Oil Sands Licenses Yield High Sales in Alberta’s Auction
Oil sands are in high demand, as shown by the high prices fetched by drilling leases. (image: nationalpost.com)
In a recent auction, the Canadian province of Alberta sold oil leases for a total of $383.9 million, making it the highest sale of onshore leases since December 2006 and the third highest in history. The most expensive lease sold for a total of $46.8 million, or about $5,700 per hectare, indicating that the bidders (big oil companies) are unafraid of the challenges associated with drilling in oil sands and are willing to spend the time and money necessary to see results.
Perhaps when you think of Alberta, you don’t imagine tremendous underground fields of oil. But according to the Oil Sands Discovery Center, the province’s oil sands are the largest known reserve of oil on earth, between 1.7 and 2.5 trillion barrels of crude, and represent about 44 percent of the country’s oil production. To gain some idea of the immensity of these reserves, consider that Saudi Arabia has only 261.9 billion barrels of proven reserves, and that the combined reserves of OPEC come to only 885 billion barrels.
Oil sands, also known as tar sands, are a combination of clay, sand, water, and bitumen—a heavy, black, viscous oil. Mining oil sands is a costly and difficult process since it requires separating the bitumen from the sand and then turning it into usable oil. There are also severe environmental consequences to mining oil sands. Environmental Defense, a Canadian nonprofit organization, released a report in 2008 that called oil sands mining “the most destructive project on Earth.”
Still, improved technology to drill for unconventional oil and rising oil prices mean that where most oil companies once saw a headache, they are beginning to see higher profit margins.
