The demand for gas in northern Alberta oilsands development is expected to equal the 1.2 Bcf/d of new resources from the proposed Mackenzie Valley Pipeline by the time the pipeline is expected to be in service in 2010, according to studies currently being filed with the National Energy Board in support of the project.

“Within Canada, Alberta will be the fastest-growing gas market,” says one study. It is among about 8,650 pages of documents now going into circulation and being posted on the Internet to support construction and environmental applications announced by the Mackenzie group last week (see Daily GPI, Oct. 11).

A portrait of increasingly tight markets is painted in a study done by international research firms, Navigant Consulting Inc. and Energy and Environmental Analysis Inc., for the Mackenzie consortium of Imperial Oil, Shell Canada, ConocoPhillips Canada, ExxonMobil Canada and the Aboriginal Pipeline Group.

“The major growth markets in the province will be the extraction and processing of bitumen in the Alberta oilsands, and electric power generation.”

By the time the proposed Mackenzie Valley Pipeline is scheduled to start delivering 1.2 Bcf/d in 2010, oilsands plant consumption is projected to increase 120% to 1.1 Bcf/d. By 2030, when the Mackenzie plan calls for the northern pipeline’s capacity to expand to 1.9 Bcf/d, gas use by oilsands plants is also forecast to reach 1.9 Bcf/d.

The oilsands share of Canadian industrial demand for natural gas is expected to about double to 38% over the next 25 years, as production rises to 2 million barrels per day by 2011, 2.5 million bbl/d by 2020 and 3.2 million bbl/d or more by 2030.

The C$7 billion (US$5.25 billion) Mackenzie production and pipeline development will be needed under all reasonably foreseeable market scenarios. Bitumen development will be the strongest Canadian force contributing to a “fundamental mismatch” of needs for natural gas racing ahead of supplies across North America, the case for the northern project predicts.

The study emphasizes its oilsands growth forecast is more moderate than many predictions. The outlook includes setbacks likely to be dealt to the current, C$60 billion (US$45 billion) lineup of Alberta projects by unreliable oil and financial markets. It also incorporates expectations of technology advances to reduce the average gas use of oilsands production, processing and upgrading operations.

Depending on the type of development — mining plus above-ground processing, or “in-situ” underground extraction with heat injections — gas use ranges as high as 1.6 Mcf per barrel of oilsands output. The Mackenzie project’s economic outlook predicts average oilsands gas consumption will be gradually reduced to 0.65 Mcf per barrel, including the effects of new processes that burn their own bitumen for heat and power to virtually eliminate requirements for external fuel.

The oilsands’ role in gas demand, prices and northern development will be scrutinized in the regulatory review of the Mackenzie project, vow environmental interveners in the case led by the Canadian Arctic Resources Committee and the Sierra Club of Canada.

But residential, commercial and power-plant gas use is also forecast to keep on rising across Canada and the United States. Canadian exports to the U.S. are forecast to drop after 2010 as domestic consumers buy more gas before it can cross the border.

Shipments to the U.S. from the Western Canadian Sedimentary Basin are forecast to peak at 13 Bcf/d in 2010, the first full year of operation by the new Mackenzie line. Then exports taper off to 12.8 Bcf/d in 2015, 11.9 Bcf/d in 2020, and into a range of 9.6-10.1 Bcf/d by 2030.

While not predicting gas prices, the Mackenzie group’s market consultants forecast there will be growing reliance on increasingly expensive supply sources as aging reserves in Alberta and the United States run down. By 2020, one-fourth of North American gas requirements are forecast to be met by production “frontiers” including the Mackenzie Delta, the U.S. Rocky Mountain Region, deep-water regions in the Gulf of Mexico and the even more difficult offshore basins of Canada’s East Coast.

“The growth in demand is expected to outstrip gas production in traditional producing basins by a widening margin, including frontier gas resources and liquefied natural gas (LNG). By bringing a large incremental supply of gas to the marketplace, the Mackenzie Pipeline will help fill the growing supply shortfall.”

But not even the far larger Alaska pipeline project, forecast to be built by 2013 and carry over 4 Bcf/d, or twice the Mackenzie line’s maximum volume, is expected to cause a gas glut that would depress prices.

“The addition of a large Alaskan pipeline in the middle of the next decade does not alter the fundamental mismatch between ever-increasing gas demand and weakening gas production growth,” says the Mackenzie project’s market outlook study.

“While large in absolute terms, deliveries of Alaskan gas would represent less than a 5% increase in supply to the overall Canadian and U.S. Lower 48 gas market which is projected to require 88.1 Bcf/d in 2015 and 98.3 Bcf/d in 2030.”

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