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Canadian oil sands production expected to double by 2015 Report says country would move to fourth in ranks of world’s oil producers Don Whiteley Petroleum News Contributing Writer
A National Energy Board report says production from Canada’s oil sands is expected to reach 2.2 million barrels of oil a day by 2015, more than double today’s production.
In a special report entitled Canada’s Oil Sands: Opportunities and Challenges to 2015, the National Energy Board says the increased production will move Canada from ninth place to fourth place in the world’s rankings of oil producers.
But with global demand expected to be about 80 million barrels of oil per day in 2015, the oil sands won’t make a big splash on the world scene. Reserves estimated at 178 billion barrels Canada’s oil sands deposits, located mostly in Northern Alberta, are considered to be one of the largest hydrocarbon deposits in the world, with reserves estimated at 178 billion barrels.
But extracting oil from the sands is an energy-intensive, costly process, and production is economic only at relatively high prices for both oil and natural gas. For this report, the National Energy Board based its projections on an oil price of $24 per barrel, and an equivalent natural gas price of $4 per thousand cubic feet.
Oil sands operating costs range from $4 to $14 for bitumen and $12 to $18 for synthetic crude oil. The estimated supply costs ranges from $10 to $19 for bitumen and from $22 to $28 for synthetic crude oil. High prices one factor in projection The board bases its projections of increased oil sands production on several factors:
• Global petroleum prices are likely to remain at levels high enough to maintain economic viability over the long term.
• Markets will remain strong for oil and natural gas despite a slow, evolutionary transition to other energy forms over time.
• Technological advancements, particularly in environmental controls, will continue to lower unit costs of oil sands production.
But the national energy body also offers some cautionary words, particularly on the sensitive topic of natural gas supply and prices.
“Natural gas requirements for the oil sands industry are projected to increase substantially during the projected period from 0.6 billion cubic feet per day in 2003 to a range of 1.4 to 1.6 billion cubic feet per day in 2015.
“In response to higher and more volatile gas prices, producers are seeking ways to reduce their dependence on natural gas as the major sources of energy and hydrogen for their operations.”
Natural gas supply and price has been controversial, as Alberta shut in some natural gas production this year to ensure a sufficient supply for oil sands production. Along with record high prices for crude oil recently, natural gas has also remained at very high levels for this time of year, hovering around $6.70 US per thousand cubic feet. Canadian gas production expected to be flat Canadian gas production, which increased dramatically in the 1990s, is expected to stay relatively flat, producing about 17 billion cubic feet per day until about 2010. Conventional supply from the Western Canada Sedimentary basin is expected to decline by 2006-2007.
The board estimates that oil sands development and related infrastructure will require a capital investment in excess of C$60 billion over the next 10 years to achieve the productions levels projected in the report. About C$20 billion has already been invested.
“Ongoing volatility in crude oil prices is expected and suggests that it is unlikely that the entire $60 billion in projects will be constructed within the planned time frame,” the report states. “Market conditions will determine the pace of oil sands development.”
The report also suggests that Alberta’s petrochemical industry, facing tight supplies of feedstock gases from conventional natural gas production, could use the ethane and ethylene produced during the bitumen upgrading process.
The National Energy Board credits the oil industry for making significant technological advancements in environmental controls that reduce emissions. The industry uses low nitrogen oxides burners, sour water treaters and flue gas desulphurization to reduce emissions.
New technology has resulted in significant reductions in greenhouse gas emissions despite an increase in production. The board’s report shows a 53 percent reduction in carbon dioxide emissions per barrel for the period from 1990 to 2010 due to investment in new technology. Multi-stakeholder groups have been established in recent years to create policies and programs to address greenhouse gas emissions.
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