Last Updated Apr 16, 2010 7:14 PM EDT
That sounds like a good deal. But in the eyes of environmentalists, it's a bit like promising to stop clubbing baby seals while poisoning them instead. In short, they weren't particularly pleased. They must have been especially perturbed to see BP's justification for pursuing the oil sands show up in its annual sustainability report.
Typically, oil sands are mined by scraping the ground clean and then scooping up the bitumen -- a sticky low-grade crude oil -- using massive trucks. The process leaves a pretty undesirable and polluted landscape behind. Instead, BP plans on using steam-assisted gravity drainage, which means pumping steam into the ground to loosen up the bitumen, so it can be extracted using pumps.
The process doesn't ravage the surrounding landscape, but it does produce more greenhouse gas emissions. That could be problematic for BP -- and its bottom line -- if governments including the U.S. Congress ever manages to pass climate legislation that includes placing a price on carbon emissions.
That's not to say BP's position is bad. It takes years and a lot of money before an oil sands project starts producing crude. It's so expensive, in fact, that oil prices need to remain high enough to offset the cost of developing the project. That means oil prices between $70 and $100 a barrel, depending on the analyst you talk to. BP believes it can make an acceptable profit with oil prices at $60 a barrel.
Here's why that's an important figure: The last time oil prices took a dive -- remember $32 a barrel in December 2008? -- the entire oil sands industry went from boom to a near standstill. If BP's claims are true and it can manage to make buck even if prices fall to $60 a barrel, that means a lot of protection against a volatility in the market.
The expense and risk is worth it to BP for two reasons: the sheer amount of oil in Canada -- which is second only to Saudi Arabia in terms of reserves -- and the proximity of the company's Midwest refinery to this very large supply. And the world is going to need all of that oil. BP estimates the oil industry will need to bring 50 to 60 million barrels a day of new production on line by 2030. That's like doubling the amount of oil produced today from the entire Middle East.
Photo of an oil sands protest in Calgary from Flickr user Grant Neufeld, CC 2.0 See additional BNET Energy coverage of BP: