Canada’s oil production will double by 2030, report says
Bulk of new production will come from oil sands
Canadian crude oil production will more than double to 6.2 million barrels per day by 2030, according to an oil industry forecast published Tuesday. The bulk of the oil is expected to come from Alberta’s oil sands.
“Resurging growth in Western Canadian conventional oil production and new oilsands investments are driving the positive outlook,” Greg Stringham, vice-president, markets and oilsands, for the Canadian Association of Petroleum Producers, said in a release. “Canadian oil is clearly on the global stage and this forecast growth will put Canada in the top three or four oil producers in the world.”
Canada currently ranks as the world’s sixth largest producer of crude oil after Saudi Arabia, Russia, the U.S., China, and Iran, according to the U.S. Energy Information Administration.
The bullish outlook suggests that conventional production is increasing because new technology allows the oil industry to produce oil from “formerly uneconomic resources,” the report reads. The forecast does not take into account how new technology will be used by other oil producers, said Warren Mabee, associate director of the Queen’s Institute for Energy and Environmental Policy at Queen’s University. “This is compounded by the fact that gasoline consumption in many Western countries, such as the U.S., is in decline, not growth, and there are some that feel that this trend will continue. Canada relies heavily on foreign investment and could be exposed if we don’t plan for this,” Mabee said.
The annual forecast indicates that Canadian crude oil production will rise to 5.6 million barrels per day in 2025, before climbing to the 6-million-barrel range. The bulk of that increase would come from the oilsands, which would produce 5 million barrels per day, up from the current 1.6 million barrels. Production in Eastern Canada would fall to100,000 barrels per day from the 300,000 million it now produces.
“As a result of strong growth in both U.S. and Canadian oil production, pipeline capacity is expected to be tight in the next few years, requiring the need for timely expansions to provide market access,” the report states.
However, Canada’s oil sands and crude producers face significant opposition from environmental and aboriginal groups because of issues related to the environment, land rights and pollution. Pipeline proposals have become lightning rods for these conflicts. Enbridge Inc., has faced opposition to its $5.5-billion Northern Gateway oil pipeline project in British Columbia, which would give producers access to Asian markets. The company said Tuesday that 60 per cent of the aboriginal communities living on the pipeline route have agreed to accept an equity stake in the project. (See further story below.)
Transcanada wins B.C. pipeline contract
Line costing $4-billion will transport natural gas from shale fields to Shell’s planned LNG export hub on the West Coast
By Nathan Vanderklippe, Globe and Mail, June 6, 2012
It may take the better part of a decade to build, but TransCanada Corp. has won a contest to install a $4-billion pipeline that will carry natural gas to British Columbia’s coast, feeding a proposed massive export terminal.
The West Coast GasLink, as TransCanada has called it, will extend 700 kilometres from Dawson Creek, the nexus of a number of rich B.C. shale gas fields, to Kitimat, B.C. Not far from that town, perched at the mouth of Douglas Channel, Royal Dutch Shell PLC has secured land and is developing a project to export 1.2 billion cubic feet a day of liquefied natural gas – and perhaps twice that – to Asian markets. TransCanada beat out Enbridge Inc. and Spectra Energy Corp. for the Shell contract.
The massive pipe, which will likely measure well over a metre in diameter, is a “key piece” in moving forward the Shell project, a spokesman at that company said, and a shot in the arm for TransCanada, which has seen the prospects for another major Canadian gas pipeline, down the Mackenzie Valley, largely vanish in recent years.
It’s also the latest signal of the industry’s rapid moves to open up West Coast shipments of natural gas. Companies are pushing forward projects worth, in Shell’s case, well over $10-billion, in a scramble to seize a window for Asian export contracts that is expected to remain open for less than a decade. As they do so, they are plunging into the same thicket of first nations and environmental obstacles that’s slowed other projects – although, for now, natural gas has been largely embraced by local groups eager to profit from LNG.
Coastal GasLink is the fourth major new pipeline proposed for the West Coast, as Canada’s energy industry looks for different avenues to export oil and gas. As such it enters uncertain territory – northern B.C. is, after all, the heart of the opposition to Enbridge Inc.’s Northern Gateway project.
TransCanada faces a similar group of 30 first nations, whose land it proposes to cross.
The company is also preceded by its legacy in the U.S., where a lengthy battle over construction of the Keystone XL pipeline, and TransCanada’s unwillingness to shift a route around a sensitive Sandhills ecosystem until forced to do so, suggested to some that the company was deaf to local interests. And the Shell project may spawn opposition, given that Shell once provoked blockades with its plans to drill in a place known as the “Sacred Headwaters.” To this day, some in northern B.C. wear “Get the Shell Out” T-shirts.
