In response to the BP oil spill in the Gulf of Mexico, regulators will probably require offshore drillers to install more equipment aimed at preventing future spills. These extra costs would hurt the profits of companies that are active in the Gulf.

That should spur more development of less-risky onshore oil and natural-gas deposits, particularly Canada’s oil sands.

Safety, falling costs could drive producers back to the land

The oil sands have drawn criticism from environmentalists and politicians, mainly because the process of recovering heavy oil from the oil sands produces higher carbon emissions than conventional sources. Even so, onshore oil-sands production remains much safer than offshore operations like the BP well.

Moreover, producers are lowering the high costs of oil-sands production by using more efficient technology that injects steam into wells to loosen the heavy oil, and makes it easier to pump to the surface. (More on a company that’s at the forefront of this “steam-assisted” technique below.)

One obvious way to profit from the expansion of the oil sands is by investing in blue chip stocks (or strong, well-established companies) with large oil-sands operations, like Suncor (symbol SU on Toronto), which we cover in our Successful Investor newsletter.

Suncor is Canada’s largest oil producer. Its oil-sands operations account for two-thirds of its production. The remainder comes from conventional oil and natural gas.

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Blue chip stocks that supply the oil sands help cut your risk

Another way to tap into the expansion of the oil sands is through blue chip stocks that supply equipment and services to oil-sands producers. Many of these firms have businesses that go beyond the resource sector. That helps cut their risk.

In a just published issue of The Successful Investor, we update our buy/sell/hold advice on one such company, engineering and construction firm SNC-Lavalin Group (symbol SNC on Toronto). What’s more, SNC has designed a system to recover heavy oil from the oil sands.

Aside from its resource-based businesses, SNC mainly designs and builds large public-works projects, such as roads, bridges, transit systems and water-treatment plants. It also builds chemical plants and electrical power systems.

This blue chip stock’s oil-recovery system could be a growth area

Petroleum and chemical projects accounted for 14% of SNC’s 2009 revenue. Last year, the company designed and built a new steam-assisted gravity-drainage system for Husky Energy Inc.’s Sunrise oil-sands project. This technology injects steam into a well to loosen the heavy oil and make it easier to pump to the surface. SNC is working on similar systems for two oil-sands projects jointly owned by Teck Resources Ltd. and UTS Energy Corp.

In the three months ended March 31, 2010, SNC’s earnings fell 7.2% from a year earlier, and revenue declined 14.7%. However, that’s mainly because the company has completed, or is close to completing, several major projects. Its results should improve as it begins work on several new projects, including an expansion of a health centre at Montreal’s McGill University, and a highway near Calgary.

We take a close look at SNC’s growth strategy and give you our clear buy/sell/hold advice on the stock in the latest issue of The Successful Investor. What’s more, you can get this just-published issue absolutely free when you subscribe today. Click here to learn how.