HOUSTON, TX, United States (UPI) -- Over the next 10 years, oil production from Canadian oil sands is expected to just about double to nearly 3 million barrels per day.

Sustained investment and continuing advances in technology are indicators of exponential growth in the market, said Jeff Collins, director of exploration and production strategies for Cambridge Energy Research Associates, at CERA Week in Houston Tuesday.

The need for energy supply security has also driven the oil sands market in Canada despite 'soaring capital, labor shortages and stress on local communities' in Western Canada, Collins said.

A 30 percent increase in average capital costs over the last year has challenged the growing market along with major infrastructure issues.

'It`s the single-most restrictive step impeding the progress of the oil sands industry,' Collins said.

New oil sand projects put heavy demand on the local communities in Canada for manpower, housing and schools, among other resources. Major projects in small communities have led to changes in immigration policy.

The current production from oil sands in Canada is about 1.3 million barrels per day and Collins said it`s expected to increase to between 2.5 million and 3 million by 2017. More production would allow sale of synthetic crude oil and ultra-low sulfur diesel to the eastern U.S. market and eventually the European market.

According the Department of Energy`s Energy Information Administration, however, oil sand projects require the use of a significant amount of energy. Also, despite efforts to curb the amount of greenhouse gases emitted from extracting oil from the oil sands, if the production were increased, the total amount of emissions would most likely increase.

Collins stressed the importance of strategic partnerships between upstream and downstream companies. The industry needs to know where the oil will be going before the first dollar is spent, Collins said.

Including the resources in the oil sands around Alberta, Canada has 178 billion barrels in its reserve, second only to Saudi Arabia. The increase in oil sands projects is offsetting the decline in Canada`s conventional crude oil production. However, the EIA said in a recent report that most of the oil sands reserves are too deep to remove using conventional methods and it`s more difficult to remove the deeper oil.

The in situ method of injecting steam to separate the bitumen, heavy oil, from the sand is becoming more refined, said Mike Ashar, executive vice president of Suncor Ltd., during his remarks at CERA Week.

And he said Suncor is working to reduce the environmental impact from the oil mining process. Ashar acknowledged the process is energy intensive and does release some greenhouse gases. Suncor, he said, has reduced its carbon dioxide emissions by 40 percent per barrel to meet the 5 million barrel a day goal by 2030, production, and in turn emissions, will continue to increase.

'It all depends on price volatility,' Ashar said. 'There are enough projects on the ground.'

Suncor alone produces about 250,000 barrels per day and has a project in Fort McMurray, one of the largets oil sands regions in the world. It plans to increase its production to 500,000 bpd by 2012. It exports mainly to the United States in the Chicago and Rocky Mountain areas but also to South Korea and other nations in the Far East.

He said the resources are there and he was confident the market would persist but so far it`s only provided returns when crude oil prices are around the $50 range. Also influencing the price and cost of oils sands product is the price of natural gas, which is needed to provide the energy to extract the oil.

Some companies, such as France`s Total are looking at nuclear as an alternative to natural gas in oil sands projects. In Canada, Ashar said, they are at least 10 years away from seeing nuclear as an option; there are currently no reactors in the region.

Source: M&G,
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