Though concentrated in North America, the production of oil from tar sands has broad implications for the global oil market. Tar sands, which are also known as oil sands, are a combination of clay, sand, water and bitumen (a heavier form of oil). Tar sands are mined and processed to extract bitumen, which is then refined into oil. Two tons of tar sands are required to produce one barrel of oil. This process is more complex and capital-intensive than conventional oil extraction.1
Bitumen. (Government of Alberta, Canada)
There are two primary extraction methods for tar sands:2
- Mining: Open-pit mining is the most common form of tar sands extraction. This method requires the use of large hydraulic shovels to dig up tar sands and load them onto trucks carrying up to 320 tons per load. The oil is finally extracted from the bitumen through a combination of heat, water, chemicals, and constant movement.
- In-situ: This method is used when bitumen deposits are buried too deep for mining to be economical. The in-situ method relies on steam injection to heat buried tar sands and facilitate extraction via conventional wells.
It is estimated that over 2 trillion barrels of oil reserves exist in the form of tar sands, although not all of these resources are economically or technically recoverable. The largest tar sand deposits are found in Canada (primarily in Alberta), Venezuela and several countries in the Middle East. The majority of U.S. tar sands resources are located in eastern Utah, with an estimated 12 billion-19 billion barrels of reserves.
Although the tar sands industry is underdeveloped worldwide, Canadian tar sands already represent 40% of total oil production. The proposed Keystone XL pipeline would deliver Canadian tar sands from Alberta to refining facilities in the Gulf of Mexico. However, environmental opposition has caused significant delays in the project.
The development of tar sands around the world could face a number of environmental and technical challenges. However, if exploitation of this resource ramps up, the global oil market would become more diversified and resilient to price shocks from supply disruptions.