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Gas-Fired Power Projected to Climb in Canada

Power generation and Alberta oilsands development are poised to make strong Canadian contributions toward reducing the natural gas supply glut, said the vice-chairman and a member of the National Energy Board (NEB).

Sheila Leggett and Georgette Habib called attention to new domestic demand projections -- which have been largely ignored in the prevailing market and price gloom -- at meetings of the Canadian Association of Members of Public Utility Tribunals and a gas turbine development committee sponsored by Ottawa's National Research Council and the Canadian Gas Association.

By 2020, annual Canadian gas-fired generation output is forecast to rise by nearly two-thirds from the current 50,809 GWh to a new high of 82,670 GWh. Just how much added gas consumption the growth fuels will depend on the technology that the development committee is dedicated to refining. But the Canadian electricity market share taken by gas-fired power stations is forecast to rise to 11.2% from 8.4% over the next decade.

"Generation from coal could drop 45%," Leggett added. The NEB vice-chairman pointed especially to announced plans for Ontario's government-owned generating corporation to phase out coal-fired plants entirely, starting with shutting down four 500 MW units within the next two or three years.

Across Canada, gas-fired generating capacity is forecast to grow by 5,517 MW from combined-cycle plants and 2,629 MW of combustion turbine and power-and-heat cogeneration operations. The new additions will only be partially offset by shutting down 1,243 MW of older, less efficient steam-turbine systems currently burning gas.

Gas consumption by thermal oilsands extraction projects is inexorably on the rise despite a reduced development pace caused by prices coming off their 2008 peaks while construction costs remain stubbornly high. "Natural gas is expected to remain a primary energy source for oilsands operations over the period to 2020," said Habib.

The NEB member pointed to calculations by the primary approval authority for northern bitumen belt development, Alberta's Energy Resources Conservation Board (ERCB). The latest, highly detailed review of oil, gas, coal and power supplies in the chief producing province documents effects of projects still under way.

The provincial agency is far from alone in anticipating continued growth of gas consumption by oilsands plants. Despite the recession and energy price setbacks, TransCanada Corp. is building a major addition to its Nova grid in Alberta called North Central Corridor, as a west-to-east funnel crossing the province from a point near the British Columbia boundary to the Fort McMurray area in the heart of the bitumen belt.

As of 2011, gas consumption by oilsands operations is projected to grow by about 60% to 1.6 Bcf/d. By 2020 the total is expected to more than double to about 2.3 Bcf/d.

Nowhere is it written -- and especially not on rallying global oil markets -- that the bitumen belt development pace will stay slowed down. Leggett observed that "an estimated C$200 billion (US$190 billion) of projects have been delayed or put on hold since mid-2008. At some point these may come roaring back to life."

The NEB vice-chairman predicted that "price and cost volatility is likely to be an ongoing feature of energy markets." The increasingly huge scale of unconventional gas and oil development alike is contributing to the outlook for continuing wide oscillations.

Leggett observed that "just like an elephant, major projects that have sufficient scale to make meaningful contributions to supply or demand take a while to get started and once in motion are difficult to stop or change direction through some form of reconfiguration or downsizing. So as the ponderous mass of large-scale energy projects attempts to meet up with the bouncing balls of prices and costs, there could be plenty of undershooting and overstepping the exact capacity required at a specific time."

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