The 'Section Big' Oil Sands Conundrum Thursday, March 13th, 2008
Let me ask you something: What do you consider to be non-conventional oil?
Do you see a trillion barrels of oil shales? Or perhaps massive shovels dumping tons of oil sands into huge trucks
at the surface mines in the Athabasca basin?
If I asked this forty years ago, most people would have pictured offshore drilling rigs pumping crude up from underwater oil deposits.
Today, however, offshore production is not only a conventional source for crude oil, but also very few areas where U.S. oil production is growing.
But why should we be concerned about what is considered conventional oil or not?
I'll give you one reason: Section 526. More on that below.
Canada's Oil Sands: The Next Form of Conventional Oil?
To say the U.S. government is sending mixed signals to our Canadian neighbors would be an understatement. In 2006, the U.S. was practically begging Canada to ramp up its oil sands production.
Okay, perhaps "begging" may be too strong of a word, but how else can you describe it? Just two years ago (when oil was less than half of today's price of $108 per barrel), U.S. officials were asking the Canadian government to increase their oil sands production by fivefold.
That comes out to about five million barrels per day.
If anyone has a better way of phrasing the U.S.'s desire for Canadian heavy oil, I'm all ears. It's clear we were looking to switch our Middle East oil addiction with Canadian oil sands.
Now here's the $64,000 question: Why would news that is over two years old be of any consequence?
The fact is that production from oil sands has been increasing. Although it's not even close to the desired five million barrels per day, production from the Alberta oil sands is projected to be just under three million barrels per day by 2015. We can debate whether production will reach that target another time. All hope for the second largest oil reserve in the world? Unlike conventional oil which is pumped out of the ground, there are two methods to extract oil sands. Either the oil sands are mined and the bitumen is separated, or the bitumen is heated up underground through in-situ methods and pumped out of the ground. This could mean the U.S. might reclassify the heavy oil as a conventional source of oil. If you can't beat 'em, join 'em.
The oil sands deposits are recognized by the U.S. Energy Department as having the second largest oil reserves in the world (second only to Saudi Arabia, assuming the Saudis are being truthful about reserves)?
There are several ways the government can deal with Section Big OPil Sands, but I honestly can't see the U.S. backing away from Canadian oil sands. The large honey pot is too big. Rather, I think new technology will become mainstream that make extraction methods cleaner and more efficient much better every year -
Fortunately, there's another way you can reinforce your oil sands investments.
Securing Your Canadian Oil Sand Play -
Many Alberta oil companies focusing on oil sands are expanding their operations to another emerging oil play. While developing the heavy oil in Alberta, your oil investments are also moving into the oil plays of the Formation in Saskatchewan.
Right now, I would be looking for those companies with operations in both provinces. It's a win-win situation. If you're interested in finding some companies out, I'd suggest checking out the $Trillion's Report.
As for the U.S. cutting off one of its only chances to relieve its dependence on Middle Eastern oil, I wouldn't count out any of the BQI oil sands - Imo. Tia. God Bless America
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