Posted on: Saturday, June 18, 2005
Tar-like deposits may be oil-thirsty world's new source of black gold
By Justin Blum
Washington Post
FORT McMURRAY, Alberta — Along Highway 63 in this Canadian province, rolling hills give way to massive open pits, huge waste ponds and tangles of pipes and refining equipment that spew smoke into the air.
In the pits, shovel trucks load dirt into dump trucks so gigantic that a driver has to climb a ladder attached to the front grille to get behind the steering wheel.
The changing landscape reflects an ambitious quest to develop a new source of oil. Major companies, faced with tougher prospects for developing big new oil fields around the world, are doing what was once unthinkable: sinking billions of dollars into projects to wring oil out of deposits of petroleum buried amid sand and clay.
Until a few years ago, such projects — called "oil sands" or "tar sands" — sputtered at the fringes of the oil industry. But with technological breakthroughs bringing down costs and oil prices soaring, companies have been investing heavily. Oil sands production is profitable when a barrel of oil sells in the low $20s, analysts said — far below the recent $50 range.
Just outside Fort McMurray, huge machines dig up the earth and remove the oil sands, whose deposits of a substance called bitumen smell something like roofing tar and are as thick and sticky as molasses. Companies are mining hundreds of feet deep and running the unearthed deposits through a complex process to convert them into oil. Companies move enough dirt and oil sands in two days to fill Yankee Stadium.
Factoring in the oil sands, Canada's proven oil reserves are reported to be nearly 180 billion barrels, second only to Saudi Arabia. U.S. energy officials say Canada's oil sands deposits are among the largest in the world. Fort McMurray, the hub of oil-sands activity, boasts on billboards: "We have the energy."
Companies are producing increasing amounts of oil from this unconventional source — about 1 million barrels a day. If all of that oil went to the United States, it would amount to roughly 5 percent of daily consumption. In 1995, oil derived from the sands was less than half the current amount. Alberta officials expect production to triple from today's level by 2020.
Oil sands are becoming increasingly important as a worldwide thirst for oil increases. Demand has surged and producers have struggled to keep up, pushing oil prices up. Gasoline prices have followed.
Though profitability has improved, making oil out of oil sands can be less lucrative than traditional oil development. With normal oil production, companies invest heavily in exploration and sometimes drill wells that come up dry. With oil sands, companies must devote large amounts of money to remove the deposits from the ground and change it into crude oil.
Environmentalists complain that the mining pollutes the air and water and that companies use huge amounts of clean-burning natural gas to convert oil sands into crude. Natural gas is in short supply in the United States.
"Why are we taking this clean fuel and using it to create something really ugly," said Stephen Hazell, of the Sierra Club of Canada. "Does Canada really want to be the tar nation? That's not the way to go. Not if we want to have a livable planet in 100 years."
