Record levels of natural gas used by oilsands

CALGARY — Nearly one-third of the natural gas burned in Canada last year was used to produce crude from the oilsands, the country’s energy regulator said Wednesday, something environmentalists called a “waste” of a cleaner-burning resource.

According to a National Energy Board report, nearly 2.38 billion cubic feet per day or a record 29 per cent of purchased natural gas was used for oilsands production in Alberta in 2016. That’s up from the 730 million cf/d or 12 per cent of total demand in 2005.

Natural gas is used in the oilsands to generate steam to inject into underground formations to thin the heavy, sticky bitumen crude and allow it to be pumped to the surface.

The growth in so-called “thermal” projects is the main driver behind increased oilsands demand for natural gas, the NEB said.

Environmentalists said that natural gas could be better used to heat houses, generate electricity or make plastics.

“Rather than wasting this relatively low-carbon fuel to extract high-carbon oil from tarsands, let’s use it to heat homes as we speed the transition to the 100 per cent renewable future that science demands,” said Greenpeace campaigner Mike Hudema in an email.

Andrew Read, a senior analyst with the Pembina Institute, said the report highlights the need for a national energy plan that aligns use of energy with Canada’s climate targets.

“This is basically using our cleaner fossil fuel resources to produce dirtier transportation fuels,” Read said.

The NEB report said spot prices in Alberta for natural gas plunged to a record low 58 cents per gigajoule (about 55 cents per thousand cubic feet) on May 8 last year, when wildfires near Fort McMurray forced the shutdown of gas supply pipelines to oilsands projects.

But commodity analyst Martin King of GMP FirstEnergy in Calgary said the oilsands are not a significant influence on long-term gas pricing.

“Overall, gas demand outside of Alberta power generation and the oilsands isn’t really moving anyway,” he said.

He said Canadian prices for natural gas are influenced mainly by weather-related demand and production trends in the United States, Canada’s largest export market. He said the average spot price last year in Alberta of $2.17 per thousand cubic feet was the lowest since 1998.

Canada’s demand for natural gas is only about half of its production, now at more than 15 billion cf/d, and that output can be quickly ramped up if new demand arrives in the form of West Coast liquefied natural gas export facilities, King said.

The NEB said natural gas is also used in oilsands mining to heat water to separate bitumen from sand. Miners that upgrade bitumen into synthetic crude oil also use gas to produce hydrogen needed for that process.

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