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Alberta oil sands hungry for natural gas Swing to thermal recovery projected to grow gas usage from 1.1 bcf per day to 3 bcf in 2020, 4% of demand, up from current 1.5% Gary Park For Petroleum News
In a sluggish North American natural gas market, there is broad agreement the Alberta oil sands are a lifeline.
As the Alberta oil sands continue their swing away from open-pit mining and toward thermal recovery, the need for gas-fired steam generation is destined to grow from 1.1 billion cubic feet per day to at least 3 bcf per day in 2020 and possibly a staggering 7 bcf, according to Calgary-based consultant Ziff Energy Group.
Current consumption is estimated to range from 1 bcf to 1.5 bcf per day, compared with 900 million cubic feet in 2006.
Based on more than 60 existing, under-construction, approved and proposed oil sands developments, oil sands gas consumption will account for 4 percent of North American demand by 2020, compared with the current 1.5 percent, said a report by Ziff gas analyst Julia Sagidova.
That assumes bitumen output will rise to 3.5 million to 4 million barrels per day, up from about 1.5 million bpd now.
But if all of the announced projects — not just those sanctioned or under construction — go ahead and reach their design capacity, Ziff estimates the oil sands sector would need more than 7 bcf per day within a decade — about half of Canada’s total current production.
Canada burned 7.2 bcf per day in 2009, with the rest exported to the United States.
However, Ziff Vice President Bill Gwozd said 3 bcf per day is viewed as a more realistic target.
Thermal in-situ production (using either steam-assisted gravity drainage or cyclic steam technologies) averaged 612,565 bpd in June, closing in on 643,600 bpd from mining operations.
Gwozd said mining projects use about 500 cubic feet of gas to produce a barrel of bitumen, while thermal in-situ projects consume about double that amount.
Gas for upgrading excluded Neither figure includes the gas used to upgrade the raw bitumen to synthetic crude for later refining to transportation fuels, although Gwozd said that process would increase gas needs by only 10 percent.
Three bcf is the energy equivalent of 530,000 bpd of bitumen, meaning that for every seven barrels of crude extracted from the oil sands, roughly one barrel of natural gas will be burned.
That prompts Jennifer Grant, oil sands program director at the Pembina Institute, an environmental think-tank, to say that consuming more natural gas will pose a challenge for Canada to meet its greenhouse gas reduction goals.
“If we’re going to be serious about fighting climate change, we need slower, not faster additions of natural gas capacity,” she said.
The Ziff forecast expects the volume of gas burned will decrease over the next decade as a result of technology improvements.
Whatever the increase in oil sands gas needs, Ziff estimates that each additional 1 bcf will raise gas prices by 25 cents per thousand cubic feet — a significant amount at a time when producers are braced for prices to remain stuck around $4 per thousand cubic feet for the next several years.
Ziff most bullish However, Ziff is the most bullish of those forecasting gas needs for the sector.
Bentek Energy, a unit of Platts, estimates demand will reach 2 bcf per day over the next five years, while Navigant Consulting targets 6 bcf by 2035.
Whatever the accuracy of those numbers, all are agreed gas demand will rise exponentially over the next 20-plus years and will keep gas prices from sinking into a quagmire.
But, other than periodic price spikes as new oil sands projects come onstream, none see the sector driving gas values to new heights in the near term.
Navigant director Gordon Pickering believes prices will remain below $5 per million British thermal units in 2020 and only edge above to $5 by 2025.
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