Forecasting Oilsands Energy Demand

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Archibald Reed
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1 Forecasting Oilsands Energy Demand Steven Everett, Economic Analyst Alberta Electric System Operator 2012 Itron Forecasters Forum / 10 th annual EFG Meeting May 10-11, 2012

is too heavy or thick to flow or be pumped without being diluted or heated

2 What are Oilsands? Oilsands are a mixture of sand, water, clay and bitumen Bitumen is oil that is too heavy or thick to flow or be pumped without being diluted or heated Tar sands is incorrect terminology; tar is a petroleum byproduct Source: Canadian Association of Petroleum Producers Source: Suncor Energy

Oilsands are extensive Oilsands deposits area is about the size of Florida Estimated Recoverable Reserves: 175 billion barrels Alberta oilsands are the largest oil reserves in the world not

3 Oilsands are extensive Oilsands deposits area is about the size of Florida Estimated Recoverable Reserves: 175 billion barrels Alberta oilsands are the largest oil reserves in the world not controlled by a national oil company Source: Government of Alberta (149,000 sq mi) (55,000 sq mi) (1,900 sq mi) (232 sq mi) Area Land (sq mi) Alberta 255,541 California 155,959 Nevada 109,826 Florida 53,927 New York 47,214 Delaware 1,954

4 Oilsands Investment Dominates Alberta Economy Oilsands Infrastructure Power Institutional Commercial/Retail Pipelines Residential Tourism/Recreation Oil & Gas Commercial/Retail & Residential Other Industrial Biofuels Chemicals & Petrochemicals Mining Forestry & Related Agriculture & Related Telecommunications Value of Alberta Capital Projects ($ millions) $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 Source: Government of Alberta, February

Oilsands Extraction Technology Mining Uses shovel and truck combination to extract oilsands (sand & heavy oil) Trucks deliver

oil or blended with diluent then shipped via pipeline to market In Situ (in place) Steam Assisted Gravity Drainage (SAGD) Two

bitumen to flow into the lower production well Cyclic Steam Stimulation (CSS) Huff & Puff One vertical well is drilled Steam is

5 Oilsands Extraction Technology Mining Uses shovel and truck combination to extract oilsands (sand & heavy oil) Trucks deliver oilsands to extraction facility which separates bitumen from sand, water & clay Bitumen is either upgraded into synthetic light oil or blended with diluent then shipped via pipeline to market In Situ (in place) Steam Assisted Gravity Drainage (SAGD) Two parallel horizontal wells are drilled, one above the other The top well injects steam which heats the formation allowing the bitumen to flow into the lower production well Cyclic Steam Stimulation (CSS) Huff & Puff One vertical well is drilled Steam is injected into the well which heats the formation Once heated, the well is used to extract the bitumen Source: Canadian Association of Petroleum Producers

6 Energy (GWh) Challenges - Methodology Pre-2007, oilsands was modeled as part of industrial sector Rapid oilsands growth and increased data on oilsands sites prompted industrial breakout into oilsands and industrial without oilsands Lack of historical oilsands data and rapidly changing technologies prohibit econometric models Need to create forecast which can be used in transmission planning 80,000 70,000 Alberta Customer Sector Electricity Consumption 60,000 50,000 40,000 30,000 20,000 10,000 0 Oilsands 18% Farm 3% Residential 13% Commercial 20% Industrial (without Oilsands) 46% Source: AESO

7 Methodology What Data Do We Have? Project information Announced, applied-for, approved, in construction, etc. Third party production forecast Site-specific information Historical information Electrical Intensities Technology type Demand (MW and MWh) Production (barrels per day)

8 Production (bbl/d) Oilsands Forecasting Project Add-up vs. Third Party Forecasts Very few projects have historically being built on schedule Projects ramp-up and typically produce below nameplate capacity Projects can be added or cancelled very quickly 7,000,000 Announced 6,000,000 5,000,000 Application 4,000,000 Approval 3,000,000 2,000,000 Under Construction 1,000,000 Existing 0 Conference Board 2011 Forecast Source: Conference Board of Canada, Oilsands Review, Company Reports

9 Production (thousand bbl/d) Oilsands Production Forecast Conference Board of Canada (CB of C) Oilsands Production Forecast Used CB of C has publicly available third-party forecast CB of C oilsands forecast is aligned with economic drivers used to forecast other sectors Oilsands Production Forecast 4,000 3,500 3,000 2,500 2,000 1,500 1, Mining In Situ Source: Conference Board of Canada, Energy Resource Conservation Board (ERCB)

