Newest hot spot for oil production: Canada

More expensive to process than the light crude oil of the Middle East, Alberta's oil sands have long remained a largely untapped resource. But with oil at $70 a barrel, it has become economically feasible to extract the thick, sticky bitumen that in former years was used to seal native people's canoes - not fuel a global economy.

Only Saudi Arabia, with 259 billion barrels, has larger oil reserves than the Florida-sized patch that surrounds this Canadian outpost. And a pipeline already exists to carry the oil to a key market: the United States.

Over the next five years, oil companies from Exxon Mobil to France's Total are expected to invest C$60 billion in oil sands. Earlier this week, Shell Canada announced a takeover of Canadian oil-sands producer BlackRock Ventures, valued at $2.4 billion Canadian ($2.17 billion).

Production in Alberta is up 61 percent over the past four years. This year, Alberta's oil sands are expected to produce 1.2 million barrels a day, roughly equal to the production of Texas.

"The oil sands ... represent a turning point in the history of energy, and a switch to synthetic [chemically processed] sources of oil," says Peter Tertzakian, chief energy economist at the Calgary-based energy consultancy ARC Financial.

Industry experts say new technology could greatly increase output, providing a significant source of secure oil for the United States. Just last month, a pipeline built to carry oil north from the Gulf of Mexico to Midwest refineries, reversed direction to take Alberta oil south.

"We can double our production and go for another 45 years," says Jim Carter, president of Syncrude Canada Ltd., the world's largest oil sands operator. "There is relatively new technology that could expand production, but there is still a lot to be mined by surface methods."

Huge swaths of the boreal forest cover Alberta's deposits, concentrated in three locations: Peace River to the west of Fort McMurray; Cold Lake to the southeast, on the Saskatchewan border; and - by far the largest - the Athabasca region surrounding Fort McMurray, the town at the center of oil sands production.

Syncrude - a joint venture of seven firms - estimates that those deposits contain 175 billion recoverable barrels of oil.

Optimists such as the Alberta Energy and Utilities Board say the reserves could be 10 times that if new technology succeeds in separating the oil from the sand in hard-to-reach underground deposits.

Syncrude and other companies, from Shell to Suncor, are stripping away the top layer of the earth to get at the bitumen that contains oil. They use giant shovels that scoop up 80 to 90 tons at a time, dropping the earth into the giant yellow Caterpillar 797B, the largest truck in the world. It is as tall as a two-story house and its tires cost $60,000 each. It never leaves the property; its weight would wreck the local roads.

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