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Oilsands Producers Look for Ways to Cut Gas Usage

At the same time that supply projections go up in Canada's chief natural gas-producing province, the demand side of the Alberta market is going on a diet. Weaning plants partly or entirely off gas is a feature of all the latest entries into the lineup of oilsands projects, the biggest and fastest-growing element of industrial fuel demand in Alberta, and also all Canada.

The trend was reinforced within a week of a report by the Alberta Energy and Utilities Board and the National Energy Board that raised estimates of Alberta's remaining producible gas by 30% to about 101 Tcf. A C$600-million (US$480-million) "petroleum coke gasifier" turned up on a construction application filed with the AEUB by Suncor Energy Inc. The plan, if approved, will eventually more than double production by Suncor's 38-year-old Fort McMurray bitumen mining and synthetic oil-upgrading complex to 550,000 b/d. The unit is a new technology for harvesting gas from the heaviest, coal-like coke byproduct of oilsands production.

The new unit would add about 10% to the C$5.9-billion (US$4.8-billion) cost of the project's centerpiece, a new upgrader for converting bitumen into refinery-ready light oil. But the expense is viewed as a reasonable price to pay for reducing reliance on increasingly expensive purchased natural gas -- and a small price compared to the overall cost of C$10 billion (US$8.2 billion) for the entire project including new mining and "in-situ" extraction operations.

The Suncor expansion is only the latest in a string of oilsands projects that has taken the pledge to try reducing reliance on natural gas. But the case highlighted the industry's determination to respond to concerns raised by forecasters with organizations ranging from TransCanada PipeLines to the NEB and the Alberta Chamber of Resources.

The Suncor plant, about 500 kilometers northeast of the Alberta capital of Edmonton, is the elder sister of the oilsands industry. Built in 1967 as Great Canadian Oil Sands, a single-project venture then majority-owned by Sun Oil and staunchly backed by personal visions of a changing supply future in its founding Pew family of Pennsylvania, the operation pioneered commercial-scale use of the heat processes used to extract crude from sand.

Gas was heavily used and the habit continued when the second and still biggest oilsands plant, Syncrude Canada, was built 11 years later. At the time gas was an all but unwanted byproduct of oil activity in Alberta that fetched prices measured in pennies, and the oilsands were a welcome market. For every barrel produced from the oilsands, the industry has historically used one thousand cubic feet of gas or more depending on the techniques employed.

The legacy of the old era continues to show at Syncrude, which is making conservation efforts but still attributes 22% of its production costs to purchased energy. Syncrude's 2004 average per-barrel operating expenses of C$19.40 (US$15.90) included C$4.24 (US$3.48) for gas.

Younger members of the oilsands tribe are blunt about needs to reduce reliance on natural gas. All concerned point to repeated forecasts that unless oilsands projects curb their appetite, the sector will within a decade consume an amount of gas equal to the 1.8 Bcf/d maximum expected from the C$7-billion (US$5.7-billion) Mackenzie Gas Project.

"That's not a sustainable proposition," said UTS Energy president Bill Roach. In the Fort Hills oilsands partnership with Petro-Canada, UTS is vowing to devise ways to reduce gas use as well as byproduct sand-and-water tailings.

The C$3.4-billion (US$2.8-billion) Long Lake oilsands project, now under construction by Nexen Energy and OPTI Canada, promises to eliminate use of purchased natural gas with a patented new way to derive fuel from heavy bitumen residue.

Another new process is being tested by Deer Creek Energy at its Joslyn oilsands project that shows the need to replace expensive purchased gas may create a niche for a new breed of technology companies. Joslyn is trying out a new system trademarked MSAR by inventor Quadrise Canada Fuel Systems Inc. of Calgary, which replaces gas with "multiphase superfine atomized residue" or a fine, flammable bitumen mist.

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