Dear Wealth Daily Reader,
The future demand for Canadian oil sands is practically assured. Over the next decade, the U.S. is going to reduce its reliance on Middle Eastern oil. President Bush confirmed this during his last two State of the Union Addresses. But Bush’s plan to develop renewable energy sources won’t have a significant effect on our energy consumption for a long time, perhaps more than 20 years.
Until then, we will continue to guzzle oil at alarming rates. EIA statistics project that U.S. oil consumption will jump to nearly 30 million barrels of oil per day by 2030. That constitutes a 30% increase in less than twenty years!
Approximately one million barrels of oil a day are exported from Canada to the U.S. That number is expected to increase fivefold over the next few years.
But how much oil could there potentially be?
Canada has the world’s second largest oil reserves–over 178 billion barrels!
-But more efficient extraction methods must be implemented in order to meet the burgeoning demand.
Canada’s oil is extracted from bitumen–a gritty mixture of oil, sand, and water. Current techniques use natural gas to heat up the bitumen enough to separate the oil. The problem is that natural gas makes up nearly 60% of the operating costs for an oil sands facility. The inability to meet future natural gas demand threatens the entire production of oil sands over the next two decades.
And that’s not the only trouble with natural gas. Last month, I alerted Wealth Daily readers to Canada’s dire natural gas situation (just click here if you are interested in catching up). Briefly, plummeting reserves and loss of development capacity to oil projects will guarantee higher future gas prices.
The Nuclear Revival
Nuclear power is emerging as the solution to the problem of oil sands extraction. Essentially, nuclear energy would generate steam for injection into the wells. This could recover raw bitumen too deep to be mined.
Support for the nuclear answer is gaining, too. Last year, the former Canadian premier Ralph Klein stated that nuclear energy should be considered a viable alternative.
More recently, the Canadian Natural Resources Minister Gary Lunn mentioned that nuclear power could "play a significant role" in future oil sands operations. Environmental concerns are also in play in promoting nuclear power. Last year Lunn announced the ecoEnergy Technology Initiative. This program will invest US$196 million over the next four years in research, development and demonstration of clean energy. Nuclear power can offer oil sands extraction with near-zero emissions.
Companies like Bruce Power and Ontario Power Generation have projects in place to increase the number of nuclear power plants. These represent the first Canadian nuclear plants built in over 25 years. The Canadian Nuclear Safety Commission is looking to expedite the Bruce Power projects. They have advised the Canadian Environmental Minister to send the project straight to a public panel. This effectively short-circuits what would otherwise be an eight-month process.
A Mere Ten Years Down the Road
Last week, the Energy Alberta Corporation announced plans to build a nuclear plant in northern Alberta to provide power for oil sands extraction. The project is expected to cost US$4.3 billion.
The first reactor could be finished by 2016, with the second completed the following year. Two more reactors are being planned for later.
Future Worth
If nuclear energy can gain support from the public as a clean alternative, the value of Canadian oil sands is going skyrocket.
In a few weeks we’ll show you some of the ways to exploit the Canadian oil sands. And trust me, this is a perfect time to get into an energy source (still relatively unknown) that will play such a vital role in meeting future U.S. demand.
Until next time,
Keith Kohl
