The future’s bright: Part two

Part One of this article can be accessed here.

Glitches and hitches

Worldwide, the production of fossil fuels faces a plethora of opposition. Spurred by the burning of coal, crude and natural gas, the concentration of Greenhouse Gases (GHGs) in the atmosphere has been rising at a steady clip. Climate scientists have associated the increase with the gradual warming of the atmosphere and oceans.

Canada’s petroleum industry come under special scrutiny over oilsands production, which requires the use of energy to coax the heavy bitumen out of the ground and upgrade it to higher quality crude. This extra processing is considered ‘dirty oil’, and various jurisdictions, including California and the EU, have tried to have it banned.

Environmental non-government organisations (ENGOs) have found little sway in slowing oilsands development directly; in the last decade, they have shifted focus onto pipelines as a proxy battle, with arguably greater success. After the Keystone XL project was announced in 2008, ENGOs and Hollywood stars put heavy pressure on the White House to veto the project (because it crosses an international border, Keystone XL needs presidential approval). States along the ROW also objected that it would damage sensitive ecosystems. The final green light for the project has now been postponed for over five years, with no end in sight.

The Northern Gateway pipeline also faces substantial hostility. Although the NEB placed over 200 conditions on the project, environmental critics and Aboriginal First Nations along the ROW have threatened both court lawsuits and direct action. Likewise, communities along the Trans Mountain expansion have expressed deep concerns regarding the proposed escalation of volumes travelling beneath their feet.

Out east, communities are likewise worried about the various proposals. Residents along Canadian ROWs are well aware of the Lac Megantic disaster in which a runaway crude train crashed in a small Quebec community, incinerating 47 of its citizens and causing hundreds of millions of dollars in damages. Although pipeline transport is vastly safer than rail, they worry that bitumen will scour pipelines, or that Bakken crude is too volatile to transport.

Even relatively clean LNG facilities are coming under scrutiny. Several years ago, British Columbia announced plans to reduce the province’s GHG emissions from 59 million t in 2011 to 20.6 million t by 2020. However, it takes about one tonne of CO2 emissions to produce one tonne of LNG. Clean Energy Canada (an ENGO promoting low carbon energy) has calculated that even if a fraction of the proposed plants are built, it will still amount to 36 million t of new CO2 emissions; for the province to meet its GHG reduction obligations and simultaneously build an entirely new LNG sector, it will have to massively invest in carbon capture and storage (CCS) capacity, or emissions offsets.

Addressing fossil fuel-related issues

Much work is being done to address fossil fuel-related issues. The governments of Alberta and Canada recently contributed Cdn$ 865 million to Shell’s Quest project. Efforts are underway to reduce the amount of energy needed to coax bitumen out of the ground by experimenting with fire-fronts, solvents and electromagnetic waves. Innovative catalysts are being tested to partially upgrade the bitumen while it is still in the reservoir, reducing its viscosity.Newspaper mogul Dave Black continues to move ahead with his Cdn$ 25 billion Kitimat Clean refinery proposal. The refinery would upgrade bitumen delivered by the Northern Gateway pipeline, thus relieving concerns that exports would befoul marine environments (any tanker spills of gasoline, diesel or jet fuel would dissipate much more rapidly than tarry bitumen). Enbridge has also appointed Jim Prentice, a respected former Indian and northern affairs and minister, to act as a liaison with First Nations.

TransCanada has finished work on the southern section of the Keystone XL portion running from Cushing, Oklahoma, to the US Gulf Coast. TransCanada has also re-aligned the northern-portion ROW, satisfying Nebraska’s concerns. In addition, the US State Department released its latest environmental assessment on the project, noting that its cancellation would not significantly slow oilsands development.

Politically, Canada’s Prime Minister Stephen Harper has spoken repeatedly to President Obama about the importance of exports to both countries in regards to security of supply and economic prosperity. Both Congressional and Senate legislators, in bipartisan agreement, have called upon Keystone XL’s approval.

Operators, increasingly faced with apportionment on existing pipelines, are relying on rail. Currently, approximately 180 000 bpd travels by rail, but the Canadian National Railway (CN), Canadian Pacific Railway (CPR), and other firms are building tanker loading facilities and devising crude-only trains that exceed 100 tankers in order to lower transportation costs. Analysts now expect capacity to exceed 1.1 million bpd in 2014.

Regardless of pipeline bottlenecks and other concerns, the future of Canada’s oil and gas sector looks very bright, indeed. In addition to the recent advances in shale gas, shale oil, NGLs and oilsands, another new play beckons on the horizon. The Duvernay formation, which underlies much of the Western Canadian Sedimentary basin, is one of the richest shale plays in existence.

The Alberta Energy Regulator recently reckoned that the Duvernay (as well as the Montney and Muskwa formations), held 3300 trillion ft3 of gas and 420 billion bbls of oil. Major oil companies have already spent over Cdn$ 6 billion building land positions, and are now beginning to explore its potential. Chevron recently completed an initial 12 well exploration drilling programme in the liquids-rich portion of the Duvernay. With plays like these waiting in the wings, Canada’s pipeline sector has decades of expansion to anticipate.

Written by Gordon cope and edited from various sources by Hannah Priestley-Eaton

Read part 1 of the abridged version of this article here. The full article can be found in the June 2014 issue of World Pipelines.

Read the article online at: https://www.worldpipelines.com/business-news/02062014/the_futures_bright_part_two/