The road to Alberta's future is paved with gooey bitumen. And Mike Ekelund says the journey down that highway will be fuelled in part with research and development dollars from the provincial government.

Ekelund, assistant deputy minister of the Alberta Department of Energy's Oil Development Division, has rolled out the Innovative Energy Technologies Program (IETP).

The program is a $200-million commitment over five years to provide royalty adjustments to a number of pilot and demonstration projects that use new technologies to increase recoveries from existing reserves, and to encourage development of in situ oilsands reserves in addition to conventional oil and natural gas reserves.

Ekelund told delegates attending the Insight Western Canada Oil Sands Summit in Calgary last week that the program is also designed to assist industry to find commercial technical solutions to the gas-over-bitumen issue that will allow efficient production of both resources.

Citing forecasts from the Alberta Chamber of Resources, Ekelund said bitumen production from the province could soar as high as around five million barrels per day (b/d) by 2030 in an effort to meet world demand.

"To achieve that vision we'd have to see an annual growth rate of between six and eight per cent," he said. "That's equivalent of a single 150,000 b/d project every year on a sustainable basis."

"With an upgrader, that could mean an investment of $5-$6 billion every year for production facilities, and if we add to that refineries, petrochemical facilities and other infrastructure, that figure could be even higher," as Alberta scrambles to that kind of continued expansion and investment over 25 years, he added.

Current production from oilsands projects is just over one million b/d.

To help achieve these goals, new R&D incentives will be needed to foster growth. Under the IETP, the government anticipates that increases in economically recoverable reserves will translate into royalty revenues to fund program areas such as education and health care.

The province says that increases in the recovery of reserves, even small ones, could make a big difference. It says a one-per-cent increase would mean an additional 600 million barrels of conventional oil, 17 billion barrels of bitumen and two trillion cubic feet of natural gas. Additional royalties paid to the province as a result would reach $2 billion, according to estimates from the Petroleum Technology Alliance of Canada.

Ekelund said trends show that the world's thirst for oil will intensify in the decades to come, and that Alberta's oilsands could be well positioned to quench that thirst. He noted that new markets continue to grow in the U.S. Midwest, on North America's west coast and especially in Asia, where countries such as China are looking for ways to tap into Canadian oilsands.

His statement took on added meaning later that day when Bob Shepherd, Husky Energy Inc.'s general manager, said the company has held several discussions with Chinese officials to "help further their knowledge" of Canada's oilsands. Rumours have been circulating for months that China wants to purchase Husky to get its hands on bitumen production.

"We have met with a couple of the delegations from China, and we expect discussions like that to continue," Shepherd said outside of the conference.

The Calgary-based company has an array of plans for future oilsands developments.

It is already moving forward on its $500-million Tucker plant in northeastern Alberta near Cold Lake. And it is also starting advance work on its much larger Sunrise plant that could cost upwards of $10 billion to fully develop.

Looking farther into the future, Ekelund said he sees costly bitumen mining operations being surpassed by more efficient in situ heavy oil recovery methods, such as steam- assisted gravity drainage, by 2020.

By that time, he said, producers will have overcome technical problems such as how to use less water in bitumen output and how to fuel their production operations in a more efficient and cost-effective manner.

"By then we will have developed the gasification of coal and bitumen, and that's probably the direction we will be taking" with respect to fueling oilsands operations, he said.

Ekelund said he sees other opportunities emerging from higher oilsands production. Value-added processing, such as the expansion of bitumen-based petrochemical, is an idea Alberta continues to eye for the near term. He also believes that prospects are good to spin the heavy metal byproducts contained in tailings into gold.

"According to the (Toronto-based) Titanium Corporation, the potential production for minerals from the oilsands in 2010 could contribute 40 per cent of the global supply of titanium and 30 per cent of the zircon supply," he noted. "These products are global industries with huge growth opportunities, and they can be produced from the oilsands mining streams."

- With files from CP

(John Ludwick can be reached at ludwick@businessedge.ca)