Can Alberta's experience be useful for Poland's energy industry?

By Tom Skrzypinski Energy supplies - efficiently allocated, competitively priced and dependable - form the foundation of any modern economy. Indeed, no developed society can function without them. Energy is to a market-based economy what oxygen is to you and me. Remember the recent fireworks in February over the interruption in natural gas deliveries by Gazprom? How about the war in Iraq? Right or wrong, at its core it has to do with ensuring security of oil supplies from an unstable region, so vital to the functioning of the developed world. Since 1989, Poland has undergone massive, historic changes; nothing is quite the same. Some things however, have changed a lot less than others. One of them is the energy sector. After all, its obvious importance to the well-being of the whole country renders it much more difficult to change. Learning from the experience of others can help. The experience of Alberta, a distant, beautiful province of Canada with an outsized energy sector, may offer valuable lessons. Energy is the engine of Alberta’s economy. It accounts for about one-quarter of its Gross Domestic Product, one-third of the provincial government’s revenue and just over half the value of its total exports. Energy also employs – directly or indirectly – nearly one in every six workers in Alberta. Alberta bristles with energy. In North America - not only in Canada - it has come to be viewed as synonymous with energy. Last year, the US Department of Energy formally recognized what the petroleum industry here has known for decades: Alberta's oil sands contain as much oil as all of Saudi Arabia. No, this is not a mistake. Nor is it an overstatement: the oil sands here match the known oil reserves of the largest oil producer in the world. Today, each day almost 160,000 m3 of oil is produced from those sands. Having spent Cdn$ 30 billion (US$ 22.5 billion at current exchange rates) since only 1996, the industry is expected to invest another Cdn$80 billion in new oil sands projects between now and 2020. By that time, almost 500,000 m3 of oil will be produced daily from the gooey deposits which not so long ago were thought by many to present too many challenges to ever economically compete with conventional oil production. Some (see Oil Sands Technology Roadmap at www.acr-alberta.com/) envi-sage bitumen production from oil sands reaching 800,000 m3 daily by 2030. While ambitious, it is certainly possible considering the size of these reserves: 28 billion m3 of oil is recoverable using technology known today. All this results from an array of significant technological advances and breakthroughs never thought possible a short while ago. After all Alberta, lest there be any doubt, also bristles with intellectual energy. The story of oil sands, no matter how striking, is only a part of the whole energy picture. Conventional oil and gas production and associated activities have long been the backbone of Alberta’s economy. About 100,000 m3 of conventional crude and about 370 million m3 of natural gas are being produced every day (136 billion m3 of gas per year). These volumes are however in decline, and are expected to continue declining. The Western Canadian Sedimen-tary Basin, thoroughly explored and exploited since the 1947 Leduc oil discovery, is mature. Hydrocarbon pools now being targeted and produced are getting smaller and smaller. This reality, instead of depressing activity, has spawned amazing applications of advanced know-how right across the spectrum of exploration and production activities, resulting in huge increases in productivity, lowering of finding and development costs, and decreases in field operating costs. Examples of such advances are horizontal – later under-balanced, now dry under-balanced – drilling, miscible flooding, continuous optimization of production equipment, 3D seismic, public geological and petrophysical data base system (giving Alberta a significant advantage over other North American and foreign locales), coiled tubing drilling, hydraulic fracturing, etc. As well, other associated activities from oil and gas processing to transportation to storage to refining to petrochemicals, have experienced tremendous technological innovation. As a result of extremely competitive and demanding environment, thriving local companies are amongst the most successful and efficient operators anywhere in the world. Many of them have actually gone international in search of hydrocarbons and business. In Alberta’s electricity market, competitive forces – the laws of supply and demand - guide decisions by developers regarding investment in new generation. Following steps to restructure and deregulate Alberta's electricity supply industry, beginning in the mid-1990s, a number of different companies have invested in developing new sources of power for the province. About 3,000 megawatts (MW) of new capacity was constructed and became operational since 1998. Plans for 5,200 MW of new additional generation worth more than $5 billion have been announced. To put this in perspective, Alberta now has about 12,400 MW of installed generating capacity. Thermal sources account for the majority of installed generating capacity: coal-fired plants make up about 50 percent of the province's total capacity, and natural gas accounts for over one-third, including efficient