Oil sands no quick fix as Big Oil leaves Venezuela

By Jeffrey Jones and Scott Haggett - Analysis

CALGARY, Alberta (Reuters) - For Exxon Mobil Corp. (XOM.N) and ConocoPhillips (COP.N) it may appear simple: shift efforts, people and resources to Canada's oil sands now that the oil majors have retreated from Venezuela.

In reality, it's no simple matter.

The oil sands have their own set of risks: surging costs due to a squeezed labor force, technical complexity and a shrinking pool of attractive available properties.

Exxon Mobil and ConocoPhillips -- who fled Venezuela last week after refusing to agree to President Hugo Chavez's more nationalistic terms -- are already among the biggest oil sands players. They know well that new projects take years to build as the rush to exploit the unconventional resource fattens costs and schedules.

"I think everybody in the investment community understands it's not easy," FirstEnergy Capital Corp. analyst Martin Molyneaux said. "It might be easy mathematically, but execution-wise it's unbelievably challenging."

Like Venezuela, Alberta's oil sands offer easy access to vast amounts of crude. It's a resource second only to the conventional reserves of Saudi Arabia and one that's recently gained a big share of the world energy spotlight.

Both Venezuela's and Canada's gooey types of oil are technically tricky to produce and require expensive upgrading plants to make them suitable for refineries.

But, unlike Venezuela, the oil sands are marked by political and fiscal stability.

The combination has become extraordinarily attractive. Oil firms have pledged to spend more than $100 billion on projects to exploit 174 billion barrels trapped in the Alberta sand.

The investments have stretched the region's workforce thin and spawned numerous multibillion-dollar budget overruns.

OIL SANDS VETERANS

Exxon Mobil owns 69.6 percent of Imperial Oil (IMO.TO), one of the biggest developers. It has 100 percent of the 150,000 barrel a day Cold Lake, Alberta, bitumen project and 25 percent of the 350,000 barrel a day Syncrude Canada operation.

Exxon Mobil is also a partner with Imperial in the C$8 billion ($7.5 billion) Kearl oil sands project, a 300,000 barrel a day venture, scheduled to start up as early as 2010.

ConocoPhillips last year signed a deal with EnCana Corp. (ECA.TO) that gave it a major stake in EnCana's oil sands reserves in exchange for interests in two U.S. refineries.

It also operates the Surmont project, which is slated to pump 100,000 barrels a day by 2012.