Evidence of meeting #21 for Natural Resources in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was going.
A recording is available from Parliament.
4:30 p.m.
Conservative
The Chair Conservative Lee Richardson
Good. We had expected you to get together to come up with a joint submission, but the separate ones will be fine.
4:30 p.m.
President, Canadian Association of Petroleum Producers
We do that at home, but not in public.
November 2nd, 2006 / 4:30 p.m.
NDP
Dennis Bevington NDP Western Arctic, NT
Thanks, Mr. Chair.
Welcome to the witnesses.
The Natural Resources energy outlook for 2006 had a pretty grim picture for natural gas resources in Canada. My question starting off is this. What is the situation moving forward with tar sands expansion and the use of natural gas?
4:30 p.m.
Vice-President, Markets and Fiscal Policy, Canadian Association of Petroleum Producers
First off, I have seen the report on the natural gas situation in Canada. One of the things we would supplement to that report is the development of what we're calling unconventional gas. They mention a small amount in their report. Just as we have conventional oil and unconventional oil, or the oil sands, in Canada we have conventional natural gas and a very large resource of unconventional gas, which isn't reflected in their forecast as much as we see coming on right now. So that's one aspect.
I would like to get to the oil sands consumption of natural gas. It depends on which kind of project you're looking at, but the range of the amount of gas that is used per barrel of consumption is between a half of 1,000 cubic feet of gas to a full 1,000 cubic feet of gas per barrel of oil.
4:30 p.m.
NDP
Dennis Bevington NDP Western Arctic, NT
Is that per barrel of bitumen extracted or refined synthetic?
4:30 p.m.
Vice-President, Markets and Fiscal Policy, Canadian Association of Petroleum Producers
Synthetic. That's the range that goes across it. If you're looking only at the bitumen, it's the lower number. If you're at the higher number, you're using more than that.
4:30 p.m.
NDP
Dennis Bevington NDP Western Arctic, NT
That's full hydrogen recovery, the full use of hydrogen addition.
4:30 p.m.
Vice-President, Markets and Fiscal Policy, Canadian Association of Petroleum Producers
It is not necessarily using hydrogen addition. It may be using the coking technology, which is carbon extraction.
4:30 p.m.
NDP
Dennis Bevington NDP Western Arctic, NT
Okay, so there might be an even higher number there with the hydrogen addition.
4:30 p.m.
Vice-President, Markets and Fiscal Policy, Canadian Association of Petroleum Producers
No. The hydrogen addition is probably the higher end, near the one, or one and a little. It may be slightly above that. It depends on the exact technology you're using.
4:30 p.m.
NDP
4:30 p.m.
Vice-President, Markets and Fiscal Policy, Canadian Association of Petroleum Producers
It depends on how much you're using and what quality you're upgrading, but the range we are using is a half of 1,000 cubic feet of gas to a full 1,000 cubic feet of gas. In economic terms, that's $3.50 to $7 of gas to create $58-a-barrel oil. So the economics are there.
The thermal capacity of that means you're using about a half of a BTU to a full BTU to create six BTUs. So you're not reducing the heat content when you're using that.
That said, natural gas is the largest single operating cost that an oil sands plant has. So they are looking at ways to try to find alternative fuels, as was mentioned before. That's the dilemma. Natural gas is a clean burning fuel, but could it be used elsewhere? If you move to some of these other technologies that are being used, such as coke gasification or some of the things that Nexen and OPTI are using at their plant, you actually burn part of the bitumen, the heavier fuel, to create your heat and steam. So you free up the natural gas to go to other markets, and the technologies there are actually much more inclined to carbon capture and can be used for more carbon capture and sequestration.
Nexen right now is building a 70,000-barrel-a-day to 150,000-barrel-a-day project in the field that will actually be using that technology. So because of the gas cost, they are driving themselves to use these alternate forms of technologies, which actually have dual benefits. If it's successful, it will really change the mindset of how people use natural gas in the oil sands.
Does that help?
4:35 p.m.
NDP
Dennis Bevington NDP Western Arctic, NT
That does help. Thank you. It doesn't give me the numbers, though, that would represent where it fits into the natural gas requirement totals for Canada.
