Top 10
Top 10: Drilling upswing
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Oil on the upswing and wind power heads for the coast—but can Alberta's gas industry survive the shale gas tsunami? Read about these stories and more in our roundup of the top 10 energy stories in Alberta from the past month.
1. DRILLING UPSWING
Modest increases in drilling activity are expected for Canada in 2011. The Petroleum Services Association of Canada (PSAC) forecasts 8,390 wells will be drilled in Alberta this year, up three per cent from last year. That’s a significant chunk of the total 12,750 wells the association predicts for the entire country—up from the 12,158 wells drilled in 2010.
WHY IT MATTERS? PSAC says the higher forecast reflects strengthening crude prices, as well as new technological innovations. At the same time, the association suggests skilled labour shortages will be a continuing drag on drilling numbers, preventing the industry from reaching its full output capacity.
2. KEEPING IT IN THE FAMILY
A new $5-billion refinery is set to be built near Redwater in Alberta’s Industrial Heartland. With an expected completion date of mid-2014, the project will refine bitumen provided by the province and Canadian Natural Resources to primarily produce low-sulphur diesel, as well as naphtha and diluent. The refinery will also capture CO2, which can then be used in conventional oil recovery projects in central Alberta.
WHY IT MATTERS? As Ian MacGregor, chairman of North West Upgrading, explains, the refinery is “keeping jobs, taxes and revenues in Alberta and creating opportunities for other petrochemical industries.” By using captured CO2 in enhanced oil recovery projects, the refinery will also help increase recovery rates from conventional oilfields.
3. CALIFORNIA BOUND
Alberta’s wind-energy industry has received a major boost thanks to California’s Pacific Gas and Electric, which has agreed to a 20-year agreement to purchase 450 megawatts of power from two wind farms currently in development in the province. Greengate Power’s 150-megawatt Halkirk project is expected to be online by 2012, while its 300-megawatt Blackspring Ridge project should be in operation by 2013. California laws require that utilities source 20 per cent of their power from renewable energy—a quarter of which can be purchased out of state.
WHY IT MATTERS? In Alberta’s energy market, renewable power sources like wind have a tough time competing against cheaper energy generated from coal and natural gas. Thanks to legislated renewable energy requirements, California offers a viable alternative market. “We needed an innovative way to proceed, and this will contribute to significant short-term growth in the Alberta wind energy market,” says Dan Balaban, president and chief executive officer of Greengate Power.
4. ONE-STOP REGULATORY SHOP
The Alberta government plans to establish a single regulatory body for upstream oil and gas activity. The regulator would streamline the process by making all the decisions required to issue an oil and gas approval. Currently, this duty is shared between the Energy Resources Conservation Board, Alberta Environment and Alberta Sustainable Resources Development.
WHY IT MATTERS? According to David Collyer, president of the Canadian Association of Petroleum Producers, a single regulator “will help both government and industry in terms of cost savings over the longer term.” The move should address the regulatory duplication that has built up over the years and hampers the approval process.
5. BRACING FOR THE SHALE GAS TSUNAMI
Thanks to its increasing shale gas supplies, the United States could
become self-sufficient in natural gas, eliminating the need for Canadian imports. “The shale gas tsunami really is a sea change for the industry as a whole,” explains Simon Mauger, director of gas services at Ziff Energy Group. “It’s going to change direction for pipeline flows.” Mauger points to two developments, the Bison pipeline in North Dakota and the Ruby pipeline in the U.S. Northwest, that will reduce the American market for Canadian gas.
WHY IT MATTERS? Growing consumption in the oilsands and power sectors may help provide new demand for the struggling Canadian gas market. By the end of the decade, gas demand in oilsands production and processing is expected to grow by two billion cubic feet per day. With new projects, that number could go as high six or seven billion cubic feet per day. That would essentially replace all of the gas exports on the TransCanada pipeline system, Mauger says. Canadian gas producers can also expect to find a market in the power generation industry, thanks to the slow growth in renewable energy sources and the long lead times required to bring new nuclear and coal-fired plants online.
6. FEAR OF SUCCESS
With crude prices at around $90 per barrel, investment is beginning to flow back into Alberta’s oilsands, pushing up production—and costs. Some analysts fear that the recent flurry of project announcements could lead to rising labour and production costs over the next few years, slowing development and contributing to a rise in world oil prices. “We’re still facing a future situation where we could be beyond Alberta’s ability to supply workers, but not to the same extent [as the last development boom],” says Jackie Forrest, director for downstream and heavy oil issues at IHS CERA.
WHY IT MATTERS? During the last boom, cost inflation was a huge challenge for the industry. As oil prices rose towards $147 per barrel, operators rushed to boost output. But labour costs skyrocketed and the industry was forced to scale back production and development plans. A new surge in costs could force producers worldwide to slow down development, fuelling global oil prices, as it did three years ago.
7. WASTE NOT, WANT NOT
The federal and provincial governments are investing $8.4 million in a new bio-energy centre to be established by the BioWaste to Energy for Canada Integration Initiative (BECii), a non-profit industry organization. The BECii Clean Energy Centre will bring together small- and medium-sized bio-energy businesses to share infrastructure and expertise. The centre will be located at Hairy Hill, near Vegreville.
WHY IT MATTERS? Each year, Alberta produces approximately 20 million tonnes of waste that could be used for potential bio-energy feedstock. By allowing companies to pool resources and knowledge, the centre will help defray the costs met on the road to commercializing new waste-to-energy technologies.
8. OPENING UP THE GATEWAY
Enbridge’s top executive is confident the company’s Northern Gateway pipeline between Alberta and the West Coast will be built, despite challenges from First Nations groups. “Although it’s not large in number, it’s very vocal opposition and it is very influential opposition,” says Pat Daniel, Enbridge president and chief executive officer. But he still remains optimistic about the project’s prospects. Since last November, the company has been offering a 10 per cent equity stake in the project to First Nations. “That has been very well received, and we are hoping to bring more and more First Nations on side as a result of it,” Daniel says.
WHY IT MATTERS? The $5.5-billion, two-pipeline project is currently awaiting approval by a joint review panel led by the National Energy Board and the Canadian Environmental Assessment Agency. If given the go-ahead, the westbound line would transport 525,000 barrels per day of cruel oil from Bruderheim, Alta., to Kitimat, B.C. The eastbound line would deliver 193,000 barrels per day of condensate from Kitimat to the Edmonton area.
9. TEACH THE WORLD TO SING
If Canada wants to remain economically competitive and avoid a delay in emissions reductions, then it needs to phase in a harmonized climate policy with the United States. That’s according to a new report from the National Round Table on the Environment and the Economy. The report recommends a “price collar” to limit carbon price differentials between the two countries, as well as a national cap-and-trade system, among other measures.
WHY IT MATTERS? A made-in-Canada policy would allow the country to achieve significant greenhouse gas reductions over the next 10 years, despite uncertainty about U.S. policies. The report also says that its recommendations will address competitiveness concerns for industry, while paving the way to more harmonization as an American policy direction emerges.
10. GREEN TO THE CORE
Edmonton has some ambitious plans for the now-defunct city-centre airport near its downtown core. The city is currently considering five different proposals for a new green development that could house 30,000 residents, with additional space for retailers and parks. All of the proposals employ a range of renewable energy sources, such as geothermal heating, solar panels and wind turbines. Officials expect to choose a plan this year, with first homes available by 2018.
WHY IT MATTERS? The former airport presents an opportunity for Edmonton to fight urban sprawl as its population grows by offering an attractive, mixed-use green community near the city’s centre.
