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The Athabasca Oil Sands are a large deposit of oil-rich Bitumen located in northern Alberta , Canada . These Oil Sands consist of a mixture of crude bitumen (a semi-solid form of crude oil), silica sand, clay minerals, and water. The Athabasca deposit is the largest of three oil sands deposits in Alberta, along with the Peace River and Cold Lake deposits. Together, these oil sand deposits cover about 141 000 km&2 of sparsely populated Boreal Forest and Muskeg (peat Bogs ). The Athabasca oil sands are named after the Athabasca River which cuts through the heart of the deposit, and traces of the heavy oil are readily observed on the river banks. Historically , the bitumen was used by the indigenous Cree and Dene Aboriginal Peoples to waterproof their canoes. The oil deposits are located within the boundaries of Treaty 8 , and several First Nations of the area are involved with the sands. The oil sands were first seen by Europeans in 1788. The key characteristic of the Athabasca deposit is that it is the only one shallow enough to be suitable for Surface Mining . About 10% of the Athabasca oil sands are covered by less than 75 metres (250 feet) of Overburden . The mineable area as defined by the Alberta government covers 37 contiguous townships (about 3400 square kilometres or 1300 square miles) north of the city of Fort McMurray . The overburden consists of 1 to 3 metres of water-logged Muskeg on top of 0 to 75 metres of clay and barren sand, while the underlying oil sands are typically 40 to 60 metres thick and sit on top of relatively flat limestone rock. As a result of the easy accessibility, the world's first oil sands mine was started by Great Canadian Oil Sands (now Suncor ) back in 1967. The Syncrude mine (the biggest mine in the world) followed in 1978, and the Albian Sands mine (operated by Shell Canada ) in 2003. All three of these mines are associated with bitumen Upgrader s that convert the unusable bitumen into Synthetic Crude oil for shipment to Refineries in Canada and the United States, though in Albian's case, the upgrader is not co-located with the mine, but at Scotford, 439 km south. The bitumen, diluted with a solvent is transferred there in a 24 inch Corridor Pipeline. The Athabasca oil sands are primarily located in and around the city of Fort McMurray which was still, in the late 1950s, primarily a wilderness outpost of a few hundred people whose main economic activities included fur trapping and salt mining. Since the Energy Crisis of the 1970s, Fort McMurray has been transformed into a Boomtown of 80,000 people struggling to provide services and housing for migrant workers, many of them from Eastern Canada, especially Newfoundland . ESTIMATED OIL RESERVES Alberta Government calculates that about 28 billion cubic metres (174 billion barrels) of crude bitumen are economically recoverable from the three Alberta oil sands areas at current prices using current technology. This is equivalent to about 10% of the estimated 1,700 and 2,500 billion barrels of bitumen in place.1. Alberta estimates that the Athabasca deposits alone contain 5.6 billion cubic metres (35 billion barrels) of surface mineable bitumen and 15.6 billion cubic metres (98 billion barrels) of bitumen recoverable by In-situ methods. These estimates of Canada's Oil Reserves caused some astonishment when they were first published but are now largely accepted by the international community. This volume places Canadian proven oil reserves second in the world behind those of Saudi Arabia . The method of calculating economically recoverable reserves that produced these estimates was adopted because conventional methods of accounting for reserves gave increasingly meaningless numbers. They made it appear that Alberta was running out of oil at a time when rapid increases in oil sands production were more than offsetting declines in conventional oil, and in fact most of Alberta's oil production is now Non-conventional Oil . Conventional estimates of Oil Reserves are really calculations of the geological risk of drilling for oil, but in the oil sands there is very little geological risk because they outcrop on the surface and are extremely easy to find. One risk is economic risk of low oil prices and with the Oil Price Increases Of 2004-2006 , this economic risk evaporated. The Alberta estimates in some ways are extremely conservative, since they assume a recovery rate of around 20% of bitumen in place, whereas oil companies using the new Steam Assisted Gravity Drainage method of extracting bitumen report that they can recover over 60% with little effort. These much higher recovery rates probably mean that the ultimate production could be several times as high as the already very large government estimates. At rate of production projected for 2015 , about 3 million barrels per day, the Athabasca oil sands reserves would last over 400 years. 2 However, production cannot increase to those levels without a huge influx of workers into northern Alberta, which by 2006 was already occurring. This need created a severe labor shortage in Alberta, which by 2007 drove unemployment rates in Alberta and adjacent British Columbia to the lowest levels in history. Even as far away as the Atlantic Provinces, where workers were leaving to work in Alberta, unemployment rates fell to levels not seen for over 100 years.3 These manpower limitations imply that, while Alberta is capable of being a major player on the world oil market for the rest of this century, it does not have enough population to replace the Middle East as the main source of American, European and Asian supply. The Venezuela n Orinoco Tar Sands site may contain more oil sands than Athabasca (see Tar Sands article). However, while the Orinoco deposits are less viscous and more easily produced using conventional techniques (the Venezuelan government prefers to call them "extra-heavy oil"), they are too deep to access by surface mining. ECONOMICS Despite the large reserves, the cost of extracting the oil from the sand has historically made production of the oil sands unprofitable - the cost of selling the extracted crude would not cover the direct costs of recovery; labour to mine the sands and fuel to extract the crude. In mid-2006, the National Energy Board of Canada estimated the operating cost of a new mining operation in the Athabasca oil sands to be $9 to $12 per barrel, while the cost of an in-situ SAGD operation (using dual horizontal wells) would be $10 to $14 per barrel. This compares to operating costs for conventional oil wells which can range from less than $1 per barrel in Iraq and Saudi Arabia to $6 and up in the United States and Canada. In addition, the capital cost of the equipment, such as the huge machines required to mine the sands and the dump trucks used to haul it to processing, is a major consideration in starting production. The NEB estimates that capital costs raise the total cost of production to $18 to $20 per barrel for a new mining operation and $18 to $22 per barrel for a SAGD operation. This does not include the cost of upgrading the crude bitumen to synthetic crude oil, which makes the final costs $36 to $40 per barrel for a new mining operation. Therefore, although high crude prices make the cost of production very attractive, sudden drops in price leaves producers unable to recover their enormous capital costs - although the companies are well financed and can tolerate long periods of low prices since the capital has already been spent and they can almost always cover incremental operating costs. However, the development of commercial production is made easier by the fact that exploration costs are virtually nil. Such costs are a major factor when assessing the economics of drilling in a traditional oil field. The location of the oil deposits in the tar sands are well known and an estimate of recovery costs can usually be made easily. Most important, the oil sands are in a politically stable area - there is not another region in the world with energy deposits of this magnitude where it would be less likely that these expensive installations would be Confiscated by a hostile national government, or be endangered by a War or Revolution . As a result of the Oil Price Increases Of 2004-2006 , the economics of oil sands have improved dramatically. At a world price of $50 per barrel, the NEB estimates an integrated mining operation would make a rate return of 16 to 23 percent, while a SAGD operation would return 16 to 27 percent. Prices in 2006 have been considerably higher than that. As a result, capital expenditures in the oil sands announced for the period 2006 to 2015 exceed $100 billion, which is twice the amount projected as recently as 2004. However, due to an acute labour shortage which has developed in Alberta, it is not likely that all these projects can be completed. |
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