The Canadian Oil Rush: The Oil Sands of Alberta

[nadepalma]

Source: http://www.cbsnews.com/stories/2006/...n1225184.shtml

The Oil Sands Of Alberta
Jan. 22, 2005



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(CBS) There’s an oil boom going on right now. Not in Saudi Arabia or Kuwait or any of those places, but 600 miles north of Montana.

In Alberta, Canada, in a town called Fort McMurray where, this time of year, the temperature sometimes zooms up to zero.

The oilmen up there aren’t digging holes in the sand and hoping for a spout. They’re digging up dirt — dirt that is saturated with oil. They’re called oil sands, and if you’ve never heard of them then you’re in for a big surprise because the reserves are so vast in the province of Alberta that they will help solve America’s energy needs for the next century.

Within a few years, the oil sands are likely to become more important to the United States than all the oil that comes to us from Saudi Arabia.

Correspondent Bob Simon reports.

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Twenty-four hours a day, 365 days a year, vehicles that look like prehistoric beasts move across an arctic wasteland, extracting the oil sands. There is so much to scoop, so much money to be made.

There are 175 billion barrels of proven oil reserves here. That’s second to Saudi Arabia’s 260 billion but it’s only what companies can get with today’s technology. The estimate of how many more barrels of oil are buried deeper underground is staggering.

"We know there’s much, much more there. The total estimates could be two trillion or even higher," says Clive Mather, Shell's Canada chief. "This is a very, very big resource."

Very big? That’s eight times the amount of reserves in Saudi Arabia. The oil sands are buried under forests in Alberta that are the size of Florida. The oil here doesn’t come gushing out of the sand the way it does in the Middle East. The oil is in the sand. It has to be dug up and processed.

Rick George, the Colorado-born CEO of Suncor Energy, took 60 Minutes into his strip mine for a tour. He says the mine will be in operation for about 25 years.

The oil sands look like a very rich, pliable kind of topsoil. Why doesn’t oil come out when squeezed?

"Well, because it’s not warm enough. If you add this to hot water you’ll start the separation process and you’ll see the oil come to the top of the water and you’ll see sand drop to the bottom," George says.

It may look like topsoil but all it grows is money.

It didn’t always. The oil sands have been in the ground for millions of years, but for decades, prospectors lost millions of dollars trying to squeeze the oil out of the sand. It simply cost too much.

T. Boone Pickens, a legendary Texas oil tycoon, was working Alberta’s traditional oil rigs back in the '60s and remembers how he and his colleagues thought mining for oil sands was a joke.

"Here we are sitting there having a drink after work and somebody said this isn’t going to, it isn’t possible. It’ll all have to be subsidized to a level, said, before they’d make money you’d have to have $5 oil," Pickens says laughing. "We never thought it would happen."

But then $40 a barrel happened and the oil sands not only made sense, they made billions for the people digging them. But it wasn’t just the price of oil that changed the landscape, it was the toys. That’s what they call the giant trucks and shovels that roam the mines.

Everything about the oil industry has always been big. It’s characterized by bigness, from the pumps to the personalities. But up here in Alberta, it’s frankly ridiculous. The mine operates the world's biggest truck. It’s three stories high and costs $5 million. It carries a load of 400 tons of oil sands, which means, at today’s oil prices, each load is worth $10,000 dollars.

What it’s like to drive one of these monsters? At the foot of a tire, we asked the driver, Jim Locke.

"You have 14 steps going up, and at my house you have 14 steps to the bedroom. So it’s like going upstairs in my house, sitting on my bed and driving the house downtown," says Locke.

But getting downtown is just the beginning. The oil sands then go into a plant. They’re heated in a cell, which separates the oil from the sand. The result looks like something out of Willy Wonka’s chocolate factory. This oil froth is then sent to an upgrader and eventually to a refinery.

Asked if the processed oil is as good as that pumped in Saudi Arabia, Mather says, "Absolutely as good as. In fact, it even trades as a, at a premium because it’s high quality crude oil."


The capital of the oil sands frenzy is a frontier town called Fort McMurray, which isn’t in the middle of nowhere. It’s north of nowhere and colder than the Klondike, but a boomtown just the same. The local hockey team is called the "Oil Barons." They’re on a winning streak.

Is this comparable to a gold rush?

"I think it’s bigger than a gold rush. We’re expecting $100 billion over the next 10 years to be invested in this area — $100 billion in a population that, currently, is 70,000 people," says Brian Jean, who represents the region in Canada’s parliament.

Pickens is one of those investors. He runs a hedge fund in Dallas and is now a true believer.

"We’re managing $5 billion here. And, about 10 percent of it is in the oil sands. So, it’s the largest single investment we have," Pickens says.

And if oil sands are the answer for investors, does Pickens think the oil sands are the answer for the United States?

"Oh, I think so," he says.

Most of those lumbering trucks are on their way to the gas tanks of America. A million barrels a day are now coming out of the oil sands and oil production is expected to triple within a decade. It won’t replace Middle Eastern oil but at that point it will be the single largest source of foreign oil for the United States, even bigger than Saudi Arabia, which sends a million and a half barrels a day to America.

Greg Stringham, who works for the Canadian Association of Petroleum Producers, says surprisingly, that Washington has only been paying attention for the "last couple of years."

Stringham often lobbies for the oil sands in Washington. He says that in Alberta you don’t have to look for the oil sands — the earth moves.

