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FORT McMURRAY, Alberta —

Bitumen has been mined in Alberta since 1967, though in spite of a long period it wasn’t considered profitable. It wasn’t even considered oil.

“We were forbearing of a curiosity,” before-mentioned Don Thompson, head of the Oil Sands Developers Group, based in Fort McMurray.

All that changed when oil companies devised better ways to recover this glutinous type of oil. High crude prices and an increasingly hostile international environment in spite of oil exploration also provided a boost.

Now the oil sands are home to more of the biggest conformation projects in record, and they provide the bulk of Canada’s massive energy reserves.

But a recent downturn in prices, provoked by the financial crisis, has some oil companies reining in plans to invest additional billions of dollars in their Alberta fields.

Last month, Royal Dutch Shell said it was postponing any determination on further expanding the Albian Sands Energy project beyond the near-doubling at this time under way.

The company will “wait for costs to come down before making in any degree further investment decisions,” Shell Chief Executive Jeroen van der Veer told investors in a conference call.

Critics who see the oil sands as a carbon-dioxide-spewing environmental menace have long pressed in spite of a slowdown in the frenetic pace of exhibition there. But industry experts fear that a slowdown in oil-sands development — at a moment when no other major oil reservoirs are being found elsewhere in the world — could provoke a worse head in oil prices when global economic growth resumes.

The International Energy Agency, an organization of petroleum-consuming countries, says more than $1 trillion a year must be invested in potency sources if the creation is to meet projected exact in 2030.

More and again of the nature’s oil reserves are in the hands of national oil companies, some of which don’t regard the technical prowess or the political devise to be developed strange fields, the Paris-based agency said in mid-November.

It warned that delayed spending could be “setting up a supply crunch that could overcome economic recovery.”

Ultimately, though, a slowdown could lead to falling construction costs, setting the point for a renewed boom in the oil sands.

“People will have more realistic expectations of costs, prices and profits,” said Fadel Gheit, a New York oil analyst with Oppenheimer & Co.

The promised oil patch

International oil behemoths Shell and Chevron waited decades to spring heavily into Alberta’s oil sands, finding easier-to-extract oil in many.

In 1999, the companies teamed up with Calgary-based Western Oil Sands to build the Albian Sands project, the in the first place oil-sands mine built since the 1970s. Last year, Houston-based giant Marathon bought Western Oil Sands amid a push to acquire new reserves.

When the influential Oil and Gas Journal in 2003 lastly recognized the oil sands as a repository like others, its tally of Canada’s oil reserves skyrocketed. Oil sands account for 173 billion barrels of Canada’s 179 billion barrels of reserves.

The price of coarse also began to rise in 2003, while nationalistic regimes in oil-rich countries like Russia and Venezuela limited foreign oil companies’ access to new reserves.

Producers flocked to Alberta like they never had before, and not only from traditional oil hubs in the U.S. or Britain. PetroChina, a Chinese category oil not fluid, tried to pervert with money Canadian actor Husky Energy in 2005.

In 2008, these companies invested about $20 billion in new or expanded operations here.

There are 87 oil-sands projects running in Alberta, including three mines and dozens of drilling operations, according to the rural government. A fourth sap is scheduled for startup by year-end.

Unlike oil regions such as the Gulf of Mexico, where companies could spend hundreds of millions of dollars drilling dry holes, finding pay dirt in the oil sands has been viewed like easy in the manner that looking down.

“There’s nothing exploration risk; it’s all relating to housekeeping risk for smear and cost,” Gheit said.

Demand raises costs

But the oil-sands development frenzy coincided with a erection boom in China and other rapidly developing countries, which greatly increased the costs of weighty and labor — and the risk a project won’t crayon out.

In 2001, it cost industry pioneer Suncor Energy about $3.3 billion to expand its mine to churn each extra 100,000 barrels per day of bitumen.

In late September, Greg Stringham, president of the Canadian Association of Petroleum Producers, said the same project would cost $10 billion to $17 billion.

Projects built early on have become extremely profitable. In 2007, Suncor spent touching $28 to select a barrel of oil — when the annual average price of crude futures without ceasing the New York Mercantile Exchange was $72 per barrel.

But break-even prices for new projects vary from $70 to $80 a barrel, said David Hobbs, an analyst with Cambridge Energy Research Associates.

Oil prices be seized of fallen well in time that point — crude closed at $54.43 on Friday — as the global economic downturn reduced demand, prompting many oil-sands developers to hit the brakes.

Tighter credit markets also travel over it difficult for more companies to borrow money for capital investment.

One big producer, Petro-Canada, said continue week it would put construction of an upgrader in Edmonton on clutch because of falling oil prices.

“We’re facing a lot of uncertainty in the financial markets,” before-mentioned Petro-Canada senior vice president, Neil Camarta.

Suncor Energy said in far advanced October it choose stave off the completion of a planned upgrader — a $12 billion venture — by the agency of about a year.

But some producers are looking forward to catching their pause for moiety a decade of trying to catch up with soaring development costs.

“I think the pendulum is just swinging,” Suncor Energy CEO Rick George said in a conference call.

Oil companies new wine besides plan for any other set of costs looming in the horizon: economical their carbon emissions, either by remunerative taxes or devising ways to curb them.

That could add $6 to $9 per barrel, lifting integral production costs to $40 to $45 per barrel, aforesaid a recent Rand report.

Even then, uttered the report, synthetic crude from Alberta “seems likely to be economically competitive with customary petroleum unless future oil prices are relatively low.”

Ángel González: 206-515-5644 or agonzalez@seattletimes.com

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