Canada’s National Energy Board (NEB) said Thursday that natural gas requirements for the country’s expanding oilsands industry will grow substantially from the 0.6 Bcf/d recorded in 2003 to a range of 1.4-1.6 Bcf/d by 2015. However, rising gas prices are forcing producers to find alternatives to reduce their dependence on gas as the major source of energy and hydrogen for their operations, the report said.

The NEB’s Energy Market Assessment (EMA), “Canada’s oilsands: Opportunities and Challenges to 2015,” provides an update on the supply and demand aspects of a similar report published in 2000, and offers a comprehensive assessment of the key opportunities and issues facing the oilsands.

Canada’s oilsands are one of the world’s largest hydrocarbon resources, and in recent years, NEB noted that stronger energy prices, together with significant strides in technology, have made this resource increasingly more economic to develop. More than C$60 billion in new oilsands related projects have been proposed, with C$20 billion already invested in completed projects.

The report also identified some potential spin-off developments in the electricity and petrochemical industries. Cogeneration of steam and electricity could lead to synergies for oilsands operations by lowering energy costs and improving electricity reliability. Also, the petrochemical industry “is currently facing a situation of tight ethane feedstock supply. The bitumen upgrading process produces off-gas from which ethane, ethylene and other light hydrocarbons could be extracted for use as a petrochemical feedstock.”

This year, Canadian oilsands production will surpass 1 million bbl/d, and by 2015, oilsands production is expected to more than double to 2.2 million bbl/d. “Growth in global oil demand suggests that markets will exist for the rising oilsands output and pipelines will be constructed or expanded to tap these markets.”

NEB noted that estimates of supply costs of oilsands production are higher than forecast in 2000, primarily reflecting higher natural gas prices and higher capital costs. The board’s analysis of project economics suggests that, in general, an oil price of $24/bbl for West Texas Intermediate and a New York Mercantile Exchange natural gas price of US$4/MMBtu “would yield a rate of return in the low- to mid-teens for both steam assisted gravity drainage and integrated mining operations. In the longer term, it is expected that the historical trend to lowering supply costs through continuous process improvement and new technologies will be re-established.”

Escalating capital costs and project delays incurred by large oilsands mining projects have resulted in an increased industry focus on improved project management, according to NEB. “Recent estimates of capital costs for planned mining projects are considered to be more accurate in that project planners and evaluators have learned from the experiences of previous projects.”

To read the full report, visit the web site at www.neb-one.gc.ca.

©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.