Are Canadian Oil Reserves Indeed Only Second to Saudi Arabia?

It seems Canada's oil reserves may well be under-rated, and that the region in fact holds no less than the world's second-largest oil reserves.

This speculation takes into account the Alberta oil sands previously considered too expensive to develop.

Dow Jones has reported that the Energy Information Administration (EIA), the statistical wing of the US Department of Energy, has provided recent private sector estimates stating that an additional 175 billion barrels of oil could be recovered from resources known to exist in Western Canada since the 19th Century.

At a briefing of the EIA International Energy Outlook, EIA Administrator, Guy Caruso, apparently cited a December report in the Oil and Gas Journal that raised Canada's proven oil reserves to 180 billion bbls from 4.9 billion bbls, thanks to inclusion of the oil sands, also known as tar sands, now considered recoverable with existing technology and market conditions.

"Canada will be producing a lot of oil from the development of these tar sands, but the quality of those reserves differs substantially from the Saudi reserves in terms of cost and ability to bring ... the productive capacity on in a meaningful way," Dow Jones quotes Caruso as commenting.

"There is a difference in the absolute amount versus the ability to turn that into productive capacity."

Oil, or tar sands, are impregnated sands that yield mixtures of liquid hydrocarbon and require further processing other than mechanical blending before becoming finished petroleum products. Oil sands are deposits of bitumen; viscous oil that must be rigorously treated in order to convert it into an upgraded crude oil before it can be used in refineries to produce gasoline and other fuels.

Interestingly, the latest estimates put Canada ahead of Iraq, which the EIA estimates holds 112.5 billion bbls. The Administration projects Canadian oil sands could produce 2.2 million barrels a day by 2025 compared with the current level of about 700,000 b/d, which already represents more than a fourth of total Canadian output of 3.1 million b/d.

The Canadian Association of Petroleum Producers has estimated that current projects will raise Alberta oil sands production to 1 million b/d this year, and continuing development will raise it further to 1.8 million b/d by 2010.

"Current oil sands projects are economically viable at crude oil prices of $18-$20 a barrel, though the quality of oil produced can vary according to whether production comes from 'in situ' reserves that require drilling assisted by steam-injection pressure or from simple mining," Greg Stringham, CAPP Vice President, has been cited as saying.

CAPP's own estimate of Canada's recoverable oil sands is apparently 315 billion bbls, 20% from mining and the rest from steam-assisted drilling.

Stringham explains that among political complications are the additional carbon dioxide emissions from production and processing of the tarry substance. He says that despite Canada's ratification of the Kyoto Protocol limiting carbon dioxide emissions, the industry expects the international agreement to add only 25 cents to 30 cents a barrel to development costs through 2012.

Oil sands development, which relies heavily on natural gas, could benefit from development and pipeline transport of large Arctic gas reserves in Alaska's North Slope and Canada's Mackenzie Delta, which under current proposals could be on-stream by 2010, the CAPP official concluded.

This article provided courtesy of EyeForEnergy