Oil Sands are deposits of bitumen, a molasses-like viscous oil that will not flow unless heated or diluted with lighter hydrocarbons. They are contained in three major areas beneath 140,200 square kilometers of northeastern Alberta, an area larger than the state of Florida.

Probably the biggest change for Alberta Oilsands Inc. was making the switch from being a conventional oil and gas production company to an oil sands developer. President Michael Lee says the transition started last summer, and the biggest challenge was securing the financing to execute the plan.

“There wasn’t much attention paid to the junior oil sands sector,” he explains. “But in January 2007, we secured our first oil sands lease and things started happening. We began attracting investors and things improved from a financial standpoint.”

Originally operating as Platform Resources Inc., Alberta Oilsands officially changed its name in June. Now a newly emerged junior oil sands exploration company, Alberta Oilsands has identified, posted and acquired prospective leases at Alberta Crown land sales.

Alberta Oilsands has amassed more than 100 sections or about three townships (one township equaling 36 square miles) of oil sands leases in 2007 and says it will execute the first phase of a coring program in the first quarter of 2008.

Alberta Oilsands made the switch to distinguish itself in a competitive market. Lee notes there were about 400 junior oil and gas companies in Calgary in 2004. “The switch to oil sands is realization of a vision to distinguish it from the rest of the junior pack,” he says. The oil sands market has tremendous potential for growth. In fact, he adds, the market capitalization of the company went from about $10 million to $80 million once it shifted its focus to oil sands.

Oilsands in Alberta
According to the Alberta Department of Energy, approximately 2,800 oil sands have lease agreements are currently in place within the province – leaving close to 69 percent of oil sands areas available for exploration and leasing.

Additionally, Canada holds 15 percent of the world’s crude oil reserves – ranking second largest after Saudi Arabia. The majority of these reserves – more than 174 billion barrels – are found in Alberta’s oil sands.

Alberta's oil sands deposits were described by Time magazine as “Canada's greatest buried energy treasure,” which “could satisfy the world's demand for petroleum for the next century.”

Oil Sands are deposits of bitumen, a molasses-like viscous oil that will not flow unless heated or diluted with lighter hydrocarbons. They are contained in three major areas beneath 140,200 square kilometers of northeastern Alberta, an area larger than the state of Florida. However, only about 2 percent of the initial established resource has been produced to date, according to the Department of Energy.

The Alberta Department of Energy says it encourages the responsible development of these extensive deposits through “planning and liaison with government, industry and communities to ensure a competitive royalty regime that is attractive to investors, appropriate regulations and environmental protection and the management of Crown rights to oil sands while taking into account some of the barriers – higher technological risk and higher capital costs – faced by oil sands developers.”

Alberta's oil sands industry is the result of multi-billion-dollar investments in infrastructure and technology required to develop the non-conventional resource. According to the Canadian Association of Petroleum Producers (CAPP), in 2005 industry investment in Alberta’s oil sands totalled approximately $10 billion.

Annual oil sands production is growing steadily as the industry matures. Output of marketable oil sands production increased to 966,000 barrels per day (bbl/d) in 2005. With anticipated growth, this level of production could reach 3 million barrels per day by 2020 and possibly even 5 million barrels per day by 2030, the Alberta Department of Energy predicts.         “This degree of activity would support the development of other key industries and see Alberta become a global energy leader,” it says.

Development of Alberta's oil sands resources represents a “triumph of technological innovation,” the Alberta Department of Energy says. “Over the years, government and industry have worked together to find innovative and economic ways to extract and process the oil sands and energy research is more important today than ever before. Working through the Alberta Energy Research Institute, the government is committed to a collaborative approach to spur new technology and innovation programs that will reduce the impact of greenhouse gases.”

“It is a very competitive environment in the oil sands sector, and we are competing with deep-pocketed majors,” Lee says. “Aligning ourselves with service companies and building those relationships are key to our survival.”

Size Advantage
Although its size can be a challenge, being a junior company has its advantages. Lee says the organization maintains an entrepreneurial spirit and is able to remain agile and make decisions quickly. Lee also stresses that junior oilsands companies are viable and necessary, pointing to acquisitions that major players have made.

“North American Oilsands was recently purchased by Statoil of Norway and that was a $2.2 billion transaction,” Lee says.

The corporate culture at Alberta Oilsands remains informal, even after its shift. However, Lee notes making the transition required a new line of thinking. “We went from thinking in the scale of less than 1 million barrels of conventional oil reserves to along the lines of hundreds of millions of barrels of reserves,” he says. “Having that shift in magnitude is huge. Additionally, our capital investment requirement has gone up 100-fold.”

To continue to attract investors, the firm increased its marketing efforts and distributes news releases through the security firms. “We’re continuing to get our story out by speaking with the media and the trades,” Lee says. “And, we continue to actively market to the investment community.”

Alberta Oilsands’ long-term goal is to prove up sufficient reserves to support insitu projects capable of producing up to 30,000 barrels a day. “We want to get ourselves to the point where we will have a project ready for production,” Lee says. “At that time, we will evaluate our options. Being a junior, it may make sense to sell the project or even sell the company to a national oil company.

“Down the road, we may also consider partnering with a larger company when the time comes to make the significant capital investment for production. Overall, our main vision is to build Alberta Oilsands into a billion-dollar company.” �