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Alberta Oilsands Pipe Expansion Approval Signals NatGas Demand Growth in Canada

The Liberal government in Ottawa opened doors Tuesday to growth by Canada’s biggest natural gas consumers, Alberta oilsands plants, by approving 970,000 b/d of capacity additions for export pipelines to the United States and overseas.

Prime Minister Justin Trudeau said the federal cabinet ratified favorable rulings by the National Energy Board (NEB) on Kinder Morgan Canada’s Trans Mountain Pipeline expansion and the Enbridge Line 3 Replacement.

Alberta Premier Rachel Notley voiced widespread relief over the pipeline approvals, which ended fears that the federal government would knuckle under to eco-pressure for a halt to fossil fuel development.

Notley flew to Ottawa to deliver a hearty thank you statement at a news conference.

“Our province has been brutally slammed by the collapse in commodity prices,” she said. “It has been a long, dark night for the people of Alberta as a result. Today we are finally seeing some morning light...

“We are getting a chance to break our land-lock. We're getting a chance to sell to China and other new markets at better prices. We're getting a chance to reduce our dependence on one market, and therefore to be more economically independent. And we're getting a chance to pick ourselves up and move forward again.”

The $5.5 billion Kinder Morgan project would triple capacity to 890,000 b/d on the 63-year old Trans Mountain conduit across 1,180 kilometers (732 miles) of Alberta and British Columbia (BC), from the Edmonton oilsands shipping hub to Vancouver.

Enbridge’s $5.6-billion program would add 370,000 b/d by replacing 1,660 kilometers (996 miles) of pipe in its 48-year-old Line 3, from a central Alberta storage and loading hub at Hardisty to a Wisconsin counterpart at Superior. The giant maintenance project would revive deliveries to their original 760,000 b/d.

Projections by the NEB this year said increased oilsands production could include a rise in natural gas used to produce the heavy oil by 62% to 4.7 Bcf/d as of the mid-2020s from a current average 2.9 Bcf/d.

Trudeau acknowledged environmental and aboriginal opposition to the projects during a nationally broadcast announcement. But he repeated his pro-economic growth stance: “There isn’t a country in the world that has billions of barrels of oil and leaves it in the ground.”

The prime minister emphasized that the federal and Alberta governments are acting to ensure “clean” fossil fuel development with carbon taxes, industrial emissions controls, a coastal tanker safety program, accelerated elimination of coal-fired power generation, and research on other potential improvements. Economic growth and environmental virtue are not mutually exclusive, he said.

The Enbridge Line 3 project is a mega-program of pipeline safety. The replacement stems from a 2010 Kalamazoo River spill in Minnesota. Resulting pressure restrictions have since cut traffic nearly in half, down to 390,000 b/d.

The prime minister also announced two concessions to native and eco-protesters. But hard-core factions denounced the approval decisions as contrary to Canadian climate change policy commitments and threatened protest lawsuits.

The federal cabinet rejected Enbridge’s rival to Trans Mountain, the Northern Gateway proposal, for a new northern line from Edmonton to Kitimat, BC on the Pacific coast. The dismissed proposal has been suspended since June, when the Federal Court of Canada overturned cabinet approval by the previous Conservative government as a result of lapses from native consultation requirements.

Trudeau plans to nail the door shut on Northern Gateway after he promised legislation soon would be introduced to impose a moratorium against loading up oil tankers on the northern BC coast.

The ban does not affect Kinder Morgan’s Vancouver dock or proposed liquefied natural gas export terminals and tanker ports with sites at Kitimat, farther north at Prince Rupert and near Vancouver.

Alberta industry and government leaders applauded the Liberal regime’s pipeline approvals, as key ingredients of provincial and national energy development plans for decades to come.

The projects are forecast to help pull Canada’s chief oil- and natural gas-producing jurisdiction out of a deep slump since energy prices nosedived in 2014.

“Albertans have suffered a great deal over the past two years,” Trudeau said.

Virtually all the added pipeline capacity is forecast to carry growing flows from the northern Alberta oilsands, which harbor an estimated 175 billion bbl of reserves that can be recovered with current technology alone. Widening markets is also expected to reduce price discounts inflicted on low-grade bitumen in glutted northern U.S. destinations for heavy oil.

The current Canadian consensus forecast for fossil fuel production, collected by the NEB this year, projects oilsands output rising to 4.3 million b/d from the current 2.5 million b/d, at an unpredictable rate depending on oil prices but certainly by 2040.

Resulting growth of natural gas consumption is documented in the current edition of the Alberta Energy Regulator’s annual reserves report. Gas use by thermal oilsands complexes, including their built-in heat and power cogeneration stations, is expected to rise by 62% to 4.7 Bcf/d as of the mid-2020s from a current average 2.9 Bcf/d.

Gas consumption is growing faster than bitumen production because of a changing supply development pattern. The biggest gas users have taken over the leading role.

Overall gas use in the oilsands averages 1 Mcf/bbl of bitumen output. But the benchmark masks wide variations in energy efficiency.

Open-pit mining and synthetic oil upgrader complexes operate below the average. But in-situ or underground extraction sites, relying on steam injections into deeper ore deposits, burn up to 2 Mcf/bbl and at times even more depending on the age of the operations and the geological structures tapped. Their higher energy use is offset by lower construction costs and sponsor options to install them in smaller stages than the mines.

 

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