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Oil Sands Located in Alberta, Canada

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What are oil sands?  Oil sands is a naturally occurring concoction of sand, clay or other minerals, water and Bitumen. Bitumen is a heavy and extremely viscous carbon rich oil which must be treated by refineries before it can be turned into usable fuels such as gasoline and diesel. While there are various theories concerning the formation of oil sand, the most prominent theory suggests that light crude oil from southern Alberta migrated north and east with the same pressures that formed the Rocky Mountains.  Over time, with the help of water and bacteria, what used to be light crude, was turned into Bitumen.  The oil saturated sand deposits settled over three main areas: Peace River, Cold Lake and Athabasca.  Oil sand is extracted in 2 ways: Surface mining and In-Situ.  Surface mining involves the use of large trucks and shovels to mine the surface and ultimately extract the oil, however; only 20% of all oil sands are close enough to the surface that surface mining is an efficient method of use.  In- Situ involves the use of steam injection to heat Bitumen enough where it can be pumped to the surface.  Once extracted, Bitumen is upgraded and shipped through underground pipelines to refineries where the Bitumen is turned into jet fuels, gasoline, and other petroleum products. 

Where are Alberta’s Oil Sands located?  Alberta’s oil sands cover 54,132 square miles of land in the Athabasca, Cold Lake and Peace River areas which are located in northern Alberta.  

Athabasca Oil Sands History - The Athabasca oil sands were first discovered in 1875 but it wasn’t until almost 20 years later in 1893, when the government of Canada first dedicated funding to conduct further research on the Athabasca oil sands and its potential use as a source of petroleum.  Once the funding was under way, drilling quickly began in 1894 when a reservoir of natural gas was hit and continued to produce oil for the following 21 years.  In 1915, several tons of Athabasca oil sands were put to test in Edmonton for road paving and then in 1921 the first company dedicated to oil sand was founded (International Bitumen Company).  They used the Bitumen for roofing and road surfacing. By 1967, a second company, Great Canadian Oil Sands which is now part of Suncor Energy Ltd., made history by kicking off the world’s first large-scale oil sands operation at Fort McMurray.  Then, in 1970 a new method of developing certain deposits of bitumen which were too deep to be mined, was discovered by Dr. Roger M. Butler.  His discovery changed the oil sands industry forever. 

Oil Sands Today - Alberta’s oil sands contain one of the biggest oil reserves in the world next to Saudi Arabia.   In 2008, Alberta’s oil sand reserves totaled 171.8 billion barrels with an estimated 300 billion barrels still yet to be recovered.  As Alberta’s government continues to expand their position as a world-leading energy supplier, their production is expected to increase from 1.31 million barrels per day  to 3 million barrels per day by 2018.  Alberta’s oil sand industry has exploded in the past few years.  In fiscal year 2008/2009, $3 billion in royalties were reported from oil sands projects and investments increased 14% from 2007 and to 2008.

Alberta Oil Sands Map - Athabasca Oil Sands
alberta oil sands

Companies that are exploring Oil Sands - Oil Sands Stocks

Marathon Oil  MRO - Marathon’s third quarter 2010 net synthetic crude production (upgraded bitumen excluding blendstocks) from the Athabasca Oil Sands Project (AOSP) mining operation was flat year over year at 27,000 barrels per day (bpd), but above previous guidance for the quarter.

For the first nine months of 2010, net synthetic crude production averaged 21,000 bpd, compared to 27,000 bpd for the same period last year. The decrease was largely due to AOSP turnaround activities that began March 22, 2010 and halted production until a staged resumption of operations in May.  Marathon expects fourth quarter net synthetic crude production will be between 28,000 and 34,000 bpd, with anticipated full-year net synthetic crude production estimated to be approximately 23,000 bpd.

Devon Energy DVN - In Canada, net production from Devon's Jackfish oil sands project averaged 21,300 barrels per day in the third quarter. Jackfish was taken offline for scheduled plant maintenance during the last three weeks of the third quarter and resumed operations on September 30, 2010.  Construction of Devon's second Jackfish oil sands project is now approximately 90 percent complete. The company plans to commence steam injection at Jackfish 2 in the second quarter of 2011, with first production expected by the end of next year.   Devon sanctioned its third Jackfish development project and filed a regulatory application in the third quarter. The company could begin facilities construction at Jackfish 3 by the end of 2011, with plant start-up targeted for 2015.

Nexen NXYNexen continues to make progress on various initiatives to support the ramp-up of production and improve operational performance. Seven of the ten wells on pad 11 have completed initial steaming and production commenced late in the first quarter of 2011. We recently completed the installation of additional natural gas pipeline capacity that is expected to be in service this summer, enabling more consistent steam generation independent of upgrader operations. Nexen commenced drilling of the 18 wells on pads 12 and 13, and steaming and production are expected to begin next year. Work continues on the addition of two once-through steam generators that are expected to add 10 to 15% to the existing steam capacity late 2012. Work also continues on a diluent recovery unit to allow for continued production of dilbit for sale when the upgrader is down.

One of the key learnings from Long Lake relates to our strategy around resource development. Nexen's original strategy was to minimize capital investment by prioritizing the development of the resource closest to the upgrader rather than developing the highest quality areas in priority. Nexen has focused on high-grading the resource development with pads 11 through 13, which are among the highest quality resource on the lease. We are assessing accelerating the development of additional pads on high-quality resource to grow bitumen volumes.

These initiatives increase the overall project cost by 10 to 15%. These incremental investments are highly economic. On a full-cycle basis, robust oil prices and high-quality upgraded crude will deliver strong cash flows and return on capital employed.

Work on the Kinosis project also continues. Extensive core hole analysis on this reservoir confirms this is a high-quality resource. We are committed to the development of our oil sands leases and plan to develop Kinosis in two smaller SAGD stages of about 40,000 bbls/d each with upgrading available after ramp up.

Statoil (STO) - Statoil Canada Oil Sands - Statoil’s oil sands leases are located approximately 120 kilometres south of Fort McMurray in the Athabasca region of north east Alberta. The company’s next phase, Corner, is a proposed 40,000 bpd facility, which along with the eventual further expansion of Leismer to 40,000 bpd, recently received approval by the Alberta Energy Resources Conservation Board (ERCB). 

"We are very pleased with the safe start up of this demonstration facility and first oil at Leismer," said Lars Christian Bacher, president of Canadian operations for Statoil Canada Ltd. “This is truly a milestone for our business in Canada.”

-Suncor Energy Inc. (SU)

-Chevron Corporation (NYSE: CVX)

-Syncrude Canada Ltd.

-Canadian Natural Resources Limited (TSX: CNQ NYSE: CNQ)

-Royal Dutch Shell

-Total S.A. (Euronext: FP, NYSE: TOT)

-Imperial Oil Limited (TSX: IMO AMEX: IMO)

-Husky Energy Inc. (TSX: HSE)

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