Oil Sands

AAA

DEFINITION of 'Oil Sands'

Sand and rock material which contains crude bitumen (a heavy, viscous form of crude oil). Oil sands are found primarily in the Athabasca region of northern Alberta, Canada, and in areas of Venezuela. Bitumen is extracted and processed using two methods:

1. Mining - Large areas of land are cleared of trees and brush, then the top soil and clay are removed to expose the oil sand. This surface mining method uses large trucks and shovels to remove the sand, which can have a volume of anywhere from 1-20% of actual bitumen. After processing and upgrading, the end result is sent to refineries, where it's made into gasoline, jet fuel and other petroleum products.

2. In Situ - This relatively new method is mainly used to get bitumen in oil sand that is buried too deep below the earth's surface to be recovered with a truck and shovel. In situ technology injects steam deep beneath the earth to separate the viscous bitumen from the sand and pump it up to the surface. The bitumen then goes through the same upgrading process as it would in the mining method.

INVESTOPEDIA EXPLAINS 'Oil Sands'

The Alberta government estimates that there are 1.7 to 2.5 trillion barrels of oil trapped in the oil sands, but some industry groups and organizations dispute this claim. The end product from oil sand is very similar to, if not better than, that of conventional oil extraction (using oil rigs). But the intensive mining, extraction and upgrading process means that oil from oil sands typically costs several times more money to produce than conventional methods.

1. The mining method is considered to be very damaging to the environment, as it involves leveling hundreds of square miles of land, trees and wildlife. Oil companies using this method are required to return the area to its original environmental condition once the mining is completed, adding further to costs.

2. The in situ method is more costly than the mining method, but it's much less damaging to the environment, requiring only a few hundred meters of land and a nearby water source to operate. It's estimated by the Alberta government that 70-80% of oil in the oil sands is buried too deep for open pit mining; therefore, in situ methods will likely be the future of extracting oil from oil sands. The most common form of in situ is called Steam Assisted Gravity Drainage (SAGD).

RELATED TERMS
  1. Unconventional Oil

    A type of petroleum that is produced or obtained through techniques ...
  2. Alberta Heritage Savings Trust ...

    A provincial fund established in the Canadian province of Alberta ...
  3. Estimated Ultimate Recovery - EUR

    A production method commonly used in the oil and gas industry. ...
  4. Organization Of Petroleum Exporting ...

    An organization consisting of the world's major oil-exporting ...
  5. Sweet Crude

    A type of oil that meets certain content requirements, including ...
  6. Barrels Per Day - B/D

    A measure of oil output, represented by the number of barrels ...
RELATED FAQS
  1. What is the relationship between oil prices and inflation?

    The price of oil and inflation are often seen as being connected in a cause and effect relationship. As oil prices move up ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Industry Handbook

    In this feature, we take an in-depth look at the various techniques that determine the value and investment quality of companies from an industry perspective.
  2. Home & Auto

    Getting A Grip On The Cost Of Gas

    Feeling overwhelmed by rising oil prices? We offer some tips that will save you money.
  3. Economics

    Peak Oil: What To Do When The Wells Run Dry

    Find out how to invest and protect your investments in this slippery sector.
  4. Forex Education

    Commodity Prices And Currency Movements

    Find out which currencies are most affected by fluctuations in gold and oil prices, and improve your trading.
  5. Options & Futures

    Fueling Futures In The Energy Market

    The energy market influences every aspect of our lives, and these four options are its driving force.
  6. Fundamental Analysis

    Accounting For Differences In Oil And Gas Accounting

    How a company accounts for its expenses affects how its net income and cash flow numbers are reported.
  7. Active Trading

    How Does Crude Oil Affect Gas Prices?

    Find out how this commodity's fluctuating price affects more than just how much you pay at the pump.
  8. Chart Advisor

    These Oil Service Stocks Are Ready For A Move Higher

    In the oil services sector, active traders have been trying hard to establish a floor and the double bottom pattern that is appearing on the chart suggests that a short-term reversal could be ...
  9. Economics

    Oil Investments Boost Egypt's Recovery Prospects

    Major foreign oil companies have provided a big boost to the Egyptian economy by agreeing to invest around US$17 billion in the country's energy sector.
  10. Economics

    Why The Russian Economy Rises and Falls With Oil

    The Russian economy depends on profitable oil production to pay for the cost of government, prop up the ruble, and provide most of it exports revenue.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center