Monday, July 17, 2006

Oil's Not Well in Canadian Sands

Wired
July 17, 2006

With all of the uncertainty in the Middle East, the U.S. government is continuing to cozy up to its important oil supplier to the north.

DOE Secretary Bodman was in Alberta last week, touring oil sands facilities where "current oil sands production is over 1 million barrels per day, and is expected to double by 2010 and reach 3 million barrels per day by 2015," according to the agency. Canada accounts for more than 16 percent of our total imported crude oil and petroleum products, and with 175 billion barrels of proven oil sands reserves, Canada ranks second only to Saudi Arabia in global oil reserves.

(Hey Canada, consider joining us. We've got 2 Disney parks, more NHL teams, and lower taxes.)

However, according to Western Oils Sands, one of the major players in the oil sands project, the cost of extracting the oil is "skyrocketing." The cost of its project jumped 50 percent over the previously estimated bill of $7.3 billion, thanks to increasing costs of labor and supplies. Competitor Nexen says its oil sands costs will rise 10 percent, while Shell says the cost of its oil sands plant went up 50 percent.

According to Western, oil sands are a mixture of sand, bitumen and water. Bitumen is a heavy viscous crude oil that contains high amounts of sulfur. Bitumen can be processed into high quality, synthetic oil.

The environmental cost is also steep, as Al Gore told Rolling Stone that "four metric tons of landscape is torn up for every barrel of oil."

So while there may be lots of oil in the sand, it won't come cheaply.

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