Where is the second biggest deposit of oil reserves in the world?

In the oil sands region of Alberta, Canada. Oil sands are a thick, viscid mixture of bitumen, sand, clay, and water. Alberta’s oil sands is comprised of 3 regions with the Athabasca area being the largest and the closest to the surface. Underneath these gooey tar sands lie trillions of barrels of oil.

So then you may ask why have we been so dependent on Mideast oil. Why haven’t we just stayed nearby and relied on Canada? In fact, Canada is the largest supplier of crude and refined oil to the United States, having supplied 2.1 million barrels per day in 2004. But the percentage supplied to the US and other parts of the world is about to grow much larger.

The big difference between oil sands and oil from the desert sands of the middle east is difficulty of extraction. The oil sands process essentially entails extracting bitumen from the sand, and upgrading it to light crude oils. Easier said than done because this is thick stuff and has been expensive to mine and extract. However new technologies are changing the equation and making it much more cost-efficient to mine and extract from the oil sands.

Mining operations are used to produce reserves close to the surface. For oil that is deeper under ground, Steam-Assisted Gravity Drainage (SAGD) and Cyclic Steam Stimulation (CSS) are used. Other examples of new technology and extraction methods include burning bitumen instead of gas to produce steam, a solvent-assisted production technique called VAPEX and a system that injects air into the oil well and ignites it to stimulate oil flow.

In addition to improvements in technology, higher oil prices are fueling expansion in the oil sands, and a lot of people want in. The Chinese, for instance. In April, China National Offshore Oil Corp., predominantly owned by the Chinese government, bought nearly 17% of MEG Energy Corp. for $122 million. The company is developing a northern Alberta project estimated to pump 25,000 barrels of crude from the oil sands by 2008. And Canadian oil pipeline giant Enbridge has announced a preliminary deal with PetroChina to anchor a $2-billion oil pipeline to the West Coast.

So how can you benefit from the increased exploration, production and sales of crude oil from the oil Sands of Alberta? Choose among the stocks of companies that are investing in the area and applying new technology to extract oil more cost-efffectively.

Companies than can capitalize on the increasing role of Canada’s oil sands in the world’s energy needs include Suncor (NYSE: SU), Encana (NYSE:ECA), Canadian Natural Resources NYSE:CNQ) Deer Creek Energy (DCE.TO), Total S.A. (NYSE:TOT), Petro Canada NYSE: PCZ), and, with its acquisition of Terasen whose pipelines are well-positioned to transport growing production from the Alberta oil sands, Kinder Morgen (NYSE: KMI).

And while it may remain somewhat more expensive to extract oil from Alberta than from the Mideast, consider the effects of global politics, terrorism and turmoil, and the chilly wilds of Northwest Canada become very attractive indeed.