Research has always been the backbone of the petroleum industry. Bringing crude oil, bitumen or natural gas to the surface presents major technological problems and, once recovered, there is little use for the resource in its raw state. When the industry was first established in Canada in the 1850s in the region of Oil Springs, southwestern Ontario, its main product was asphalt. Soon after, a Nova Scotia physician-geologist, Abraham Gesner, developed a technique for producing kerosene, a high-quality illuminating oil, initially from coal and later from petroleum. This development laid the groundwork for the petroleum-refining industry. Technology for drilling and production of crude oil was developed in the oil fields around Petrolia and Oil Springs, Ont, in the latter half of the 19th century. Notable early developments were spring-pole percussion drilling and a jerker-rod pumping system still in use in southern Ontario fields. The expertise of the Petrolia drillers was used abroad in the development of oil fields in Java, Galicia, Germany and Hungary. In 1884 a German chemist, Herman Frasch, was hired by Imperial Oil to study petroleum-refining problems. He developed a process for the removal of sulphur from kerosene that solved the odour problems of Canadian kerosene and enabled it to compete with products made from low-sulphur Pennsylvania crude. This development initiated the use of chemistry in improving the quality of petroleum products.

The first Canadian petroleum-related laboratory was established by the federal government in Ottawa in 1910 as the Fuels Testing Station of the Dept of Mines, now the Energy Research Laboratories of the Dept of Energy, Mines and Resources. In 1921 the Alberta government established the forerunner of the Alberta Research Council, a body that has been intimately involved in petroleum, coal and bitumen research. The first industrial research laboratory was established by Imperial Oil in Sarnia, Ont, in 1924, when R.K. Stratford was hired as a research chemist and later appointed director of the technical and research department. This laboratory is currently the largest petroleum research centre in Canada. In 1949 Imperial Oil formed a production research division in Calgary, now the research department of Esso Resources Canada Ltd. Imperial also initiated geophysical and geological research and development in exploration technology in the early 1950s; most major exploration companies now maintain programs in applied research in earth science. Syncrude Canada, originally Cities Service Athabasca Ltd, set up its research operations in Edmonton, Alta, in 1958 to support its proposed oil-sands mining and upgrading plant. Shell Canada Ltd established a research centre in Oakville, Ont, in 1962, and in Calgary, Alta, in 1982. Gulf Canada Ltd opened laboratories in Sheridan Park, Ont, in 1964. Petro-Canada initiated research operations in Calgary soon after its formation in 1975. In 1985 Petro-Canada took over Gulf's Sheridan Park research facilities. NOVA-Husky Research Corp was established in 1987 to carry out research. The Geological Survey of Canada conducts geological and geophysical research at the Institute of Sedimentary and Petroleum Geology in Calgary and at the Bedford Institute of Oceanography in Dartmouth, NS. In addition to these government and industry operations, substantial research into petroleum recovery is carried out in centres associated with the universities of Alberta and Calgary, notably the Petroleum Recovery Institute and the Computer Modelling Group. In Canada, in 1982, there were about 1500 people involved in petroleum research and development; since then, in the wake of low world oil prices, the figure has declined.

Much of the research carried out in these laboratories is associated with the solution of problems directly related to Canadian conditions, although the solutions have often been applied worldwide. Manufacture of high-quality lubricants from Canadian crudes, which may contain waxy components, sulphur and other impurities, has resulted in the development of extraction, dewaxing and hydrotreating processes now used in many countries. Sulphur-asphalt paving mixtures and fuels and lubricants designed to operate under harsh, winter conditions are other examples of Canadian-developed products. Since Canada has extensive deposits of heavy crude and oil sands in Alberta and Saskatchewan, many laboratories are involved in researching methods of the recovery and upgrading of bitumen to produce high-quality synthetic crudes. In the 1970s and 1980s the increase in world crude prices, accompanied by the decline in production of conventional oil and gas in Canada, led to an increase in research studies aimed at conservation and efficient use of natural resources. As well as methods to increase recovery of hydrocarbons from conventional oil fields, research has resulted in such developments as fuel-saving lubricants, high-efficiency fuel oil and natural-gas burners, and the use of alcohol fuels to extend gasoline supplies. New techniques, such as the building of artificial islands and ice-resistant drilling platforms, have been developed for hydrocarbon exploration in Canada's northern and offshore frontier areas (see ocean industry). Another significant area of research is in reservoir engineering, which uses computer modelling and other techniques to determine why oil accumulates in the way it does. The rapidly changing conditions in the petroleum industry and the incentives to achieve self-sufficiency ensure that R&D will remain an important part of the petroleum industry (see industrial research and development).