10 Oilsands Production (thousand bbl/d) Oilsands Production Forecast Comparison Conference Board of Canada oilsands production forecast is checked against other forecasts 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Forecast revised upwards in 2012 due to new projects and cheaper natural gas price forecast CB of C 2011 CB of C 2012 IHS CERA ERCB Source: Conference Board of Canada, IHS CERA, Energy Resource Conservation Board (ERCB)

11 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Average kwh / barrel Mining Intensity Average Oilsands Mining Electricity Intensity Spike caused by new mine ramping up Source: Energy Resource Conservation Board (ERCB), AESO

12 Average kwh / barrel In Situ Intensity 25 Average Oilsands In Situ Electricity Intensity Source: Energy Resource Conservation Board (ERCB), AESO

New Technologies Technological Change SAGD, CSS, and Mining are current main extraction technologies Prototype electricity-based extraction technologies are being tested E-T Energy s ET-DSP

13 New Technologies Technological Change SAGD, CSS, and Mining are current main extraction technologies Prototype electricity-based extraction technologies are being tested E-T Energy s ET-DSP (Electro-Thermal Dynamic Stripping Process) technology Electrodes are inserted into the bitumen formation Electricity flows through the bitumen between electrodes heating the bitumen Heated bitumen is pumped out Initial estimates suggest 4-10 times more electricity intensive than SAGD Source: E-T Energy

New Technologies Technological Change Thermal-Assisted Gravity Drainage Two horizontal wells, similar to SAGD, wells are also inductive heater wells that use electricity Initial estimates suggest 10

14 New Technologies Technological Change Thermal-Assisted Gravity Drainage Two horizontal wells, similar to SAGD, wells are also inductive heater wells that use electricity Initial estimates suggest 10 times more electricity intensive than SAGD Solvent-Cyclic Steam Assisted Gravity Drainage (SC-SAGD) Adds solvent injection to enhance SAGD Likely to be more electricity-intensive Source: Cenovus Energy

15 Factors which increase intensities Additional motors Pumps Compressors Electrical Submersible Pumps (ESPs) Injectors (solvent, steam) New Technologies E-T Energy s electrode technology (4-10X higher intensity) Electric heating coils Electric heating elements (Shell, AOSP) Inductive heating (10X higher intensity) In situ combustion (requires air injection instead of steam) Maintaining production Need more electrical equipment to keep production constant New production Electricity ramps up before production causing higher initial intensities Environmental Carbon Capture equipment Centrifuges Higher tailings ponds Water recycling

Factors which decrease intensities Variable motors Instead of two motors Well pairing communication When well pairings share heat/pressure, they can be optimized and can potentially

16 Factors which decrease intensities Variable motors Instead of two motors Well pairing communication When well pairings share heat/pressure, they can be optimized and can potentially lower intensities Improved tailings management Non-energy intensive solutions Wildcard Technologies THAI technology Injecting air, not steam In-situ upgrading (lighter oil is extracted)

17 Oilsands Forecast Process Overview Database of all known oilsands projects Validation and Checks Historical Data Apply delays, ramping to projects based on status Add up of projects provides demand outlook Third party production forecast Implied forecast intensities Electrical intensity assessment Electrical intensity comparison Demand outlook

18 Energy (GWh) 2012 AESO Oilsands Sector Forecast Includes all known projects Is aligned with third-party outlooks of oilsands Is aligned with historical and expected electricity intensities Incorporates new technologies 35,000 30,000 25,000 20,000 15,000 10,000 5, AESO Oilsands Forecast Forecast Average Annual Growth Rates: : 10.3% : 7.6% : 4.7% Source: AESO 2012 AESO Forecast Historical

19 Energy (GWh) Oilsands is fastest growing sector in Alberta 140, AESO Customer Sector Forecast 120, ,000 80,000 60,000 40,000 20,000 0 Source: AESO Industrial (without Oilsands) Residential Commercial Farm Oilsands

20 Thank You!

A Primer on the Canadian Oil Sands

A Primer on the Canadian Oil Sands An EPRINC Briefing Memorandum November 2010 Overview Canadian oil sands have long been recognized as one of the world s largest endowments of oil resources with over