A Seeking Alpha article today (published first on April 10) titled ‘Canadian Oil Sands Offers Long-Life, Clean Energy’ comments briefly on the Canadian Oil Sands Trust, which the article calls “a favorite income stock in the last cycle”. The article then turns to a general discussion of the Canadian Oil Sands resource, saying:

• that in the author’s opinion high-quality synthetic crude oil is a more attractive fuel environmentally on a complete basis than perhaps half of the world’s energy supply;

• the most visible investment advantage of oil sands is that once the resource is outlined and the infrastructure is up and running, production can continue for a long time at a constant rate with minimal upkeep and at moderate operating cost;

• the initial capital cost for an oil sands mine and upgrader is high. Facilities are necessarily large to take advantage of economies of scale;

• if the world energy supply is considered to be one-third coal, one-third oil and one-third natural gas, nuclear and hydro, in the context of ‘clean’ coal is at one end, oil in the middle and natural gas at the other end. Oil sands, part of oil supply, is between coal and conventional oil on the clean spectrum;

• because of Canada’s high environmental standards, the author rates Canadian oil sands as cleaner than half of world energy supply; and,

• clean coal is still a dream, but clean oil sands have become a reality. If clean coal is in our future, we’ll increasingly appreciate the superior economics of clean oil sands.

From what I know of the Canadian oil sands, the picture is not all the author paints. First, I am not as certain as the author that production from the oil sands pursuant to existing mining practices are as environmentally friendly as the article might lead one to conclude. Second, oil sands production pursuant to the SAGD process which uses natural gas as an important input is comparatively inexpensive when Natural Gas prices are low (as they are today), but becomes increasingly more expensive as Natural Gas prices increase. Third, new technologies are being developed that may result in commercial exploitation of the oil sands being cleaner and less expensive than current extractive techniques. For an example of a company undertaking development of such a new technology, readers might consider researching Petrobank Energy and Resources Ltd. (TSX: PBG) which is both an Oil & Gas explorer and producer and a developer of a patented oil sands extraction technology. I am not currently a Petrobank shareholder, and am not recommending Petrobank shares as an investment. For full disclosure, Petrobank is an advertiser on StockResearchPortal.com. I suggest you click here and read the referenced article in its entirely for both content and context.

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