Bitumen (an “unconventional” crude oil), coal, and natural gas resources are undoubtedly still plentiful in North America and have become more easily accessible because of recent technological advances, but “conventional” oil resources have become less abundant and more difficult to extract mainly because most new finds are located in deep offshore areas or in the Arctic region. In Canada and the US, natural gas is utilized mainly for power generation and household heating and cooking, coal is used mainly for power generation and as an industrial heat source, and both conventional and unconventional crude oils are used mainly as sources of liquid fuels for the transportation sectors.
Mining or extracting bitumen is more energy-intensive and therefore more expensive compared to drilling for conventional petroleum on land. In addition, bitumen has to be upgraded before it can be refined into gasoline, diesel, jet fuel and other types of petroleum fuels. Many US refineries though are capable of refining diluted bitumen into fuel distillates at sufficiently low costs such that the final products are still priced competitively in the world market. Therefore, the US petroleum industry can provide the US with traditional transport fuels derived entirely from Canadian bitumen, provided that sufficient quantities are available at sufficiently low prices.
Natural gas is easier to extract and process than bitumen and it is traded according to long-term contractual arrangements between suppliers and purchasers. Also, because of its current abundance, natural gas is not subject to the same price volatilities as with petroleum. Cheap natural gas has begun to displace coal as fuel for power plants (particularly in the US), but still, there is now so much natural gas that its price has remained low even though a (still increasing) number of power plants have shifted from coal to natural gas. Natural gas has therefore become the least expensive source of energy among the fossil fuels. However, natural gas has been unable to gain significant market share in the US and Canadian transport fuels sector.
The low price of natural gas is mostly bad news for gas producers. Many US gas producers that had previously contracted drillers to target prospective gas deposits have now been forced to shift exploration and production budgets towards unconventional “tight” oil deposits. But tight oil deposits are fewer and smaller compared to natural gas deposits. North American rig counts therefore have generally been going down lately as drilling contracts for natural gas dwindle while prospective tight-oil deposits become harder and harder to find. But the economics of drilling for natural gas might become favorable once again if natural gas could establish significant inroads into the transport fuels market.
Compressed natural gas (CNG) and liquefied natural gas (LNG) are being used as transport fuels to some extent, but their widespread adoption has been prevented by the difficulty (and expense) of handling and storing natural gas. Natural gas is readily transported through pipelines as a gas, but storing natural gas under high compression or in liquid form is more difficult and expensive both for retail fuel vendors and for vehicle owners or fleet operators. Because of the low density and high vapor pressure of methane (the main component of natural gas), it takes a lot of energy to compress or liquefy natural gas and to keep it in that compressed or condensed form. Expensive containers with thick or insulated walls are necessary, but such containers are heavier and/or bulkier and more expensive than ordinary fuel tanks. Fuel retailers, for one, might not be able or willing to invest in the expensive storage tanks and equipment for handling natural gas. CNG or LNG fuel tanks also add to the cost of a vehicle; and modifying a vehicle's engine and fuel system for natural gas compatibility can also be expensive.
The alternative to directly using natural gas as a commercial transport fuel is to first convert the natural gas into a suitable liquid or gaseous substance that does not require the same handling and storage conditions as CNG or LNG, and then to build or modify vehicles to be able to use that substance as fuel. Methanol synthesized from coal is being used exactly for this purpose, mainly in China.
In the 1990s, methanol-compatible cars were offered for sale to American consumers. Manufacturing such cars does not significantly add to production costs since the technology and materials/components for using pure methanol and gasoline-methanol blends has been widely applied to high-performance vehicles (such as dragsters and Indy Racing cars) competing in various US motor-racing circuits; and US automakers have always been major sponsors of these events. At least one US car maker has provided technical assistance to Chinese automakers for manufacturing cars that can run on methanol-gasoline blends. Such cars are being manufactured and sold in China today.
Although the market for fuel methanol in China has already been established, such is not the case for Canada nor the US. Incentives such as tax breaks for manufacturers and dealers of methanol-powered cars and for methanol fuel manufacturers and retailers can stimulate demand for methanol-compatible cars in the same way that incentives for ethanol fuel have allowed consumer acceptance of gasoline-ethanol blends. Flex-fuel cars that can run on various gasoline and methanol/ethanol blend ratios are also being promoted. Unlike natural gas, methanol (a liquid at ambient temperatures and pressures) does not require bulky and expensive storage containers. Inexpensive materials and components resistant to methanol corrosion are commercially available. Interest or demand from the general public for gasoline-methanol blends can motivate politicians to more aggressively push for the adoption of this clean-burning alcohol-based fuel. Widespread adoption of alcohol-based fuels that can be synthesized from natural gas (including methanol, ethanol, and dimethyl ether) will certainly increase demand for natural gas to the benefit of both gas producers and drilling companies.
