S. Korea to purchase 250-million-barrel oil sands mine in Canada

South Korea plans to buy an oil sands mine in Canada that is expected to produce 250 million barrels of oil, the Ministry of Commerce, Industry and Energy said Sunday.

It said the size of the deposits of the mine in the Cold Lake region of Alberta will allow 30,000-35,000 barrels of oil to be extracted per day for the next 20 years. Initial production is expected around 2008, with full-scale operations to commence two years later.

Oil sands, also referred to as tar or bituminous sands, are deposits of bitmen trapped in a mixture of clay, sand and water.

They are in essence sand or sandstone containing at least 10 percent petroleum.

There are estimated to be 175 billion barrels of petroleum that can be extracted from oil sands mines around the world.

The ministry said once production begins, it could noticeably raise the country's oil output self-sufficiency level by around 1.2 percent.

South Korea currently produces 115,000 barrels of oil daily from local and overseas oil fields.

Seoul wants to raise the self-sufficiency level from around 4 percent at present to 18 percent in 2013.

Without revealing details such as the purchase price, which it said must be kept confidential, the Energy Ministry said talks had been started by the Korea National Oil Corp. in April, and that most of the details of the purchase have been agreed upon. It said if there are no major problems, a deal will be signed before the end of the month.

"We will use excess facilities in Canada and the United States to process oil sands to make them into oil," said Kim Young-hak, the head of the ministry's energy resources development headquarters.

He said the oil could be sold on the North American market or brought to South Korea.

The official also said if South Korea is able to buy more oil sands mines, it might consider setting up its own processing facility in Canada.

"Many local companies have expressed interest in building the processing facility," the director general said.

Canada has the world's second-largest reserve of oil sands after Venezuela and is able to churn out 4.7 billion barrels of oil on a annual basis.

Experts said the purchase, which received a boost from South Korean commerce minister Chung Sye-kyun's visit to Alberta late last week, is timely since high international crude prices make production of oil sands cost-efficient.

When oil prices were in the range of US$30 per barrel, the development of oil sands was practical since it takes $20-25 to refine them into oil. However, this has changed because oil prices are hovering at around $70 per barrel.

Some said that even if oil prices fell to around the $40 range, oil sands could remain a viable source of energy.

Seoul, July 2 (Yonhap News)