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Thursday, 24 April 2008

Has Oil Peaked ?

A lot of you will be familiar with the Peak Oil theory -for those who are not then you can read more about it here-Peak Oil. Oil reached more or less $120 a barrel recently but today backed off and was at one point down $4.

A recent Reuters report quoting Saudi's King Abdullah did not seem to be reported much but could have big implications for the Peak Oil story and Oil prices in general it said:

Saudi Arabia's King Abdullah said he had ordered some new oil discoveries left untapped to preserve oil wealth in the world's top exporter for future generations?

"When there were some new finds, I told them, 'no, leave it in the ground, with grace from god, our children need it'," King Abdullah said?

Saudi production capacity stands at around 11.3 million bpd, and is scheduled to rise to 12.5 million bpd next year

Al-Shaybah oil Field-SE Saudi Arabia

Al-Shaybah oil field, southeastern Saudi Arabia






If , as you could interpret by these comments there may be a reduction in available oil to the world from the Saudi's in years to come then this could have major global macro economic ramifications.

Currently the US relies heavily on Middle Eastern Oil and this has been reasoned as one of the major drivers of the conflicts in that area, namely control of Oil supplies or at least ensuring they do not fall into the hands of states that the US may find difficulty dealing with.

Whatever the reasons for any conflicts ion the Middle East it has been well documented that the US is keen to reduce its reliance on Oil from the Gulf.So where can it go to get alternative supplies?

We are all aware of the claims being made on the Arctic and Antarctic driven a lot by the belief of huge reserves in these areas, Alaska is another area where there is the potential for some large finds.Politically though these areas are going to come up against a  lot of resistance from the Conservationist lobby's and there could easily be a  lot of the NIMBY (not in my backyard) fraternity unhappy as well.

A less problematic solution particularly with the price of Oil at  $115-$120 a barrel is the Tar Sands of Canada.


The most talked about of these is  in the country's Alberta region.Over the past few years, companies like Suncor, Canadian Oil Sands Trust, and Western Oil Sands have all shot up more than 1,000% by literally extracting valuable crude oil from the province's sandy Northern terrain.Alberta was the first province to set up a regulatory framework and workforce infrastructure. Today, nearly two-dozen companies have a stake in Alberta's oil sands.

However there's a region of Canada that geologists believe holds even richer oil deposits than Alberta.


In fact, it's the province right next to Alberta... Saskatchewan.

  • The Saskatoon StarPhoenix reports, the "Saskatchewan side of the oil sands formation could lead to a long-term economic bonanza for this Province."
  • The National Post writes, the "bitumen find in Saskatchewan could spawn a new industry."
  • The Regina Leader-Post writes, "Although the Alberta oil sands tend to get most of the publicity, the oil sands in Saskatchewan contain ‘significant world class deposits' that are of ‘top quality.'"

How much oil is in Saskatchewan?

Preliminary estimates are 60 BILLION barrels of oil.

Thing is, less than 5% of Saskatchewan's oil property has been fully explored!  So there could potentially be even more undiscovered oil!

For  more than 40 years Saskatchewan has sat idle—untapped—chock-full of rich oil sands because the Saskatchewan government  had refused the necessary permits to allow exploration

Recently the Saskatchewan government finally granted access to this region.Without a doubt the Canadian Oil Sands would solve a lot of the issues facing the US

Canada is sitting on a huge oil reserve with a "no risk" transport route to the world's largest consumer. Currently with Oil priced as it is then extraction is a worthwhile exercise compared to when Oil was at $50 a barrel.

I believe that in years to come the Canadian Tar sands will become a key plank of the US strategy for reducing its reliance on the Gulf for its Oil. This can only bode well for the companies that are involved such as :


Western Oil Sands
Canadian Oil Sands Trust
Nexen Inc.    
Imperial Oil


I would look for some pullbacks on some of these companies and start tucking away small amounts at a time when the price has dropped back.I believe that companies such as these will continue to grow at the rates that they have done in the last 5-10 years.


Best Wishes



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