Canadian oilsands producers are being urged to go to work on “kicking the natural gas dependency” after an industry canvass turned up alarming demand projections. In a draft report scheduled for release early in 2004, the Alberta Chamber of Resources says that continuing present patterns would cause an “unthinkable” squeeze, with up to half of Canadian gas supplies needed to make the synthetic oil which is rapidly taking over from conventional production.

“Oilsands projects are heavily dependent on natural gas for energy and power (co-generation) and hydrogen production for upgrading,” says the 68-year-old organization of 170 companies, government agencies and academic institutes. The membership roster includes the principal developers of the northern Alberta oilsands, where 175 billion barrels of reserves were recognized as economically recoverable earlier this year.

The gas dependence is a feature of both the two methods currently used to tap the vast northern Alberta bitumen deposits. In-situ or underground extraction, employing steam injections to generate flows through wells, use about 1 Mcf of gas for every barrel of oil produced. Strip-mining likewise uses gas heavily for heat processes in above-ground separation of oil and sand and for power to run equipment.

For both types of production, heavy gas use is also a feature of “upgraders” that convert the molasses-like bitumen into refinery-ready synthetic oil. This manufacturing process uses up to 700 cf of gas per barrel of end product, says the report, titled the Oil Sands Technology Roadmap. The resources chamber says that after taking 35 years to reach one million barrels per day, oilsands production is poised to double within 10 years and then has potential to more than double again to five million barrels daily by 2030.

The northern Alberta resource is big enough to become a secure supply source, from outside the Organization of Petroleum Exporting Countries, to satisfy 20% of total North American requirements for oil as conventional production subsides over the next 27 years, the forecast says. But Canadian gas production is projected to dwindle over the same period by about 50% into the range of 3.5 Tcf per year.

If oilsands developers tried to reach their five-million-barrels-daily potential using current methods, their annual gas requirements would rise to more than 1.5 Tcf. The resources chamber says “in this scenario, natural gas usage would rise from 10% of Western Canadian Sedimentary Basin, coalbed methane and Mackenzie Delta supply by 2012 to an unthinkable 50% by 2030. Such a demand level, combined with competition from other markets in the face of dwindling reserves, will help to drive price increases. The ‘business-as-usual’ case is clearly unsustainable and uneconomical.”

Efforts to break the gas habit are evident among the next generation of oilsands projects, which are currently advancing rapidly before regulatory agencies and in some cases already holding approvals and awaiting only formal authorizations for expenditure from boards of directors. The lineup includes a partnership called Lakeland, between Nexen Inc. and Israeli-owned Opti Canada, which dispenses with external gas supplies by using a new process to generate its own methane from the heavy bottom ends of the bitumen barrel.

An independent upgrader project named Heartland after its location in a central Alberta industrial district, by Asian-financed BA Energy, likewise breaks the gas habit with advanced engineering. The resources chamber suggests the Lakeland and Heartland projects are on a right path. “The solution is energy and hydrogen self-sufficiency, either through the use of residues (of bitumen extraction) or external energy alternatives such as coal or nuclear energy.”

©Copyright 2003 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.