cogeneration. The remainder is hydro, wind and biomass. All this is taking place in a province about twice the size of Poland, with only 3 million inhabiting it. A place nestled against some of the most striking parts of the Rockies anywhere, some of the most bountiful wildlife in North America, a land known for its natural beauty. A clean and healthy environment - in spite of these tremendous levels of economic activity - is not only extremely important to Albertans. It is a reality. The energy industry in general is known throughout the world to be a heavy polluter. Alberta's energy industry, by contrast, has long been recognized worldwide for its innovations in pollution abatement activities. Its sour gas processing expertise has no peer anywhere in the world, including recent groundbreaking experimentation with environmentally friendly new sour gas processing technologies. Local coal based power producers are the world leaders in clean coal technology, and more and more power plants use natural gas to generate electricity. You will also find some of the world's leaders in alternative fuels right here. Alberta’s population is a microcosm of the world; most ethnic groups are represented here. Poles in particular have been a significant and well-respected presence for over a hundred years. Today, about 85,000 Polish Canadians make Alberta their home. Some are highly visible public figures. Others are well known for their contribution to business, academia, professions and culture. Goodwill toward Poland is evident, and not only among the more recent arrivals or those connected to their homeland through heritage. Poland's own energy sector faces major challenges stemming from the country's integration into the European Union. Many of those are the same or similar issues that have already been addressed by Alberta's energy companies. Their experience may be valuable. Some of the challenges facing Poland's gas sector result from the required opening up of its gas industry to competition, others from the need to diversify Poland's sources of natural gas supply and the need to lessen its high dependency on gas imports from Russia. The recent interruption in Russian natural gas deliveries merely serves to underscore the urgency of the need to increase both Poland's own underground storage capacity and its domestic gas production. Hence, PGNiG’s stated intention to increase its own production from domestic sources to 5.5-6 billion m3 within 2 years or so, up from its current (2003) 4.2 billion m3 per annum. Given their scale, the challenges facing Poland's heat and electric power sector are arguably even more daunting. For about a decade now, in fits and starts, and with a good deal of politics thrown into the mix, the sector has been trying to restructure and privatize. Its capital investment needs are massive. The country's generating capacity is aging, and some of it needs to be replaced. Poland’s traditional heavy dependency on coal in heat and power generation (the third highest in the world after China and South Africa), with its history of resulting pollution, will need to be gradually lessened in favour of, primarily, natural gas. All of the energy sectors, traditionally heavy polluters, will have to continue making significant investments in pollution abatement technologies and applications, rendering their activities more environmentally benign. A Calgary based company Maxxen International Corp. (www.maxxen.ca), sees significant mutual economic benefits from bringing the energy sectors of Poland and Canada closer together. For a variety of reasons, those benefits have largely remained in the realm of 'untapped potential'. The company provides consulting, strategic advice and technology transfer services to energy companies which wish to exploit this potential, both in Canada and in Poland. It also aims to identify issues and niches where mutually profitable activity can be undertaken. Maxxen’s two founders Mira Starczyk and Tom Skrzypinski, represent more than 40 years of experience in the energy industry in Canada and internationally. Between them, they have owned companies involved in the provision of geophysical equipment, well-logging, drilling, production, CNG, workover and MWD equipment and services in Canada and internationally, the provision of management and technical training courses for the oil and gas industry (REF TEK Canada Inc.), as well as senior level corporate headhunting for the energy industry in Canada and worldwide (T.J. Seaton Management Inc.). Tom Skrzypinski is also a founder and chairman of the Calgary based Canadian-Polish Chamber of Commerce, now being renamed Canadian-Polish Business Council. Two of the companies featured in this WBJ Energy Supplement: MEG Worley - a leading Calgary based engineering firm with worldwide experience in the design and construction of oil, gas and power facilities; and IMW Industries - a world leader in the manufacture and installation of compressed natural gas (CNG) equipment, have been introduced to Poland by Maxxen’s principals. One can readily foresee real, tangible and mutual benefits from increased interaction between the energy sectors of Canada and Poland. Well thought-out energy projects have a way of producing significant benefits going beyond those measurable in economic terms. Like life itself, that interaction is a journey. Let the journey begin!