If you think you've missed the Canadian oil sands boom...think again!

The suits on Wall Street are saying that the time to buy oil sands stocks has already come and gone. And yes -- you would've made quite the pretty penny buying oil sands production or exploration stock five years ago. But the fact is the overall sector still has a lot room to grow.

The Canadian Oil Sands Boom Continues

In May 2004, Canada's National Energy Board (NEB) released a report on the major aspects of the Canadian oil sands industry. The report assessed the opportunities and challenges facing the development of the massive oil sands resource.

Even back then with oil prices hovering around $40 a barrel the NEB recognized that the oil sands had massive potential written all over it.

Since that time, the conditions surrounding oil sands development have significantly changed for the better. Interests and activity in the oil sands has sharply ramped up for good reason. This has been primarily due:

• Years of sustained higher oil prices resulting in increased cash flows and profitability for oil sands operators
• An outlook for sustained high oil prices in the future
• Increased recognition that the oil sands represent a very large, economically attractive accumulation of oil in a politically stable country

As a result of this heightened activity, the NEB decided to update their report, highlighting the major changes and developments. And it's huge news for the entire oil sands industry!

Future Oil Sands Production

The NEB recently released a report saying that production of Alberta oil sands could nearly triple to three million barrels per day by 2015! And that's just the base case scenario. Take a look:

In its projections, the NEB assumes three scenarios or "cases" that all lead to higher production.

The "Low Case" projection is based on what might happen if oil prices go south. This case assumes sustained oil prices below $35 a barrel. $35 oil would lead to marginal revenue for many projects and would slow development. But you and I both know that unless several massive oil fields are found, that's not going to happen.

Robust global oil demand growth in the past several years has been the key driver in the expansion of the oil sands. And if all the estimates are correct, this demand will only continue to grow.

The "All Projects" case assumes that all projects publicly announced to date commence operation at their name-plate volume and start date. This would result in production of about 4.4 MMb/d by 2015!

In reality though, the NEB says that this level of production is considered to be beyond the limits of capacity growth that could be reasonably expected within that time period.

The development of the "Base Case" projections is based on a sustained high oil price and an economically attractive environment.

This case shows oil sands production increasing to as high as three million barrels per day -- triple today's production -- and is the most likely scenario.

Oil Sands Land Sales Double

Present land sales can provide a good indicator of the future of interest in the oil sands. Sales of potential oil sands property reached record levels in 2005 and early 2006, with prices paid averaging $2,200 per hectare.

In 2005, total sales reached $450 million, more than double any previous year. Take a look:

New Projects

Another indicator of the continuing interest in the next decade is the massive number of new projects or expansion plans for existing projects that have been announced over the past few years.

Many new players have been attracted to the oil sands. Several of the world's multi-national oil companies and several subsidiaries of foreign firms have driven their stake in the sands. There is a literal logjam of announced projects in the 2008 to 2012 period.

Now, not all these projects will proceed as originally scheduled. Some will be delayed and some may be cancelled all together. Nonetheless these projects will added significantly to production,

Major project plans include:

• Suncor Energy (TSX:SU) announced its Voyageur growth strategy, a multi-phased plan designed to increase the company's oil sands production capacity to a range of 500 Mb/d to 550 Mb/d by 2010 to 2012
• EnCana (TSX:ECA) plans to utilize SAGD technology to expand production from its leases to 500 Mb/d by 2016
• Canadian Natural Resources (TSX:CNQ) announced additional phases to its Horizon Oil Sands mining project to expand production to 500 Mb/d by 2018, plus plans to expand in situ production by 300 Mb/d
• Imperial Oil Limited (TSX:IMO) and Exxon Mobil (NYSE:XOM) filed a regulatory application for a three-phase 300 Mb/d mining project at their Kearl project
• Shell Canada (TSX:SCA) announced expansion plans at both its Peace River and Jackpine Lake properties
• Petro-Canada (TSX:PCA), partnered with UTS Energy Corporation (TSX:UTS) and Teck Cominco (TSX:TEK.A;TEK.B), received regulatory approval for the 100 Mb/d Phase 1 of the Fort Hills mining project
• Husky Energy (TSX:HSE) received regulatory approval for its Sunrise project, with capacity of 200 Mb/d over four phases, and disclosed plans to expand its Lloydminster upgrader to 150 Mb/d of synthetic crude oil and diluent production capacity
• BA Energy received approval for its three-phase 150 Mb/d Synthetic crude oil production capacity Heartland Upgrader project will be built in Strathcona County northeast of Edmonton, Alberta
• North West Upgrading has disclosed plans for its North West Upgrader, a three-phase 200 Mb/d merchant upgrader to be located in Sturgeon County, near Edmonton
• Total E&P Canada has acquired Deer Creek Energy and its Joslyn oil sands operations and leases
• Shell EP Americas, a subsidiary of Royal Dutch Shell Plc (NYSE:RDA.A; RDS.B), recently purchased 10 properties in northern Alberta targeting bitumen deposits situated in carbonate formations and formed a new company, SURE Northern Energy, to develop its new holdings
• Chevron (NYSE:CVX) recently acquired five heavy oil leases in the Athabasca region and anticipates developing these leases using SAGD technology.

Examples of participation by foreign national oil companies include:

• SinoCanada Petroleum has partnered with Synenco Energy to develop the proposed Northern Lights project, an integrated mining, extraction and upgrading project, with the upgrader to be located in Sturgeon County near Edmonton
• China National Offshore Oil Corporation bought a 17 percent stake in MEG Energy Corporation, the developer of the Christina Lake project, which is designed to produce 25 Mb/d
• Enbridge (NYSE:ENB) has entered into a memorandum of understanding with PetroChina International Company to cooperate on the development of the Gateway Pipeline and supply crude oil from Canada to China.

According to the NEB, the number of major mining, upgrading and thermal in situ projects has grown to include some 46 existing and proposed projects, encompassing 135 individual project expansion phases in various stages of execution, from those announced to those already under construction.

Capital Expenditure Increases

Capital expenditures for oil sands projects have increased substantially during the past few years and are likely to continue.

Estimates of capital expenditures to construct all announced projects over the period 2006 to 2015 total C$125 billion. Take a look:

Continued high oil prices coupled with increasing global oil demand and heavy interest will continue to drive in the expansion of the Canadian oil sands.

And like I mentioned before the Canadian oil sands boom is far from over.

While all Canadian oil sands stocks are likely to continue increasing, I'd look to slightly riskier small to mid-cap companies for the biggest gains.

"Energy stocks... The only way a human is going to make any money."

-- Matt Simmons, Peak Oil's first and most vocal proponent,
and founder of the country's last pure play energy investment banking firm.

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