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Oil Sands' Natural Gas Demand Expected to Triple

Date: 02-Jun-06
Country: CANADA

Production from the oil sands of northern Alberta is expected to rise to more than 3 million barrels a day by 2015, according to a study by the National Energy Board, triple last year's output.

However that increase will demand massive amounts of new natural gas for the oil sands projects that are increasingly prevalent around Fort McMurray, Alberta, even as Canadian supplies wane.

Natural gas is a key power source for oil sands projects. It is used as fuel to heat the steam used to liquefy the tar-like bitumen for thermal, well-based projects. It's also a source of heat and hydrogen in mining and upgrading projects, which turn bitumen into synthetic crude.

According to the NEB's 2006 oil sands Energy Market Assessment, the amount of gas used in oil sands production will rise to 2.1 billion cubic feet a day in 2015 from about 700 million cubic feet last year.

If the board's forecast, which hinges on nearly C$100 billion (US$90.2 billion) worth of new projects being constructed by 2015, the area will use 13.2 percent of Canada's current daily gas output of about 17 billion cubic feet a day at the end of 2004.

Canadian gas production peaked at 17.4 billion cubic feet a day in 2001 and 2002, according to figures from the Canadian Association of Petroleum Producers, and large new discoveries of natural gas have become rare.

However while gas production is waning, new supplies are expected to reach the oil sands region from the planned Mackenzie Valley natural gas pipeline, which will bring the fuel down from Canada's Arctic, as well as from imports of liquefied natural gas and perhaps gas from Alaska.

"We don't see any issues on gas availability," said Bill Wall, oil technical specialist for the NEB.

In its study the board also said it expects oil sands projects to be economic as long as benchmark oil prices remain above US$35 a barrel, half their current level.

Canada's oil sands have an estimated 174 billion barrels of recoverable oil, a resource second only in size to Saudi Arabia

(US$1=$1.10 Canadian)

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