- The Washington Times - Monday, May 1, 2006


High in northern Canada, a company called Syncrude is mining oil from a black pit that measures 35,000 acres. Giant trucks, the largest in the world, take three loads of oil sands from a huge shovel then deliver the material to a crusher on its way to becoming oil.

“Each truck carries about 400 tons of material and we get about 200 barrels of oil from that,” said Jim Carter, president and chief operating officer of Syncrude, the largest oil-sands operator in the world. The Fort McMurray company is a consortium owned by seven firms, including Canadian Oil Sands Trust, Imperial Oil, which is the Canadian arm of Exxon Mobil, and Petro Canada.

Mr. Carter comes from a mining background, not an oil background. He pushed for the use of giant shovels and trucks, which are more flexible than giant moving scoops and draglines, the last of which were retired last month. He said the mine site is barely touched.

“We will be mining here for another 45 years,” Mr. Carter said. “Last year our production was 250,000 barrels a day. We will have that to 350,000 by the end of this year.”

That is on this one site. Alberta, about the size of Ireland, has 30,888 square miles of oil sands. Huge swaths of the boreal forest and a light layer of topsoil cover the oil sands. The deposits come in three locations: Peace River to the west of here, Cold Lake to the east on the Saskatchewan border, and by far the largest deposit in the Athabasca region surrounding Fort McMurray.

About 6,500 people are working on the Syncrude site, in the open-pit mine and the plant that upgrades the heavy oil to light synthetic crude. Canadian Indians, a group with some of the highest rates of unemployment in the country, comprise more than 10 percent of the work force.

Billions of barrels

The Indians once used the gooey tar to waterproof the seams of their birch-bark canoes. The oil was pushed to the surface eons ago from deep underground by the same geological forces that formed the Rocky Mountains just to the west.

The oil sands of Alberta contain 175 billion barrels of oil. Only Saudi Arabia has larger reserves at 259 billion barrels. Optimists such as the Canadian Association of Petroleum Producers (CAPP) say the reserves could be 10 times that if technology succeeds in separating the oil from the sand in the underground deposits that are difficult to access.

Using just conventional technology will vault Canada to one of the world’s leading sources of petroleum, with all the oil safely connected by pipeline to refineries in the United States. Just this month an unused pipeline running south to north in the United States reversed direction to take Alberta oil south.

“Right now, Canada is the eighth-largest producer in the world, just below Norway. By 2015, we will be No. 5, moving to just below Iran or maybe past it,” said Greg Stringham, vice president of CAPP in Calgary.

The light oil of Saudi Arabia and the Middle East is cheap to pump and easy to refine. The heavy oil sands of Alberta have to be mined and then separated. The process consumes a lot of energy, but with oil nearing $75 a barrel, the world’s oil giants think it is worth it.

Operating in the Athabasca region near Fort McMurray are three companies: Syncrude, Suncor and Shell, in a venture with Chevron. Oil companies from Exxon Mobil to France’s Total are expected to invest $75 billion to $80 billion in the next decade.

Help wanted

Some of the oil is heavy, but Syncrude pumps light oil that Mr. Stringham calls “the lighter half of the conventional Texas or Alberta barrel.”

“The light synthetic oil can feed existing refineries to produce gasoline and other products,” Mr. Stringham said.

Mining is used to reach most of the oil, but the bulk of it lies far below the surface. Getting at the bitumen that is too deep to mine requires complex methods. High-temperature steam — about 662 degrees Fahrenheit — is pumped down under high pressure into the deposits of oil sands. The tar liquefies and is pumped to the surface.

The cost of pumping light synthetic crude is $21 to $25 per barrel, and that has risen by $3 a barrel in the past year or so, along with the price of natural gas and diesel. Still, Mr. Carter of Syncrude notes that his firm provides its own diesel and much of its natural gas.

With oil at current prices, the companies are profitable, and the shares of firms such as Canadian Natural Resources and Suncor have been soaring on the Toronto Stock Exchange.

The major difficulty for many operators is finding people to do the work.

“Our biggest problem is finding housing for the people who are coming here,” said Melissa Blake, mayor of Fort McMurray, the town at the center of the oil-sands development. On average 100 people a week arrive in this town of 61,000 looking for work. A transient population as high as 12,000 commutes to work from other parts of Canada, staying in rented quarters for weeks on end.

Supply at a price

Workers are so hard to come by that unskilled people in fast-food restaurants are paid $14 ($12 U.S.) Canadian per hour, double the minimum wage. The Fort McKay Group, run by an Indian tribal council, pays trained cooks in its catering service as much as $40 Canadian ($34.50 U.S.) an hour.

“The price of oil drives growth in Fort McMurray. And at these prices we expect our [permanent] population to grow to 100,000 by 2012,” Miss Blake said.

The oil sands are expected to yield at least 3 million barrels per day by 2015, but that will not be enough to bring a return to cheap gasoline.

“The oil sands will not mean lower oil prices,” said Peter Tertzakian of ARC Financial, a Calgary-based energy consultancy. Mr. Tertzakian has just published a book on the world energy business called “A Thousand Barrels a Second.”

“The oil sands do represent a turning point in the history of energy and a switch to synthetic sources of oil,” Mr. Tertzakian said. He added that the world is not running out of oil, just cheap oil.

The oil sands do mean a growing supply of secure oil for the United States, one that could outstrip even the most optimistic estimates if technology can be perfected to mine deep underground deposits.

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