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Demand for unconventional oil and gas on the increase

Demand for unconventional oil is expected to reach 10.31 million bbl in 2008, up from 8.59 million barrels in 2003 at an average annual growth rate (AAGR) of 3.7%, said Business Communications Co. Inc., Norwalk, Conn.

Meanwhile, demand for unconventional natural gas is expected to increase from 7.68 tcf in 2003 to 12.78 tcf by 2008. BCC reached those conclusions in a soon-to-be-released report entitled "Demand for Unconventional Oil and Natural Gas Resources."

Improved exploration and production technology along with additional investments have led to significant levels of commercial production from unconventional oil and gas resources that previously were considered too costly to produce.

"Unconventional oil includes extra-heavy oil (oil sands), and bitumen, syncrude, shale oil, and conventional heavy oil. The strong gains in heavy crude supply can be attributed to a combination of favorable developments," BCC said.

Technological advances have reduced the cost of producing these resources and have promoted their development. Demand growth occurred in key US Midwest and Rocky Mountain areas because refiners expanded their heavy crude processing capacity.

These US heavy crude refineries process mainly Canadian and Venezuelan heavy oil because of greater availability and good performance in coking units and asphalt production, BCC said.

Strong commodity pricing also brought a strong influx of equity capital to the Western Canadian industry.

Technological advances such as steam-assisted gravity drainage, vapor extraction incorporating a solvent such as naphtha, and new cyclic steaming techniques are helping reach the bulk of Canada's postulated 300 billion bbl of recoverable-oil in oil sands too deep to be tapped by conventional technology.

Gas contained within unconventional deposits generally is stored more uniformly within reservoirs that can extend over vast areas, rather than trapped within isolated anticline closures.

During the next 5 years, demand for unconventional gas will increase at an AAGR of 10.7%. Newer recovery innovations have significantly raised the recovery rate for unconventional gas reserves.

Technological improvements are facilitating Rocky Mountain production of tight sands gas and coalbed methane. BCC statistics shows that marketed production in Wyoming, for example, have increased to 7.1% of total US output in 2002 from 3.4% in 1996.

"Continued steady economic growth in the industrialized countries of Europe and North America will also sustain the level of natural gas demand. Resurgence in the developing countries is critical to demand growth, since economic growth in these countries is more closely tied to energy," the BCC said.

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