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Will Oil Sands be USA's trump card?

|Includes:ATPAQ, COP, Chevron Corporation (CVX)

In the year 1778, a fur trader named, Alexander MacKenzie, was traveling across Canada and stumbled upon some bituminous fountains. He inserted a 20 foot pole into one of the fountains and encountered little resistance. What he was unaware of then, was that he had discovered the second largest oil reserve on the planet.  


I keep running across the controversial topic of whether or not oil reserves have peaked. I've seen all types of predictions about where a barrel of oil will go in price, from down to $10 to as much as what Goldman Sachs now predicts $150/barrel sometime next year.

With GS's prediction, and including that I recall that both Bill Gates and Warren Buffet recently visited Canadian oil sites together, I decided to delve into and do some research of what's really going on in the oil sector. From an investing standpoint, if oil does go to $150.00, I might as well make some money so I can afford to put $5.00 gas in my car.

What I've learned astounded me. It is now my assumption that OPEC in no way wants oil to go to $150.00/barrel. Why? Because the USA and Canada have vast reserves of newly discovered oil that nobody seems to be talking about.

We all know about Alaska's Prudoe Bay and the North Slope reserves, and all the ongoing environmental controversy. Comments are welcome, but this article will not go down that path.

The current total of proven global reserves is 1.239 billion barrels of oil.
This figure was taken from the March 3, 2009 table provided by:
From the same Department of Energy table, they claim that the USA has 30.460 billion barrels in reserve, and that Canada has 27.664 billion barrels of reserves.

These numbers are more dis-information coming from our beloved government.

The truth is that there are in excess of 2 trillion barrels of proven reserves globally. And the newest and largest discoveries of oil are right here in North America.  

Out in Utah and Montana, and in Canada there have been a massive discoveries of oil that nobody seems to be talking about. Canada now ranks second behind Saudia Arabia in proven reserves.

The following was taken from Cobra Oil and Gas's website: "Of those 2 trillion+ barrels [of reserves], the greatest concentration lies in North America, with Canada holding the larger part."

The oil is in the sand, so to speak, and from that we get term: oil sands (projects).

The problem is extraction. It takes about 150 gallons of water to produce 1 barrel of oil. In the sand there are large amounts of bitumen, which is melted away with the new "high pressure steaming" technologies. This is proving to be the answer to somewhat economically extracting the oil. But in most oil sands projects, the process is still too expensive to compete with conventional land and ocean production at current prices. 

The National Board of Energy (NEB) in Canada estimates the average cost of producing a conventional barrel of oil in Saudia Arabia and Iraq is slightly less than $1.00. The NEB estimates the cost of producing a conventional barrel of oil in the US to range from $4.00 to $6.00.

The NEB states that the cost of producing a barrel of oil from the oil sands ranges from $9.00 to $20.00. This does not include upgrading the crude bitumen to synthetic grade oil, which then takes the final costs up to $36.00 to $40.00.


When the following companies are involved with the Oil Sands, an investor should take notice; Exon, Royal Dutch Shell, BP, Chevron, Total S.A., Conoco Phillips, StatiolHydro, Suncor and Marathon Oil. They are involved because they know oil will rise in price, and when it does, they will be postioned to take advantage of what the fur trader, Alexander MacKenzie, discovered. 

That 20 foot "stake" should have remained in place. 

Disclosure: I have holdings in Conoco Phillips (NYSE:COP), ATP Oil and Gas, (ATPG), Chevron (CHX), and Doral Energy, Corp (DEGY).