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This item relates to two issues filed on this Wed-site;
The End of Cheap Oil
Will the Ontario government's plans to use Natural gas for power generation endanger supplies, create shortages & drive prices up? ???? Will it lead to drilling in the Arctic ????
There is some very blunt talk in this piece and it should be remembered it appears in a well respected national newspaper that serves the business community - as it is part of a 7 day series to warn all of us about the dangers of the end of cheap oil, we should take it very seriously. Don't get caught up in the technical talk - the bottom line is clear, there is only so much oil and finding better ways to get it will not make more oil.
"Today, it's about $8 and has been as high as $16." & "the upward pressure on gas prices could be formidable."
"Ontario wants to build a new fleet of gas burners to make electricity. Good luck. The province will have to compete with Imperial Oil, PetroCanada, EnCana and other oil sands companies for the fuel. The era of bargain gas is probably over."
"Imagine the premier of Ontario explaining to voters that the province can't build a Kyoto friendly gas plant to replace the doomed coal burners because Alberta needs the clean fuel to make oil for American SUVs."
The Globe & Mail - May Sat. 28-05 - By ERIC REGULY <email@example.com> - CALGARY - B2
Oil sands mother lode could doom gas reserves
The old adage about natural gas went like this. Find it once and you're reprimanded. Find it twice and you're fired.
Not many years ago, gas was a nuisance fuel that was routinely burnt, or "flared off " in drillers' argot, at the wellhead; oil is what they wanted. Now gas is considered a premium fuel and look at the price. In the late 1990s, the Alberta spot price was less than $2 per gigajoule (roughly equivalent to 1,000 cubic feet). Today, it's about $8 and has been as high as $16. How did that happen?
The plethora of gas-fired electricity-generating plants and residential gas furnaces in Canada and the United States can take only some of the blame. Much of the rest can go to Alberta's oil sands, which use vast quantities of gas to make oil.
The economic problem is expense. As gas prices rise, so does the cost of wringing oil out of the oil sands. There are environmental and political problems, too. Burning a clean fuel to make a dirty fuel is a form of reverse alchemy, like turning gold into lead. It also leaves less gas for more sensible uses, such as making electricity and heating your home. Ontario wants to build a new fleet of gas burners to make electricity. Good luck. The province will have to compete with Imperial Oil, PetroCanada, EnCana and other oil sands companies for the fuel. The era of bargain gas is probably over.
Oil from the oil sands can be produced in two ways. If the guck is near the surface, it can be dug out of the ground with mammoth shovel loaders. Warm water is then used to separate the sand from the bitumen, which is then sent on to a refinery for upgrading. Syncrude and Suncor use this method.
The more technically difficult and energy intensive method is the "in situ" process, in which gas is used to boil water to make steam. The steam is injected underground to heat up the reservoir and free the oil, which is then pumped to the surface.
As the oil sands expand they're billed as the next Saudi Arabia - gas demand will become voracious. In theory, all of the estimated six trillion cubic feet of gas in the Mackenzie River Delta, Canada's next gas frontier, could go to the oil sands alone. Imperial Oil's Cold Lake project, the biggest in situ operation, consumes 100 million to 150 million cubic feet a day to make about 130,000 barrels a day of oil. The daily gas bill comes to about $1-million and can only go up as Cold Lake expands (production will probably reach 150,000 barrels by the end of the year).
Quadrise, a company developing alternative fuels for oil sands production, says in situ oil production consumed about 400 million cubic feet a day last year. Based on projected oil production increases, the figure will more than triple in the early years of the next decade. Currently, the oil sands consume 5 per cent or less of Canada’s total gas production. The problem is that production has probably reached its peak and, Mackenzie Delta or not, is expected to decline. Some Alberta gas wells are depleting at 25 per cent a year. As the oil sands consume bigger chunks of the dwindling resource, the upward pressure on gas prices could be formidable.
The good news is the oil companies know they have to find an alternative to gas to avoid a cost crunch and a potential east-west energy clash. Imagine the premier of Ontario explaining to voters that the province can't build a Kyoto friendly gas plant to replace the doomed coal burners because Alberta needs the clean fuel to make oil for American SUVs. The bad news is that the alternatives to burning gas, while under development, are many years away from widespread commercial use.
But at least they're under development. An oil sands company called Deer Creek Energy is experimenting with a Quadrise fuel technology called MSAR - multiphase superfine atormized residue - that was first developed by British Petroleum and the Venezuelan national oil company in the 1980s. The technology takes a heavy, lowgrade (and hence cheap) crude and turns it into fine droplets dispersed in water. It burns like gas and can be manufactured at the oil sands field, eliminating the expense of shipping it in.
The Alberta Long Lake project, a joint venture between Opti Canada and Nexen, uses an entirely different technology to separate oil from the oil sands, one that also eliminates the use of gas. The process turns a certain grade of bitumen into hydrogen gas. The hydrogen is used to make enough steam, heat and electric power for all of the Long Lake operations. The Alberta Energy Research Institute called the technology "the future of Canadian oil sands expansion."
More technology concepts are being pitched. The idea of building a nuclear-powered steam-generating plant near the Alberta-Saskatchewan border has been floated. It went nowhere. But if gas prices soar, the nuclear option will no doubt be revived.
A decade ago, the oil sands were a fringe operation. Today, they are considered the key to North American oil security. Even President George W. Bush is praising their apparent success. But when you calculate the toll on gas reserves, the cleanest and most versatile hydrocarbon, the oil sands dont look like a godsend after all.
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