Alberta leaders are voicing hope the province will become the world leader in synthetic gas production to prevent massive waste of the natural commodity by its oilsands development rush.
“It is said that using natural gas to make bitumen is akin to turning gold into lead,” a Calgary oil conference heard from Eddy Isaacs, executive director of the provincial government’s Alberta Energy Research Institute (AERI).”We lose value every time we use it.”
Isaacs drew no quarrels from executives and analysts who attended the crowded conference, an annual event staged by the provincial- and federal government backed Canadian Energy Research Institute. At the same time as he spoke, officers of oilsands developers, such as Suncor Inc., were making vows to stockholders at corporate annual meetings that action will be taken to control costs with new technology and conservation measures.
The view voiced by Isaacs is expected to become official later this year in an “integrated energy strategy” now under development by the Alberta Department of Energy. He ranks among architects of the policy. His AERI, now an advisory agency, was formerly the Alberta Oil Sands Technology and Research Authority, a Crown or government corporation that ran more than C$1 billion (US$850 million) in innovation partnerships with industry during the 1970s and 1980s.
Although newer oilsands complexes have reduced gas use, Isaacs pointed out consumption is still high by heat and hydrogen-addition processes used to separate bitumen from sand then run “upgraders” that finish the job of making refinery-ready synthetic oil.
Bitumen strip-mining and upgrading complexes, which date back to the 1960s, use gas at an average rate of 1.1 Bcf for every million barrels of their end product.
Newer oilsands technology — SAGD or steam-assisted gravity drainage, developed in the 1990s for deposits too deep to mine — is an even heavier gas user to date. For every one million barrels of upgraded synthetic oil from SAGD-based oilsands complexes using current technology, 1.7 Bcf of gas is consumed.
Total oilsands production is forecast by various industry and government authorities to triple or quadruple into a range of three to four million barrels daily in the next 10 to 15 years. Output is widely projected to hit 5 MMb/d by 2030.
At current consumption rates, gas use by a 5 MMb/d oilsands sector is forecast to hit 6 Bcf/d. That would be about 60% of the gas production capacity Alberta is expected to have left in 2030 unless the province’s fledgling coalbed methane sector more than replaces forecast declines in output from aging conventional wells.
Oilsands developers, pointing to Canadian gas prices that remain more than triple their 1990s average despite recent market declines, are not waiting for government policy to tell them to improve. Virtually all current projects include “gasification” schemes that involve extracting methane from heavy hydrocarbons that represent about 20% of oilsands bitumen by volume.
Suncor, owner of the oldest oilsands complex near Fort McMurray in northeastern Alberta, has proposed Canada’s first free-standing gasification plant as part of planned expansions that would about double production to 500,000 b/d.
A gasification scheme is under engineering study for future stages of the newest strip-mining and upgrading complex, the Horizon Project now under construction by Canadian Natural Resources.
The biggest current SAGD project, C$3.5-billion (US$3-billion) Long Lake nearing completion by Nexen Energy and OPTI Canada, pioneers a new gas-manufacturing system as part of its upgrader complex. A lineup of four free-standing bitumen upgraders now in regulatory and early construction phases in the Edmonton and Peace River regions also incorporates variations on the synthetic gas theme.
Besides gas prices, there is an incentive built into oil markets for oilsands projects to devise efficient methods of producing upgraded synthetic crude. At annual average oil prices of US$50/bbl, industry analysts forecast discounts commanded by refiners buying heavy bitumen will stay at about 35% or US$17.50/bbl. That opens up a wide economic field for upgrader projects if they can control costs. One of the biggest is gas, with plants using about 0.85 Mcf per barrel of upgraded synthetic oil production. The differential has periodically jumped into the range of 40-50% during spells of crowding on oil markets caused by refinery and upgrader maintenance.
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