It is still uncertain whether the pipeline will be built and whether other related projects will be completed as originally planned. There remain significant regulatory, legal, political, technical, and cost-related obstacles. But what economic benefits would these projects bring to Canada if 1.4 MMBbl/d of additional bitumen were produced?

How Large Is the Potential Incremental Oil Production?

In 2024, Canadian crude oil production was 5.135 MMBbl/d. Canada ranked fourth in the world for oil production (6.2% of global output). Figure 1 shows how the potential new production compares with the 2024 crude oil production of other countries. The additional production would exceed the total oil output of many countries, including Qatar, Libya, and Angola. An increase of 1.4 MMBbl/d is equivalent to 1.7% of global oil production in 2024. Although this share would decline as other countries increase production by the time the pipeline is completed and new capacity is reached, it remains a substantial addition to global supply.

Economic Benefits of Increased Production

Total revenue from crude oil production of 1.4 MMBbl/d, based on a Western Canadian Select (WCS) oil price of CAD $65/bbl, would be approximately CAD $33.2 billion per year. Currently, oil production brings in about CAD $121 billion in revenue per year. This figure does not include revenue from natural gas or NGLs. For comparison, manufacturing sales of motor vehicles and parts were CAD $55.1 billion in 2024.

Oil and gas producers pay royalties to mineral rights holders, which in the case of the oil sands is primarily the Province of Alberta. Royalty rates in Alberta are calculated using a complex formula that ensures capital cost recovery until project payout. Rates generally range from around 5% before payout to about 30% after payout. Incorrys estimates that an additional 1.4 MMBbl/d of bitumen production would generate an extra CAD $6–7 billion for the Alberta budget, up from CAD $17.2 billion in bitumen royalty revenue today.
Producers also pay corporate income taxes after recovering their investment costs. Future corporate tax revenue is difficult to estimate, but based on historical results from Canada’s leading producers—Suncor and CNRL—incremental corporate income taxes from the additional 1.4 MMBbl/d would likely exceed CAD $2.5 billion per year after payout.

These estimates of the economic benefits of increasing oil production in Canada do not include individual income taxes or the broader indirect contributions to the Canadian economy.

References:
“Canada-Alberta Memorandum of Understanding.”, Prime Minister of Canada, November 27, 2025, https://www.pm.gc.ca/en/news/backgrounders/2025/11/27/canada-alberta-memorandum-understanding

“Statistical Review of World Energy.”, Energy Institute, 2025, https://www.energyinst.org/statistical-review

“Important Facts.”, Canadian Vehicle Manufacturers’ Association, 2025, https://www.cvma.ca/industry/facts/

“Oil sands royalty guidelines.”, Government of Alberta, 2025, https://www.alberta.ca/oil-sands-royalty-guidelines

“Budget. Revenue.”, Government of Alberta, 2025, https://www.alberta.ca/revenue