“The negative reputations of TransCanada and Shell will definitely make it harder for these companies to get social licence,” said Nikki Skuce, a Smithers, B.C.based campaigner for ForestEthicsAdvocacy. She pointed to the 200 tankers a year that Shell’s project alone could bring to the area.
The prospect of huge increases in vessel traffic has already raised some concern given its potential impact on traditional harvesters of salmon, clams and cockles.
Yet it’s clear those concerns are secondary for indigenous groups eager to profit from LNG. The Haisla First Nation, who claim land around Kitimat, have established formal business relationships with two other LNG proposals, the Douglas Channel Energy Partnership and Kitimat LNG, and are talking with Shell. Among the options on the table are direct equity, revenue sharing and royalty sharing, said Ellis Ross, chief councillor for the Haisla. And while nothing has been resolved, the relationship is clearly warm. Shell has “made tremendous progress in outreaching to our community and our council,” he said.
Art Sterritt, executive director of an alliance of coastal first nations, said groups are contemplating ways to drive far-reaching benefits from LNG. For example, revenues from those terminals could be used to purchase new fishing vessels and help revitalize more traditional economies. First nations are also attempting to find ways to sell renewable power – hydro, run-of-river and wind – to projects that will need massive amounts of electricity. “It may very well be there could be a marriage between non-renewables helping finance our renewable economy,” Mr. Sterritt said.
As for TransCanada, it’s clear the company is attempting to learn from its lessons in Nebraska’s Sandhills. The company has devoted significant effort to planning and engineering a route for GasLink. But it declined to make it public, saying it wanted to first consult local groups. “It makes good sense that we talk to folks on the ground before we start refining and putting lines on maps,” said Rick Gateman, TransCanada vice-president for major projects business development.
The financial community, too, believes TransCanada faces a relatively simple route forward for the line, which could enter the B.C. environmental approval process by early 2014 and complete construction by the end of the decade. The pipe would also link in the Alberta natural gas system, allowing Shell an outlet for rising production as it builds its LNG terminal, and Alberta producers potential access to Asian markets.
Relative to other West Coast proposals, “this one actually probably has the best potential of all of them,” said Carl Kirst, a BMO Nesbitt Burns analyst. “Make no mistake, we are just at the very, very beginning of a longterm process. But in my opinion, the fundamental constraint is simply going to be whether Shell and its partners decide to make a final investment decision.”
See map and image. BC gas production: year 2000, 2 billion cu ft per day; 2020 (projected), 5 billion cu ft per day
Little opposition expected to planned $4-billion gas pipeline
TransCanada says native groups have a stake in the proposed scheme
By Scott Haggett, Reuters, June 6, 2012
TransCanada Corp will build a $4-billion pipeline to serve Royal Dutch Shell PLC’s planned liquefied natural gas plant on British Columbia’s northern coast, the company said on Tuesday.
TransCanada, Canada’s No. 1 pipeline company, said it would design and build a 700-kilometre line capable of shipping 1.7 billion cubic feet of gas per day from the Dawson Creek area to Kitimat, where three LNG plants, including Shell’s facility, are planned.
Northeastern British Columbia contains some of the world’s largest unconventional natural gas reserves. The Montney and Horn River shale gas deposits alone contain trillions of cubic feet of gas. However the U.S. market is glutted with its own shale gas production, and B.C.’s producers have pinned their hopes on LNG exports to tap lucrative Asian markets.
TransCanada said in a statement that it expected to complete the line by the end of the decade, pending regulatory and corporate approvals.
The line will run near Enbridge Inc.’s Northern Gateway oil pipeline project, which will also end at Kitimat. In regulatory hearings, Northern Gateway faces strong opposition from environmental groups and many of the first nations communities along its planned route.
That opposition has already added more than a year to regulatory hearings, a delay that encouraged the federal government to put in new rules capping the length of such sessions.
However, TransCanada’s pipeline is expected to get an easier ride. With little risk of sustained environmental damage from a rupture, natural gas pipelines have not faced the same opposition as oil lines. Also, some first nation communities, such as the Haisla who live near Kitimat, have a stake in LNG projects.
“I don’t think it will get the same sort of resistance [as Northern Gateway faces],” said UBS Securities analyst Chad Friess. “In addition, it’s starting from square one and subject to the accelerated regulatory review that the Canadian government has put out there.”
The line will serve the LNG export facility planned by and partners Korea Gas Corp., Mitsubishi Corp. and PetroChina Co. Ltd. The partners are considering a plant that would initially include two units with capacity of 6 million tonnes each annually, or a total of 2 billion cubic feet a day. The plant could be in service by 2020.
Two other proposals have already received LNG export licenses from Canadian regulators. Kitimat LNG is backed by Apache Corp., Encana Corp., and EOG Resources Inc., while the BC LNG Export Co-operative is made up of the Haisla First Nation, Houston-based LNG Partners and natural gas producers.