Years of research, development and production line changes will be needed to clean up the oilsands by replacing the current method of boiling them into flowing with steam heat, according to new projections by Alberta's Energy Resources Conservation Board (ERCB).

Natural gas use for oil extraction and upgrading is forecast to grow 2.3-fold by 2021, even faster than the anticipated 2.2-fold increase in production across the bitumen belt spanning 142,000 square kilometers (56,000 square miles) of northern Alberta.

Over the 10-year period oilsands output will climb to 3.7 million b/d from the 2011 average of 1.7 million b/d, said the latest edition of an annual ERCB state-of-the-industry report, "Alberta's Energy Reserves and Supply-Demand Outlook."

Natural gas consumption by oilsands sites is projected to climb to 2.8 Bcf/d by 2021 from the 2011 average of 1.2 Bcf/d.

Bitumen belt economics favor the production technique that uses the most gas, the ERCB figures show.

Mining and upgrading complexes that make refinery-ready light oil, also known as synthetic crude, use an average of 0.65 Mcf of natural gas per barrel of production, reports the board. In-situ or underground thermal extraction of molasses-like bitumen, diluted with lighter liquid hydrocarbons for pipeline shipment and sale to refineries with their own upgrading installations, consume 1.18-1.35 Mcf of gas, said the ERCB.

But new mining-upgrading plants, which need to pump out 100,000 b/d or more to be economic, currently cost C$5.5-7.5 billion (U.S. dollar at par) for the minimum-sized operation, and need oil prices to average $70-91/bbl, the board calculated.

In-situ projects that use horizontal wells and injections of super-heated steam from gas-fired boilers can be built in 30,000 b/d stages for $750 million to $1.5 billion apiece, and prosper with oil prices in a range of $50-78/bbl, reports the ERCB.

The oilsands industry started up using the mining-upgrading approach on the bitumen belt's richest, shallowest ore north of Fort McMurray in 1967, and it continues to account for a 52% majority of production. By 2021, output from the open-pit mining complexes is projected to reach 1.65 million b/d.

But the ERCB forecast shows in-situ extraction taking over the lead in about 2015. As of 2021, drilled and boiled bitumen is projected to hit 2.04 million b/d or a 55% majority of the industry's total output of 3.7 million b/d.

Both production techniques are under heavy fire from international environmental groups. The mines' biggest headaches are waste tailings ponds that take decades to reclaim. The in-situ sites face increasingly close scrutiny for greenhouse gas emissions. Water use is an environmental issue for all oilsands production types.

The ERCB made no attempt to guess at results that might be achieved with a promise by the province's Conservative government to resurrect a major improvement agency, the Alberta oilsands Technology and Research Authority (AOSTRA).

The original AOSTRA is credited with developing key ideas, methods and equipment used by thermal extraction projects in $1.3 billion-worth of research partnerships with industry during 1974-86. The government has predicted the agency's new incarnation will eventually do much to overcome the industry's environmental challenges with a similar but larger, $3-billion effort (see Daily GPI, June 18).

No target date has been set yet for the oilsands improvement work to begin, but government sources indicate AOSTRA's rebirth may come during the Alberta legislature's fall sitting.

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