"When it comes to exploration in the oil sands, you can’t drill a dry hole. It’s there," he says. "We know where it is. They’ve outlined it. You don’t have any risk. But other conventional sectors around the world, there’s a huge exploration risk."

The exploration risks are the least of it. Much of the world’s crude is in the Middle East where the instability is deeper than the oil. When Alberta’s blue-eyed sheiks took to Wall Street last summer in their Stetsons to drum up support for the oil sands, their message seemed to be, "If you can’t trust Alberta, who can you trust?"

"Alberta is a very good place to do business. It’s a very stable environment," says Mather.

The bonus for Canadians, aside from the treasure, is the notion that Americans might have to start treating them with a little less condescension.

"With their oil, I think we’re going to need them a lot more than they need us," says Pickens.

"We may appear in Canada to be a mouse compared to the elephant down south in terms of diplomacy or politics. But in terms of resources, we are mighty equals," says Mather.

There have been grumblings out of Ottawa that Canada should consider using the oil sands as leverage in its serious trade disputes with the United States.

Does Brian Jean think America is taking Canada for granted on the oil sands?

"Absolutely. And I think most people, most Canadians believe that," he says.

And the Canadians have alternatives. The Chinese, for example, are just dying to get a piece of the sandbox.

"I’ve been contacted personally by Chinese delegates that want to get into the plant sites here and want to see and want to invest," says Jean.

Asked what he thinks about the Chinese interest in the oil sands up in Alberta, Pickens says, "At first I thought they were tire kickers. But I think they’re serious buyers."

Much, much more HERE

[GMCSonoma]

I saw this on TV just this weekend, it was an intriguing report, which also meant a much needed financial gain for west Canada...

[Aerodynamix]

To say that Alberta has done very for itself due to it's oil is a huge understatement. I believe they've just finished paying off the provincial deficit - and I think they're the only province to do so.

One of the guys that I used to work with last month before he got canned is planning on going to Fort McMurray very soon to work on the oil sands. He got the idea after his dad (one of the other salesman at my dealer) sold an Avalanche to a guy who works out there. I've actually thought about doing it myself. I'm just not sure if I'm up to it.

[give_it_all_]

This costs a lot to extract the oil from the sand. And that means it will cost a lot more. Also, I know some of the workers in the oil sands, they get paid $400/day. That'll bring up the price for American's to buy it. I hope they keep the prices down in Canada at least

[TmGeneral]

It costs around $25 to 35 per barrel to process and refine petroleum from oil sands. Now that oil has been consistently over $60 per barrel with no relief in sight, tapping the oil sands makes a lot of sense.

[moman]

It would be great if we could cut our consumption and become 100% reliant on our own oil and Canadas. This would provide dividends far more than spending billions in the Gulf trying to promote stability in a region known for instability.

[CRBoyd91]

If it wasn't for oil, the US would probably not even be in the Middle East today. I see the oil sands as much needed relief for the US, and Canada. Hopefully Canada won't take advantage on the US and raise the prices sky high.

[86fleet]

This is good for both Canada and the US. Now we don't have to pay terrorists for our oil. (unless of course Canada has a dirty secret)

[CRBoyd91]

Originally Posted by 86fleet

This is good for both Canada and the US. Now we don't have to pay terrorists for our oil. (unless of course Canada has a dirty secret)

LMAO!!!

[nadepalma]

I was impressed by this article, especially when they say that this Oil Sand is now the second largest "oil field" in the world and that it has the potential to be the largest out there. I would much rather purchase our oil from our cousins to the north than Venezuela or the Middle East.

Nevertheless, I wonder what it will eventually yield? I wonder what our own reserves will yield, especially if they do exploratory drilling in ANWAR like they plan on doing..they say that has a great deal of potential as well.

I'm glad for Canada though -- I read a year ago that they now have one of the largest open Diamond mines in the world -- it's completely frozen but they are working to extract the diamonds and they say that the quality rivals those from South Africa. Nice when your neighbors do well, I think

[dindak]

If you want to make a lot of money over the long haul guys, buy oil sands stocks. My family accounts have done very very well with them and there are lots of up and coming stocks to buy like Synenco Energy, Opti Canada, UTS Energy and more. Even some of integrated Canadian oils have good sands exposure like Petro Canada and Suncor. Check it out.. buy and hold for a lifetime. You will be glad you did.

[Proetus]

"Kyoto obliges Canada to cut the output of greenhouse gases by 6 percent from 1990 levels by 2012. Canada's overall emissions in 2003 were in fact 24 percent above 1990."

Poor, poor Paul Martin.

[Family Man]

Please don't invade us... Please???

[nadepalma]

Originally Posted by dindak

If you want to make a lot of money over the long haul guys, buy oil sands stocks. My family accounts have done very very well with them and there are lots of up and coming stocks to buy like Synenco Energy, Opti Canada, UTS Energy and more. Even some of integrated Canadian oils have good sands exposure like Petro Canada and Suncor. Check it out.. buy and hold for a lifetime. You will be glad you did.

That's good advice...Thanks!

Do you happen to know exactly when this big build up of the Oil Sand started exactly? Don't get me wrong, as the price of oil climbs there's no doubt it looks more and more attractive but just wondering.

[vdoh182]

I read on CNN an article talking about alternative places to find oil and in north america between shale and sands and new drilling techniques and offshore rigs, there would be a major boost to the proven reserves
http://money.cnn.com/pf/features/oil_crunch/