Natural resource wealth, 2010
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Kazi Islam, Patrick Adams and Michael Wright, Environment Accounts and Statistics Division
Canada is endowed with substantial reserves of natural resources, from energy and minerals in the ground to accessible stands of timber in forests. Fuelled by increased world demand for energy and minerals, natural resource wealth—defined as the value of selected 13 natural resource reserves—grew in 2010 following a decline in 2009 due to the global economic downturn. In 2010, natural resource wealth stood at $1.16 trillion or $34,000 per capita, 14 representing 15% of Canada's non-financial wealth 15 —equal to the sum of produced assets, 16 land and natural resource assets (Chart 6).
Like land and produced assets, natural resource wealth plays a significant role in generating income, exports, and employment. 17 This article provides a brief overview of recent trends in Canada's natural resource wealth.
What you should know about this study
This study uses data from the Natural Resource Stock Accounts. These accounts measure the value of natural resource assets; for example, reserves of metal ore in the ground or accessible stands of timber in forests. For mineral and energy resources, reserves are defined by the amount of proven and probable stocks that are profitable to extract using available technology. For timber resources, only the stocks that are physically accessible and available for harvesting are accounted for.
The approach taken to value resources is similar to that of valuing an annuity—a resource's value is equated to the stream of income that can be generated from extracting it over its useful lifetime.
The first step to estimating the stream of income involves calculating the current year's income from extraction. Income, also known as 'resource rent,' is equal to total revenue received from sales throughout the year minus all costs incurred during extraction. Costs include operating costs, like fuel and labour, as well as capital costs, such as wear-and-tear on machinery. Apart from these costs, businesses also pay fees, taxes and royalties to various levels of government. These payments implicitly represent rent and, hence, are not deducted from sales revenue.
Next, it is assumed that the quantity extracted as well as the rent generated from extracting the resource will remain constant in each successive year until reserves are exhausted. A final step in valuation is to calculate the present value of this stream of income. Since any rent that will be received in the future is worth less than it would be if it were in hand today, all future rents must be discounted before being summed together. This method is widely used by other countries to estimate natural resource wealth and is consistent with international statistical best practice.
For more information please see Definitions, data sources and methods: Natural Resource Stock Accounts.
Natural resource wealth bounces back
Natural resource wealth is more volatile than other types of wealth. Natural resource prices 18 are determined by global demand and supply while the value of land and produced assets is more influenced by domestic market conditions. Owing to a variety of factors, such as high global demand, geopolitical risks and the depreciation of the U.S. dollar, oil prices reached an all-time high during the first ten months of 2008. 19 In the summer of 2008 the price of oil grew to around US$150 per barrel only to drop to US$40 per barrel a few months later. This is reflected in the value of energy resource wealth (Chart 7).
In 2009, natural resource wealth dropped in the face of the global economic downturn. In 2010, this wealth regained some of its losses as global demand began to recover. Both energy and mineral resources contributed to the upturn; in 2010, energy resources accounted for 63% of total natural resource wealth; mineral and timber resources accounted for 22% and 15% respectively.
Oil sands drive energy wealth
In 2010, the value of crude bitumen (oil sands) reserves stood at $460 billion, accounting for 63% of total energy wealth. Crude oil (conventional oil), which had a higher average price in the year, represented about 20% of energy wealth in 2010 (Chart 8). 20 This difference in share reflects the larger size of crude bitumen reserves as compared to crude oil reserves. 21 , 22
In 2010, oil sands reserves under active development amounted to around 4,130 million m3—one of the largest hydrocarbon deposits in the world.
Natural gas wealth has yet to recover from its drop in 2009, due to lower prices. The value of coal reserves has remained steady since 2008.
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