Calgary (Platts)--13Dec2012/615 pm EST/2315 GMT

The Alberta government is aiming to attract major investment in its natural gas sector in 2013, as part of the Canadian province's strategy to develop a balanced and diversified energy portfolio, a provincial government official said Thursday.

Low gas prices in recent years have acted as a deterrent and resulted in producers shutting-in wells and reducing output. But, with prices projected to increase next year, the scenario could change, Justin Riemer, assistant deputy minister at the province's Department of Enterprise, said in a telephone interview from Edmonton.

The department facilitates energy investment in Alberta and also acts as the province's prime economic development agency.

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"The Petroleum Services Association of Canada has recently forecast a 3% increase in natural gas utilization in 2013, compared with the current year, assuming an AECO price of $3.25/MMBtu," he said, adding that an increase in gas demand in the province could potentially drive prices up further, to $4/MMBtu.

"The liquids content in the gas is attracting investments and we also expect to see increased demand for natural gas from the oil sands sector, particularly those projects that utilize [steam-assisted gravity drainage] technology to extract bitumen," he said.

Alberta regulator Energy Resources Conservation Board has projected natural gas utilization by the oil sands patch will total 1.13 Bcf/d in 2012, compared with 950,000 Mcf/d last year, with an increase to 2.36 Bcf/d by 2021.

Bill Gwozd, a vice-president with Ziff Energy Resources, said November 15 at an industry conference in Calgary that gas consumption by Alberta's oil sands producers could grow to even 7 Bcf/d by 2020, if oil prices hold steady and all the planned projects move ahead.

"The planned export of LNG from British Columbia to new markets will also result in driving up gas demand. The industry tells us that startup of an LNG industry in the West Coast will be an important indicator of planned new investments in the shale gas plays in both Alberta and British Columbia," Riemer said.

LOOKING FOR WAYS TO ENCOURAGE MORE GAS USE

The provincial government is not planning any changes in its existing royalty structure to provide tax credits for gas operators in Alberta, but Riemer said his department is actively looking at ways to encourage more gas consumption for downstream processing.

"We already have a gas-based downstream industry in the province and are now working on providing further value to the bitumen chain. We are working hard with prospective investors to help them with the challenges they face related to availability of feedstock gas, rising capital costs of projects and a growing shortage of labor," he said.

Commenting on a recent announcement by Sasol that it would postpone by at least a year, to end-2013, a final investment decision on its gas-to-liquids facility in Alberta, Riemer said the provincial government is hopeful there will be a positive outcome.

"We are continuing to work them and see the announcement as a postponement, rather than anything else," he said.

Sasol's 96,000 b/d GTL plant -- to be built in two equal phases -- is expected to use 1 Bcf/d of natural gas.

"Sasol is only one the several companies we are working with in the province for downstream oil and gas investments. An investment decision was recently announced for the Redwater heavy oil refinery. Also, Williams Energy is planning a [propane dehydrogenation] facility and in early November Keyera Energy said they will expand their NGL processing complex. We now see more of an interest in Alberta's downstream sector than earlier," Riemer said.

On November 8, a partnership of Canadian Natural Resources and North West Upgrading said it would move ahead with the first-phase development of the new refinery, committing to invest C$5 billion (US$5.02 billion).

This was followed by Williams Energy saying it would invest C$500 million-C$600 million to set up new natural gas liquids and olefins processing facilities in the province.

At the same time, Keyera Energy said it would spend C$300 million in 2013 to expand its two existing facilities in Alberta. One project involves installing a 30,000 b/d de-ethanizer column at its Fort Saskatchewan gas fractionation and storage facility to process an ethane-rich mix of NGLs. The second project is the construction of a 400,000-Mcf/d turbo expander at the Rimbey gas plant for NGL recovery, including extracting up to 20,000 b/d of ethane as well as incremental propane, butane and condensate.

--Ashok Dutta, newsdesk@platts.com
--Edited by Lisa Miller, lisa_miller@platts.com

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