Thursday, November 12, 2009

Alberta's Oilsands- the future of oil production

The days of oil rigs pumping furiously are coming to an end. Unconventional sources of oil require more manpower to get the oil out of the ground.

What does oil have to do with real estate?

Imagine if your investment property was near the next big oil reserve, workers from around the world were going there to live and work for the next few decades. Tenants were willing to pay top rents because the economy was booming and they were making oil dollars.

Alberta is that place, with vast oil sands that hold a proven 175 billion barrels of recoverable oil, second only to Saudi Arabia. The most impressive part is that Alberta has only just begun; experts say oil sands production can be sustained for at least 400 years.

"These are ambitious projects, very big projects, and thus very expensive," he said in a telephone interview from Calgary, Alberta -- Canada's oil capital.

"It's clear that cost is a problem," he conceded. "But it's also an important deposit -- several billion barrels of oil in the ground -- while more conventional sources of oil that would be relatively easier to extract are either drying up or are inaccessible to international firms such as Total."

"The price of energy is not going to collapse," despite downward pressure from a spiralling global economy, Gires predicts.

"To justify our massive investments in the oil sands, we're looking at what the world will look like in 2020, 2025 or 2030," he said.

"In the long run, despite all of the efforts to boost energy efficiency and develop alternative energy sources, the planet's appetite for energy ... will mean additional oil production will be welcomed and we'll find buyers for our output."

Think of the long-term, not an economy that in coming out of a recession but as the world starts to recover and the demand for oil increases - rents, property values will again increase. Maybe not like 2007 in Alberta but steady consistent growth that makes investors happy.

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