Oilsands Quest: To become a major Canadian oil producer

For all the chatter surrounding wind, solar, biomass and other “green” energy sources, the world still runs on old-fashioned fossil fuel — and will to an even greater degree into the distant future. The U.S. Energy Information Administration presages daily world petroleum consumption will grow to 97 million barrels in 2015 to 118 million barrels in 2030, from 83 million barrels today.

Growing demand for petroleum and its distillates is as old as the industry itself. In recent years, the demand has quickened a step or two; hence, the five-fold increase in per-barrel prices over the past decade.

No one likes to pay higher prices, but higher prices spur entrepreneurs to bring new oil supplies to market. One notable entrepreneur actively seeking new supplies is Oilsands Quest Inc. (AMEX: BQI), a Calgary-based energy exploration and development company whose business is extracting oil from oil sands.

And there's potentially a lot of oil for Oilsands to extract. Canada's oil sand reserves lie under an expanse of real estate larger than Florida, putting it on par with Saudi Arabia's reserves. But unlike the Saudi's reserves, which flow relatively freely, Canada's oil from sand often requires high-pressure steam — produced by burning vast amounts of natural gas — that's injected into the ground to separate the viscous bitumen from the sand to which it adheres.

Oil at $30 a barrel provides little incentive to pressure-wash sand for oil. Oil at $100 a barrel is another matter. Today's prices have inspired oil sands projects valued at $100 billion, further cementing Canada's position as the number one crude-oil supplier to the United States.

Oilsands is working to assure that the United States's petroleum thirst remains well slaked. The company owns a 100% interest in the Saskatchewan Oil Shale exploration, as well as lesser projects in the Alberta oil sands, giving it the largest contiguous lease on oil sands in Canada, if not the world. The company has forged ahead with an ambitious winter drilling program to prove reserves ahead of a 10,000-barrel-per-day pilot project scheduled to start up in 2009, with a subsequent target of 100,000 barrels per day. The company has four rigs turning in Alberta and Saskatchewan to delineate an estimated 1.5 billion barrels of contingent reserves.