How to invest in Canada’s black gold mine
by investor on 01/06/08 at 12:00 am
“It’s raining money in Alberta,” says the Canadian Globe and Mail. So much so that the Conservative premier, Ralph Klein is handing out cheques worth C$400 (£198) to every single one of the Canadian province’s 2.3 million residents.
So where’s the money coming from? The same place most big money comes from these days: the oil market. Alberta, once thought of as just an attractive area of deep forest, turns out to be rather more than this: it is sitting on oil reserves equivalent to an estimated 1.7 trillion barrels of oil in the form of tar sands that cover an area larger than England.
Before the oil price started rising a few years ago, no one cared very much about Canada’s oil sands. Getting oil out of them is not particularly easy: the sands are accessed from open-pit mines and hot water is then added to them. The resulting slurry is piped to an extraction plant, where it is agitated and the oil, in the form of bitumen, is finally skimmed off the top.
And it isn’t cheap either. Getting a barrel of oil out of the ground in Mexico or the Middle East can cost as little as $2. However, extracting oil from tar sands runs to more like $12-$18, something that means it really isn’t worth doing unless the price of oil is over $30 per barrel, and expected to stay there. And even at $30 or $40 a barrel, much of this oil is not economically viable as it is simply too deep to get out, even at a cost of $18 a barrel.
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