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Booming Oilsands Lifting Canada’s NatGas Demand

Nearly twice as much new oilsands production will be added as Alberta companies have postponed since prices fell, in a development wave sustaining growth of Canada’s biggest industrial natural gas consumer.

A project count by the National Energy Board (NEB) shows continuing construction now under way -- of both new plants and improvements to operating sites -- will raise northern bitumen belt output by one million b/d, to three million b/d, as early as 2018.

At the average oilsands gas consumption, estimated by the Alberta Energy Regulator as 1 Mcf per barrel of production, the output growth foreshadows fuel use growth of 1 Bcf/d in the sector’s thermal extraction and power generation processes.

The current construction wave includes the first in a series of oilsands region pipeline additions planned by TransCanada Corp.’s supply and trading grid in Alberta and British Columbia, Nova Gas Transmission Ltd.

The NEB oilsands count recorded suspensions of nine long-range projects, not yet under construction, to produce 527,500 b/d. To the extent that low prices last and the plans stay shelved, about 528 MMcf/d will be cut off gas demand forecasts made before oil markets turned soft.

The board’s count is consistent with an early winter industry snapshot by the Canadian Association of Petroleum Producers (CAPP). A member survey forecast a C$8 billion (US$6.4 billion) drop in oilsands capital investment intentions but survival by C$25 billion (US$20 billion)-worth of currently active projects. CAPP predicted the growth momentum would raise bitumen output by 300,000 b/d in 2015-2016 alone.

The NEB and CAPP outlooks are also consistent with the theme of the 2015 World Heavy Oil Congress, held in Edmonton March 24-26. The event slogan was "producing more with less."

Congress chairman Mark Little, production chief of Alberta bitumen mainstay Suncor Energy, said seven extreme price volatility episodes in his career to date taught that survival in the oilsands requires a "permanent lifestyle" commitment.

Outlasting the busts requires constant focus on cost control and not yielding to temptation to ease off during market fat years, Little said. "We can take advantage of this downturn by pushing a lifestyle change rather than taking a crash dive."

The message was aimed especially at current generations of supply, service, labor and construction contractors that dined out on the past 15 years of almost uninterrupted acceleration of oilsands development employing tens of thousands of skilled workers.

To production company veterans, Little’s lesson was old hat. Congress sessions on plant efficiency, reliability and technology evoked memories of the worst market calamity in the mid-1980s, when prices fell well below oilsands day-to-day cash operating costs.

The crisis inspired top-to-bottom plant overhauls. The most visible change replaced mining networks of giant bucket wheels, draglines and conveyor belts imported from Europe with agile, faster and much lower-cost jumbo trucks and shovels devised in collaboration with North American and Asian equipment manufacturers.

The overall effect, which Little urged his peers to continue, was to generate economies of scale, with construction and operating expenses spread thinner over a 10-fold increase in total oilsands production volume since 1985.

The notoriously heavy uses of natural gas and water in thermal oilsands production are prime targets of current engineering, earth sciences and technology research and development, the international industry congress confirmed.

Arrays of cost-cutting -- and potentially environmental -- improvements are under study, from refinements of underground computer imaging and modeling that guide production installations to steam additives, chemical solvents and electric and solar industrial heat systems or substitutes. "We know where this oil is and we’ve developed deep expertise at producing it," said Little. "We have to find better ways."

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