After tripling over the last 10 years, natural gas use by Alberta thermal oilsands production will nearly double again in the coming decade, predicts the province’s Energy Resources Conservation Board (ERCB).
In an annual review and outlook report, the agency forecasts that consumption by the industrial gas guzzler will rise to 3.4 Bcf/d as of 2019.
The total used for bitumen production, upgrader plants to turn the tar into refinery-ready light oil and associated power-heat cogeneration plants averaged 1.8 Bcf/d in 2009.
A decade earlier, at the start of the oilsands development rush, gas consumption hovered at 580 MMcf/d by a small handful of plants scattered across the province’s 140,000-square kilometer (56,000-square-mile) northern bitumen belt.
The rising industrial consumption is expected to make a strong contribution to gradual reduction of gas exports from Alberta, traditionally the source of 80% of Canadian production. Domestic gas use is on the rise at the same time as natural depletion of aging conventional wells is reducing output.
Since peaking 2001 at 14.5 Bcf/d, Alberta gas production has slipped to 12 Bcf/d. Output dropped by 7.5% in 2008-2009 alone as soft prices cut drilling activity in half.
By 2019, the ERCB expects Alberta gas production from all sources to drop to about 8 Bcf/d.
Although the decline rate is expected to slow down as prices recover, the ERCB says conventional gas fields are just plain too old for any amount of accelerated drilling to restore peak production.
Coalbed methane development continues to spread, but too slowly to make up for depletion of conventional fields. Shale gas operations are still only in infant, research or confidential pilot stages in Alberta. Although spring royalty cuts for applying the new technology involved are expected to contribute to accelerated shale projects eventually, industry analysts say prices remain too low for effects of the policy to be felt fully.
Industrial consumption is viewed as inexorably on the rise by government and industry forecasters alike. Gas use in the oilsands averages about one thousand cubic feet per barrel of production, but often goes much higher depending on the quality of the ore and efficiency of the extraction system.
The densest, shallowest deposits are dug up by open-pit mines that hold fuel consumption below 1 Mcf per barrel of production. But gas use can go much higher at “in-situ” production sites that tap deeper layers with pairs of horizontal wells for simultaneous steam injections and oil flows that the heat separates from sand underground.
Although there is a trend towards reducing oilsands gas use with gradual advances in efficiency technology, it is being offset by steadily increasing development of in-situ production as participation in the industry expands beyond the limited area of top-grade deposits suitable for mining.
While an array of new approaches such as solvent injections and underground combustion of coke-like “heavy ends” of bitumen, they are still in field-trial stages and their evolution into large-scale operations is slow. The ERCB foresees gradual overall efficiency improvements rather than industry-transforming breakthroughs.
The board outlook, differing only in detail from forecasts by the Canadian Association of Petroleum Producers (CAPP), anticipates oilsands production will climb to 3.4 million b/d as of 2019 or more than double current output of about 1.5 million.
The ERCB and CAPP alike have raised oilsands production growth forecasts as a result of strong prices and an influx of investment commitments, most recently Chinese state energy enterprises acquiring joint-venture interests in bitumen projects.
Even the current forecasts of oilsands development could turn out to be too conservative if one Alberta school of thought proves to be right. BP’s Macondo well blowout in the Gulf of Mexico is believed to offer a potential boost to oilsands because the nasty accident makes Alberta’s controversial developments look environmentally mild by comparison.
A headline in an investment research report by Calgary’s FirstEnergy Capital Corp. raised the question: “Oilsands and the environment: From whipping boy to white knight?” The answer suggested by the article is yes. “As a result of the BP spill, the oil and gas industry, and perhaps the public in general, will make reassessments and determine that the oilsands just moved up on the scale of relatively attractive areas to invest in production.”
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