Alberta and other Western provinces will need billions of dollars in new oil and gas pipelines over the next 10 years just to keep their energy-based economies fuelled, industry experts say.
At the same time, industry leaders are worried that stricter environmental regulations and growing opposition from landowners and special-interest groups are making it increasingly difficult to build new pipeline projects.
Pipelines that transport oil and gas from Alberta’s burgeoning oilsands and the Western Canadian Sedimentary Basin to U.S. markets are expected to be filled to capacity within five years, speakers told the Pacific NorthWest Economic Region’s 13th annual summit, held in Calgary last week.
Existing pipeline networks will be jammed with gas, mostly to supply more than $80 billion in planned expansions and new oilsands projects in Alberta.
Alberta and other oil- and gas-producing provinces won’t be able to expand their export markets or create new markets without building hundreds of kilometres of new pipelines, speakers said.
At least $4 billion in new pipeline infrastructure – not including the two massive Arctic gas pipeline projects – will be needed over the next 10 years, said Wilf Schrage, director of North American business development for Enbridge Pipelines Inc.
The Canadian Association of Petroleum Producers (CAPP) estimates that oilsands production will double in a decade, to 1.8 million barrels of bitumen a day. Canadian producers will be developing blends of medium-crude oil for sale to new markets in California and the U.S. west coast, said Onno DeVries, CAPP’s general manager of oilsands and oil markets. “We will need (new pipelines) to reach new markets.”
Spurred by mounting oilsands production, Calgary-based Enbridge announced earlier this month that it will spend $122 million US to buy a 90-per-cent share in the Cushing, Okla.-to-Chicago pipeline. The 1,050-kilometre system will transport Canadian crude oil south as far as a key refining hub in Oklahoma, to supply markets in the southern U.S. Also this month, Calgary-based Pembina Pipeline Corp. received approval from provincial regulators for a $200- million pipeline, to increase capacity to transport production from Syncrude Canada’s expanding oilsands pit mines to Edmonton refineries.
Tony Palmer, vice-president of northern development for TransCanada Corp., told the economic summit that new natural gas pipelines will be required to meet demand.
North American gas consumption, now about 70 billion cubic feet a day, is expected to grow by a total of 18 billion cubic feet per day over the next 10 years. In comparison, the entire Western Canadian Sedimentary Basin now produces about 17 billion cu. ft./day of gas. That means most of North America’s new gas supplies will have to come from the Arctic, other yet-to-be-discovered reserves and unconventional sources such as coalbed methane.
Northern gas from the Mackenzie Delta won’t be sufficient to meet demand even in Western Canada over the next decade, Palmer noted.
Just to keep gas prices competitive, he added, North America will need all the new gas from the $4-billion Mackenzie pipeline project and the $25-billion Alaska Highway pipeline, plus new imports of liquid natural gas.
Several speakers predicted that the current tight gas market, coupled with increasing demand, will keep gas prices close to $5 US per million British thermal units (Btu) for the rest of the year. Prices could hit $10/Btu this winter depending how cold it gets, they said. Industry players warned they won’t be able to build enough pipelines to meet demand without attracting new private investment and, in some cases, securing government financial support.
Hal Kvisle, president and CEO of TransCanada Corp., said in the face of volatile commodity prices, governments should share some of the financial risks of colossal projects such as the Alaska Highway gas pipeline. “Some sort of underpinning is required.”
Richard Ballantyne, president of Terasen Pipelines Inc., urged governments to settle First Nations land claims, and to remove uncertainty about the long-term financial implications of reducing greenhouse gas emissions under the Kyoto accord.
Canada’s emissions will definitely increase given all the new oil and gas projects required to satisfy North American energy demand, Ballantyne said. Referring to Canada’s Kyoto target, to reduce emissions to six per cent below 1990 levels by the end of 2012, he added: “It’s just ludicrous to think you can get there.”
New pipelines and other projects will be difficult to build unless governments streamline regulations, and various regulatory agencies work together to speed up project approvals, speakers said.
“We clearly need some advances on the regulatory front,” said TransCanada’s Kvisle.
But Brian Bietz, former chairman of Alberta’s Natural Resources Conservation Board and now a Calgary-based consultant, said progress “remains glacial” on streamlining and harmonizing energy development regulations.
The barriers to change come from “institutional inertia,” and from individuals within organizations that resist change, Bietz said.
Environmental groups are opposed to the continent-wide fossil fuel-based expansion contemplated by summit delegates, and are instead seeking a greater focus on renewable energy. Bietz, however, said a properly designed regulatory regime can enhance the energy industry’s ability to do its job, while clear and well-understood regulations can better protect the environment and the rights of landowners and other groups.