Despite the considerable excitement surrounding the development of Canada’s Oil sands reserves, there are still several difficulties that could impede the future development of the industry.

Analysts predict that the production of synthetic crude from oil sands is only economically viable with synthetic crude prices in the $30 per Barrel range. While further advances in oil sands technology could reduce production costs, it is likely that economical synthetic oil production will continue to be dependent upon high Crude Oil prices.

Second, the oil sands industry is heavily reliant upon water and Natural Gas, which is necessary in both the extraction of bitumen from oil sands and the upgrading of bitumen to synthetic oil. Even though there have been some efforts to reduce this dependence on natural gas, any increase in natural gas prices or sharp reduction in natural gas supply would have critical repercussions for the oil sands industry.

Finally, there have been reports that the oil sands boom is creating a labor shortage in Alberta’s oil industry, especially in Fort McMurray. This has led to an escalation in labor costs and construction delays due to a lack of available workers.

Source: Energy Information Administration