The report clearly indicates that we're going to have to reduce our exports of natural gas. That's something that is difficult in this NAFTA era, because of course we've signed agreements that say we maintain certain percentages of natural gas.
I'm just curious as to how this is all coming down in the industry. You've answered one of the questions, that they're looking for new technology, but quite clearly there are a lot of plants out there that are going to be using traditional technology for quite a while yet.
4:35 p.m.
Vice-President, Markets and Fiscal Policy, Canadian Association of Petroleum Producers
But even those plants are reducing the amount of gas they can use, because of the high cost. For example, I mentioned that Syncrude is reducing their water temperature. That will reduce the amount of natural gas they consume going forward.
4:35 p.m.
NDP
Dennis Bevington NDP Western Arctic, NT
The question of carbon sequestration is an interesting one. Of course, it does speak to that. We have had numbers given to us, $60 to $100 a tonne for capture and storage of carbon sequestration. Are you comfortable with those numbers?
4:35 p.m.
President, Canadian Association of Petroleum Producers
Again, we're going to give you a range--for example, Weyburn, in southern Saskatchewan, where you had a reservoir that was very receptive, with a relatively cheap and available source of carbon dioxide, is at the bottom end of the range.
If you are looking at large-scale capture and storage, I think the number that industry is talking about is in the $50-plus range for pure storage, with no enhanced oil recovery. There are a bunch of studies on that. If you want, we can make those available as well.
4:35 p.m.
NDP
Dennis Bevington NDP Western Arctic, NT
Where's the industry on this? Weyburn has been in place for a number of years. My understanding is that they've been in place long enough that they have corrosion problems in their system and have had to replace a lot of components. So it has been around a while.
Where is the next project in Canada that would have normally shown up by this time?
4:35 p.m.
President, Canadian Association of Petroleum Producers
There was one just down the road in Midale that Apache just opened last year, which is taking more of the carbon dioxide stream from EnCana.
Kinder Morgan, which is a large Canadian pipeline company, is now proposing a billion-dollar project in Alberta with a number of enhanced oil recoveries. I think that's the next one.
After that, there are two more projects being talked about, one in the Pembina field and one in the Redwater field.
That will just about cover the enhanced oil recovery opportunities. But what a lot of people are talking about is capturing and storage in salt caverns, exhausted fields, where there is no enhanced oil recovery associated with it and that would require a tremendous amount of horsepower to pump this carbon dioxide down into the ground.
One of the big challenges is that you want to make sure you're spending less carbon dioxide to pump it down than is actually going up in the first instance. The economics on these large-scale projects is simply not there yet.
4:35 p.m.
NDP
Dennis Bevington NDP Western Arctic, NT
What's the scale? We're talking about enhanced oil recovery. What percentage of the production from the oil industry in 2020 could we anticipate going into enhanced oil production?
4:35 p.m.
Vice-President, Markets and Fiscal Policy, Canadian Association of Petroleum Producers
It depends on how you define enhanced, but with just the CO2 flooding there, it's relatively small from that perspective. Right now, we see conventional oil and oil sands are about one to one, so one out of every two barrels comes from either side of that.
As we move forward with the growth in the oil sands, one out of every four or five barrels is conventional. The rest of them are oil sands. But as you get to that range in the future, a lot of that will be done through enhanced oil recovery technologies.
The challenge we have is that in the conventional oil industry, we're recovering about 27% to 30% of the oil out of the ground. The other seventy-some-odd percent stays in the ground, because we can't get it out of the ground with today's technologies. New technologies like carbon dioxide will enhance that, and if you can--okay, go ahead.
4:40 p.m.
NDP
Dennis Bevington NDP Western Arctic, NT
How much of the CO2 from the industry will we be able to put in the ground, that's the question, by 2020, first for enhanced oil recovery? What percentage?
4:40 p.m.
President, Canadian Association of Petroleum Producers
I don't have an answer to that, but I'll get you one.
4:40 p.m.
NDP
Dennis Bevington NDP Western Arctic, NT
Then the second phase would be to find other places to put this.
4:40 p.m.
President, Canadian Association of Petroleum Producers
Yes. We will have a look and give you a list of the projects under consideration, at least the ones that are public information--