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China Oilsands Investment

The news from Calgary is of an expected China oilsands investment in Albert totaling tens of billions of dollars. Chinese energy companies have been investing roughly three quarters of a billion dollars a month in development of energy sources in Western Canada over the last year and a half. The increased China oilsands investment in Canada is because China expects to see a 75% increase in energy needs by 2035. Canada has huge petroleum reserves. However, oil sands are a source from which it is difficult to extract and transport usable petroleum products. Learning how to invest in oilsands companies could be profitable as higher oil prices support its extraction, refining, and transport to fulfill China’s increasing energy needs as well as those of the USA. Don’t forget that Canada is the leading importer of petroleum products into the USA.

Oilsands are bituminous sands, also referred to as tar sands or oil sands. These are mixtures of water, clay, sand, and a very viscous form of petroleum known as bitumen. The largest deposits in the world are in Venezuela and Canada. Until oil prices rose substantially it was not profitable to extract the deposits in Canada. It requires refining on site in order to make oilsands less thick and to remove non petroleum constituents. Then the resulting product needs to be transported for further refining. Here is where there is an issue with China oilsands investment. According to news reports Chinese energy companies would like to use the huge oilsands deposits in Canada but have insisted on a substantial upgrade and enlargement of pipeline capacity to move the oilsands distillate to the Canadian West Coast for transport to China. As demand for and extraction of oilsands increases the strategy of investing in growing companies will likely include investing in companies involved in extracting, refining, transporting, and exporting oilsands petroleum products.

Profitable investments today still include energy products despite the apparent chaos from civil war in North Africa to the terrible earthquake and tsunami that struck Japan. The Chinese industrial machine continues to grow. China is increasing investment in its infrastructure for internal consumption as well. Thus we can believe that the estimate of a near doubling of energy needs in a generation is likely correct along with the assumption that much of the energy needed will come from China oilsands investment.

An issue with oilsands is that it requires petroleum to extract petroleum from oil sands. The process of extraction involves steam injection and then refining is necessary just to product the equivalent of crude oil before that is further refined. The extraction to use of oilsands produces as much as 45% more greenhouse gases than convention crude oil. Nevertheless, energy needs are increasing throughout the world and as the recession finally mends itself the price of oil will rise again. These factors will drive the extraction of oilsands and China oilsands investment along with the development of transport facilities from the oil bearing sands of Alberta to the Canadian West Coast or South to the USA. How to invest in stocks in the arena will be to research the companies and learn about just how profitable it is to extract, process, transport, and sell this petroleum product.

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