Very bullish oil sands article from WSJAlberta's Draw:
Oil Sands, and Technology
Tools for Tapping Heavy-Crude Deposits
Prove Just as Big a Lure for Foreign Investors
By TAMSIN CARLISLE
February 14, 2006; Page A17
CALGARY, Alberta -- China, India and other foreign investors are flocking to Alberta to snatch up massive petroleum reserves trapped within the Western Canadian province's oil sands. But the lure isn't just the oil itself.
The foreign investors are also chasing the chance to acquire or develop heavy-oil technology in a world where new big supplies of traditional light crude are becoming hard to find.
Increasingly, the world's oil supply is tilting toward stickier, or "heavier," grades of crude. Typically, heavy-crude deposits are easier to locate than undiscovered light-crude pools, but the oil they contain is more difficult and costly to extract, transport and process into fuels like gasoline and diesel.
The tilt comes as growing global demand, especially from the U.S. and rapidly developing nations like China and India, has led to a doubling of oil prices in about two years. The price gains and advances in squeezing fuels out of heavy oil have made it a more economically viable alternative to meeting the world's growing energy needs.
One of the heaviest types of oil is bitumen, a tar-like crude found mixed with grit in Alberta's oil sands. While oil sands are found in many countries, Canada's deposits stand out because they are the biggest, consisting of an estimated 1.7 trillion barrels of oil in place, though the amount recoverable depends on further technology improvements and whether oil prices justify the expense of a project. Alberta has become the world's proving ground for emerging technology for extracting and handling ultra-heavy crude at lower cost.
Canadian and international energy companies are prepared to pour as much as 100 billion Canadian dollars (US$86.7 billion) into oil-sands development over the next 10 years, if all the announced projects are built. Canada's top oil-industry research investors spent a total of C$272 million on research and development in 2004, according to Research Infosource Inc., of Toronto.
Some of the world's biggest multinational oil companies see opportunities elsewhere for applying oil-sands technology developed in Canada. Total SA of France, for example, is in negotiations with the Venezuelan government over plans to expand an existing oil-sands project in that country. While Venezuela's sands contain heavy oil, which is a less-viscous grade of crude oil than bitumen, Total may seek to apply some of the improved production techniques it is developing in Canada, said company spokeswoman Patricia Marie.
China has been sending trade missions to Alberta regularly for a couple of decades, but made two modest oil-sands investments only last year. A Chinese government official at the time cited interest in securing both new oil supplies and oil-sands technology.
China's go-slow approach to investment is more consistent with gaining technology than securing supplies for its own immediate needs, analysts say. For one, it is unlikely that much oil will be piped west from Alberta across rugged mountain ranges to Pacific Coast export terminals any time soon. For the foreseeable future, the upper limit to Canadian oil exports to China will be a modest 200,000 barrels a day, or half the capacity of one of two proposed multibillion-dollar pipelines that would carry oil from Alberta's main pipeline hub to a deep-water port in northern British Columbia. The other half of the pipeline's capacity is expected to be earmarked for shipments to the U.S. via West Coast tankers.
The two pipeline proposals are competing for backing from Alberta oil-sands producers and other shippers that eventually would cover construction costs through their oil-transportation tolls. Analysts doubt that shippers will risk paying higher tolls by backing two westbound pipelines, at least for another few years.
Peter Zeihan, chief analyst for global economic issues at private-intelligence firm Stratfor, Washington, D.C., believes China isn't likely to seek significant new oil supplies from Canada, partly because of logistics. "There's a reason why the pipelines run south and east from Alberta, not west," he said. More likely, he reckons, China will build pipelines to import more oil from its Asian neighbor Kazakhstan, and that it will invest heavily in new technology for producing and processing its own untapped oil resources.
One area of technology with Chinese involvement is carbon gasification, a process that can use fuels like coal to power oil-sands operations with less polluting sulphur emissions and without burning pricey natural gas, as is currently used.
One project, the proposed C$10.7 billion Northern Lights oil-sands project, is 60% owned by Synenco Energy Inc. of Canada and 40% owned by China Petroleum & Chemical Corp., known as Sinopec. In a recent presentation, Steve Gilliland, Synenco's executive vice president, operations, said the company plans to invest C$1.7 billion in bitumen-processing and carbon-gasification at Northern Lights over several years, while roughly C$800 million would be spent on oil-sands mining and bitumen extraction.
India and Japan have also recently sent delegations to Alberta to kick tires in the province's oil sands, with both teams visiting provincial government scientists at the Alberta Research Council. During his visit, an Indian government official said India is interested in investing as much as $1 billion in Canadian oil sands in the next 12 months.