While stimulating research on substitutes and new processes, natural gas prices are not yet high enough to make Alberta oilsands developers blink. Canadian Natural Resources Ltd. is going ahead on the next bitumen mega-mine in northern Alberta, while acknowledging gas will be a major continuing expense.
Gas and power will be 30% of daily production costs for the 232,000 bbl/d Horizon Project which is poised to enter construction 45 miles north of Fort McMurray, CNRL predicted, while declaring its intentions to press ahead with the development. Daily cash energy input costs, dominated by gas, are forecast to be C$3.85 (US$3.08) per barrel of a total C$12.70 (US$10.16) cost.
But oil markets, while shaky lately and widely rated in the Canadian industry as ripe for a substantial fall, are still high enough to clear hurdles like expensive gas by locking in prices at US$30 a barrel in long-range hedging contracts, CNRL chief operating officer Steve Laut said.
The company disclosed a 22% increase in overall construction cost estimates to C$9.7 billion (US$7.8 billion). But CNRL also said Horizon will still recover all expenses and net a 15% annual rate of return if the oil price falls 45 % to an average US$28 per barrel.
Construction is already getting under way with up to 1,000 workers expected to be busy this winter on preliminary site preparation. As a development on a grand scale even by oilsands standards, Horizon will be built in stages over 12 years. The preparations alone include construction of an airport big enough to handle 125-seat jets such as Boeing 737s for long-distance commuters among a forthcoming army of about 6,000 construction tradesmen and supervisors.
Improving the efficiency of gas use, or eliminating it altogether, in bitumen extraction and synthetic crude upgrading was high on the priority list of assignments when Imperial Oil Ltd. last month gave the University of Alberta’s engineering department C$10 million (US$8 million) to create an oilsands research center.
But expansion of the oilsands as Canada’s fastest-growing consumer of gas is also continuing on a large scale with no signs of pausing. As 25% owner of the biggest oilsands producer, 250,000-barrels-daily Syncrude Canada, Imperial is also contributing to a mammoth expansion project now underway that will eventually double its output. This project started long before gas prices became a concern.
Imperial, 70% controlled by ExxonMobil, is also pressing ahead on steady expansion of its own Cold Lake oilsands development, and advancing plans for an C$8 billion additional mining and processing complex in partnership with ExxonMobil Canada. The entire Canadian industry is heavily committed to the oilsands, to the point where Enbridge Inc. is eagerly advancing plans to put the sector on the map as a global crude supplier. President Pat Daniel said “very good progress” is being made on the Enbridge’s proposed Gateway Pipeline, an entirely new route planned to deliver oilsands production from northern Alberta to the west coast of British Columbia.
The plan calls for a C$2.5 billion (US$2 billion) pipeline to load up tankers with an initial 400,000 barrels per day, and then more, as markets warrant capacity expansions. Along with Alberta oil producers and American importers, prospective shippers include refiners and consumers in Asian countries such as South Korea.
There is considerable talk, although no sign of action yet, about Chinese investment in the oilsands as either a producer or buyer or both. “The pressure is on us to try to move along as quickly as possible to meet a late 2008 or ’09 time frame” for putting the oilsands export line into service, Daniel said. Construction of Gateway is expected to ensure long-range expansion of oilsands development as new markets open up. Depending on methods used, gas consumption by oilsands production can exceed on Mcf for every barrel of output.
The heaviest gas user is “in-situ” or underground extraction, relying on steam injections into oilsands deposits to heat bitumen, separate it from the sands and make it flow to the surface. Forecasts prepared for the Mackenzie Gas Project say gas demand increases among oilsands developers will about match the maximum volume of 1.9 Bcf/d the Canadian arctic pipeline will put on the market.
The huge consumption level will be reached even if the oilsands projects improve their efficiency significantly, due to the vast scale of development believed to be just beginning. Oilsands production, tapping 175 billion barrels of reserves rated as recoverable with current technology, is forecast to triple or more into the range of three million barrels per day over the next 10 to 20 years.
Â©Copyright 2004 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1266 |