Chevron (NYSE:CVX) recently announced a $60 million acquisition of the leases to 75,000 acres in northern Canada in order to develop a giant oil-sands project. The risky venture could ultimately cost tens of billions of dollars and take up to a decade to develop, since the tar in the oil sands isn't easily converted to usable oil. But Chevron may have a very tiny ace up its sleeve, thanks to its involvement with nanotechnology.

Chevron's new site is capable of producing 100,000 barrels a day, with a possible total of 7.5 billion barrels of oil in its reserves. If oil stays around $60 a barrel, that's one heck of an upside, but the good news for Chevron investors is that company officials estimate the project will still be profitable even if oil drops back to $35 a barrel. A lot could still go wrong with the project: cost overruns, potential environmental regulations, and even the shortage of skilled workers. (It's not easy to get people to move to northern Canada.) Nonetheless, I'm bullish on its long-term prospects, largely because of Chevron's little-known history of exploiting nanotechnology.

In 2003, the company spun off a subsidiary called MolecularDiamond Technologies, which has successfully harvested diamondoid nanoparticles from existing petroleum reserves. These new diamondoid materials may have applications in refining processes, next-generation optics, electronics, and pharmaceuticals. Chevron is also an investor in Konarka, one of the most promising nanotechnology-related solar-cell companies in the world.

But while MolecularDiamond has some limited potential, and Konarka is definitely a strategic investment, Chevron's work in creating new nanoparticles offers the greatest promise. If the company can produce new nanoparticles with unique catalytic capabilities, it may be able to more effectively and efficiently refine the thick, gooey tar-sands into highly refined -- and profitable --oil.

Headwaters (NYSE:HW) is already developing nanocatalysts to convert heavy oils into higher-yield oils, and I have reason to believe that Chevron is doing the same. If the company succeeds, these powerful new nanocatalysts could make extracting oil from the tar sands profitable, even at prices lower than $35 a barrel. And if oil prices stay high, a cheaper extraction process will only bolster Chevron's profit margins. It's yet another small solution to a potentially big risk.

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Fool contributor Jack Uldrich lives in Minnesota, but the thought of working in northern Canada makes even him shiver. He is the author of two books on nanotechnology, including his newest: Investing in Nanotechnology: Think Small, Win Big. He does not own any of the companies mentioned in this article.