"When the incremental demand generated as a result of the oilsands development is factored in, the amount of Canadian gas available for export to the U.S. is likely to diminish considerably over time," said Raymond James analysts J. Marshall Adkins, Wayne Andrews and Pavel Molchanov.
They noted that Natural Resources Canada estimates non-oilsands gas demand in Canada will grow about 2.1% per year through 2020, while Canadian natural gas production is expected to rise only 0.2% per year over the same period. Canada exported 8.8 Bcf/d of gas to the United States last year, which was more than half of its production. That 8.8 Bcf/d provided about 15% of U.S. gas needs.
In 2005, about 261 MMcf/d of gas went to open pit mining of oilsands, which is restricted to deposits near the surface. According to Raymond James' estimates demand for open-pit mining will grow to 1.1 Bcf/d by 2020. In-situ mining of oilsands, in which gas or steam is injected into the ground to lower the viscosity of the oil, consumed 246 MMcf/d of gas in 2005, but the analysts project that will grow to 1.2 Bcf/d by 2020. In total, Raymond James projects that gas demand from oilsands development will grow from 0.5 Bcf/d in 2005 to 2.3 Bcf/d by 2020.
"Combined with rising non-oilsands Canadian gas demand and stagnant Canadian gas supply, this is almost certain to greatly limit the excess amount of gas available for Canada to export," the analysts said.
One factor that Raymond James did not consider, however, is the innovate fuel alternatives that oilsands development has only started to make possible. For example, two weeks ago Synenco Energy Inc. signed an agreement to provide Agrium with hydrogen, nitrogen, sulfur and carbon dioxide produced from asphaltenes in the 100,000 bbl/d Northern Lights Upgrader oilsands project proposed in Sturgeon County, AB. Agrium will use the products in its anhydrous ammonia production, resulting in a 22 Bcf/year reduction in Agrium's natural gas consumption.
The emerging next generation of Alberta oilsands projects provides an early example of how new technology will make oilsands a contributor to natural gas supplies rather than just a drain (see Daily GPI, July 21).
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