Canada's oil sands and heavy oil resources are among the world's largest petroleum deposits. They include the oil sands of northern Alberta, and the heavy oil reservoirs that surround the small city of Lloydminster, which sits on the border between Alberta and Saskatchewan. The extent of these resources is well known, but better technologies to produce oil from them are still being developed.
Because of the high cost of extraction and refinement, they tend to come on stream later in the cycle of petroleum resource development in a given producing region. This is because oil companies tend to extract the light, high-value oils first. The more difficult-to-extract resources are developed later, generally during periods of high commodity prices, such as the extended period of higher prices which began in the early 1970s.
Experimentation began at about the same time as drilling for conventional petroleum in western Canada. Although the promise of the oil sands deposits has been clear for more than a century, oil production from the Suncor and Syncrude oil sands plants did not become profitable until well after the 1979 energy crisis. Despite comparatively high oil prices in world markets, the National Energy Program kept prices for oil artificially low until well into the 1980s.
Heavy oil, oil sands, and the synthetic crude produced from them have accounted for the majority of Canada's oil production for more than two decades. As of 2023, they comprised nearly 75% of Canada's oil output.
Much of Canada's petroleum effort has focused on producing oil from the oil sands (sometimes called "tar sands") of northern Alberta. To appreciate these resources, it is important to understand a simple concept from chemistry and physics: the "gravity" of crude oil and natural gas liquids. The oil industry measures the weight of oil on terms of an artificial scale known as API (American Petroleum Institute) gravity. Ten degrees API is the gravity of water. Light oils use a higher API number. Generally heavier than water, bitumen typically has an API of 8-10 degrees API.
Gravity refers to the weight spectrum of hydrocarbons, which increases with the ratio of hydrogen to carbon in a chemical compound's molecule. Methane () - the simplest form of natural gas - has four hydrogen atoms for every carbon atom. It has light gravity, and takes the form of a gas at normal temperatures and pressures. The next heavier hydrocarbon, ethane, has the chemical formula C<sub>2</sub>H<sub>6</sub> and is a slightly denser gas. Gases, of course, have no gravity at atmospheric temperatures and pressures.
Organic compounds combining carbon and oxygen are many in number. Those with more carbon atoms per hydrogen atom are heavier and denser. Most hydrocarbons are liquid under standard conditions, with greater viscosity associated with greater gravity.
Heavy oil and bitumen, which have far more carbon mass than hydrogen, are heavy, black, sticky and either slow-pouring or so close to being solid that they will not pour at all unless heated. Although the dividing line is fuzzy, the term heavy oil refers to slow-pouring heavy hydrocarbon mixtures. Bitumen refers to mixtures with the consistency of cold molasses that pour at room temperatures with agonizing slowness. Oils with high viscosity and heavy gravity do not float on water, but sink.
In the oil sands, this thick, black gunk is mixed with sand and many chemical impurities such as sulfur; these must be separated from the bitumen for the oil to be useful. This can be done by surface mining and processing and by underground in situ techniques.
Fields in northern Alberta include four major deposits which underlie almost 70,000 square kilometres of land. The volume of bitumen in those sands dwarfs the light oil reserves of the entire Middle East. One of those deposits, the Athabasca oil sands, is the world's largest known crude oil resource.
The first recorded mention of Canada's bitumen deposits goes back to June 12, 1719. According to an entry in the York Factory journal, on that day a Cree man, Wa-Pa-Sun, brought a sample of oil sand to Henry Kelsey of the Hudson's Bay Company. When fur trader Peter Pond travelled down the Clearwater River to Athabasca in 1778, he saw the deposits and wrote of "springs of bitumen that flow along the ground." A decade later, Alexander Mackenzie saw Chipewyan communities using oil from the oil sands to caulk their canoes.
In 1875, John Macoun of the Geological Survey also noted the presence of the oil sands. Later reports by Robert Bell and later by D.G. McConnell, also of the Geological Survey, led to drilling some test holes. In 1893, Parliament voted $7,000 for drilling. This first commercial effort to exploit the oil sands probably hoped to find free oil at the base of the sands, as drillers had in the gum beds of southern Ontario a few decades earlier. Although the Survey's three wells failed to find oil, the second was noteworthy for quite another reason.
Drilled at a site called Pelican Portage, the well blew out at 235 metres after encountering a high-pressure gas zone. According to drilling contractor A.W. Fraser, Fraser's crew unsuccessfully tried to kill the well by casing it, then abandoned the well for that year. They returned in 1898 to finish the job, but again they failed. In the end, they simply left the well blowing wild. Natural gas flowed from the well at a rate of some 250,000 cubic metres per day until 1918. In that year a crew led by geologist S.E. Slipper and C.W. Dingman finally shut in the well.
These wells helped establish that the bitumen resource in the area was huge. There was now clear recognition of the commercial potential of the oil sands, and a long period of exploration and experimentation followed. The point of this research was to find a method of getting oil out of the oil sands at a reasonable price.
Alfred Hammerstein, who claimed to be a German count (historically there are von Hammerstein barons, but not counts), was one of the colourful early players in the oil sands. He said he encountered Fort McMurray area bitumen deposits en route to the Klondike, and decided to stay and turn his interest from gold to the oil sands. In 1906 he drilled at the mouth of the Horse River, but struck salt instead of oil. He continued working in the area, however, in 1907 Hammerstein made a presentation to a Senate committee investigating the potential of the oil sands:
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