Have you heard of the Athabasca oil sands? If you haven’t, you will surely hear about them soon. In the near future, oil sands may represent as much as 2/3 of the world’s total petroleum reserves. Canada’s Athabasca oil sands alone hold about 1.7 trillion barrels of oil sands, compared to 1.75 trillion barrels of conventional oil worldwide.
Alberta’s large deposits contain at least 85 percent of the world’s known bitumen (oil sands) reserves. Currently, only about 10 percent of the reserves are counted as recoverable, which amounts to about 3/4 of North America’s petroleum reserves. Many countries around the world have oil sand deposits, but only Canada and Venezuela have oil sand reserves that equal the world’s total reserves of conventional crude oil.
Until a few years ago, extracting crude from oil sands was not economically viable, since large amounts of energy are required to reduce the bitumen’s viscosity to extract the crude oil trapped in the sand. However, high oil prices and new technologies have enabled companies to extract the oil sands at a profitable level and convert the crude to usable products. Most of the oil sands’ extraction so far is done through surface-mining techniques, but over 80 percent of Canada’s reserves are too far below the earth’s surface to be extracted in this manner. New in-situ techniques have been developed to extract oil that was unreachable just a few years ago.
In July 2007, Royal Dutch Shell released its 2006 annual report and announced that its Canadian oil sands unit made an after-tax profit of $21.75 per barrel, nearly double its worldwide profit of $12.41 per barrel on conventional crude oil. A few days later, Shell announced it filed for regulatory approval to build a $27 billion oil sands refinery in Alberta, one of $38 billion in new oil sands projects announced that week.
A huge environmental cost is associated with oil sands extraction. The extraction process involves clearing forests, destroying natural habitat for plants and animals in the area. Since a significant amount of energy is used in the extraction process and produces carbon dioxide emissions, this resource is no more environmentally friendly than any other petroleum-based products. Under pressure from environmental groups, the current Conservative government in Canada announced last year that it was going to phase out some of the oil sands tax incentives over the coming years. However, with oil prices crossing over $100 this year, government tax incentives may no longer be necessary to promote investments in the area.
Fort McMurray, which lies in the heart of the Athabasca oil sands reserves, grew from a population of 37,000 in 1996 to 80,000 in 2006. By 2010, oil sands production is projected to reach 2 million barrels per day, or two-thirds of Canada’s total oil production. By 2015, crude oil extracted from oil sands is expected to represent over 80 percent of Canada’s oil production, which is estimated to be around 4 million barrels per day. The Athabasca oil sands are now featured prominently in international trade talks, with energy rivals China and the United States negotiating with Canada for a bigger share of the oil sands’ rapidly increasing output.