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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 40-F

             [_]    Registration Statement pursuant to section 12 of the
                    Securities Exchange Act of 1934


             [X]    Annual report pursuant to section 13(a) or 15(d) of the
                    Securities Exchange Act of 1934


For the fiscal year ended December 31, 2006     Commission File Number:333-90736

                             WESTERN OIL SANDS INC.
             (Exact name of Registrant as specified in its charter)


                                     ALBERTA
        (Province or other jurisdiction of incorporation or organization)

                                      1311
            (Primary Standard Industrial Classification Code Numbers)

                                 NOT APPLICABLE
             (I.R.S. Employer Identification Number (if applicable))

                 2400 ERNST & YOUNG TOWER, 440-2ND AVENUE S.W.,
                       CALGARY, ALBERTA, CANADA, T2P 5E9
                            TELEPHONE: (403) 233-1700
   (Address and telephone number of Registrant's principal executive offices)

         CT CORPORATION SYSTEM, 111-8TH AVENUE, NEW YORK, NEW YORK 10011
                                 (212) 894-8940
                (Name, address (including zip code) and telephone
                    number (including area code) of agent for
                          service in the United States)

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

TITLE OF EACH CLASS: None

SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(D)
OF THE ACT:

  The Registrant is a "voluntary filer" and files annual reports on Form 40-F,
      and furnishes information on Form 6-K to the Securities and Exchange
   Commission, pursuant to its obligations under its indenture dated April 23,
                   2002 relating to its 8 3/8% Senior Secured
                              Notes due May 1, 2012


FOR ANNUAL REPORTS, INDICATE BY CHECK MARK THE INFORMATION FILED WITH THIS FORM:

      [X] Annual information form      [X] Audited annual financial statements

   NUMBER OF OUTSTANDING SHARES OF EACH OF THE ISSUER'S CLASSES OF CAPITAL OR
    COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY THE ANNUAL REPORT.
          161,378,399 Common Shares outstanding as of December 31, 2006


Indicate by check mark whether the Registrant is furnishing the information
contained in this Form to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934 (the "Exchange Act"). If "Yes" is marked,
indicate the filing number assigned to the Registrant in connection with such
Rule.

              Yes [_]                               No [X]


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days.


              Yes [X]                               No [_]

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<PAGE>


PRINCIPAL DOCUMENTS

The following  documents  have been filed as part of this Annual Report on Form
40-F:


A.       ANNUAL INFORMATION FORM

For the Annual Information Form of Western Oil Sands Inc. ("Western Oil Sands")
for the year ended  December 31, 2006,  see Exhibit 1 of this Annual  Report on
Form 40-F.

B.       AUDITED ANNUAL FINANCIAL STATEMENTS

For Western Oil Sands' consolidated  audited financial  statements for the year
ended December 31, 2006 and 2005,  including the auditor's  report with respect
thereto,  see  Exhibit  2 of this  Annual  Report  on Form  40-F.  The audit by
PricewaterhouseCoopers   LLP  ("PWC")  of   management's   evaluation   of  the
effectiveness  of internal  control  over  financial  reporting is set forth in
Exhibit 2 of this Annual Report on Form 40-F. For a reconciliation of important
differences  between Canadian and United States generally  accepted  accounting
principles,  see Note 21 of the  Notes to the  consolidated  audited  financial
statements for the year ended December 31, 2006.

C.       MANAGEMENT'S DISCUSSION AND ANALYSIS

For Western Oil Sands' Management's  Discussion and Analysis for the year ended
December 31, 2006, see Exhibit 3 of this Annual Report on Form 40-F.

CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS

As of December 31, 2006, an evaluation was carried out,  under the  supervision
of and with the participation of management,  including the President and Chief
Executive  Officer  ("CEO")  and  Chief  Financial  Officer  ("CFO"),   of  the
effectiveness of our disclosure controls and procedures as defined in Canada in
Multilateral Instrument 52-109,  Certification of Disclosure in Issuers' Annual
and  Interim  Filings,  and in the United  States by Rule  13a-15(e)  under the
SECURITIES AND EXCHANGE ACT OF 1934, as amended (the "Exchange Act").  Based on
that evaluation, the CEO and CFO concluded that the design and operation of our
disclosure  controls and  procedures  were effective as at December 31, 2006 to
ensure that information  required to be disclosed by us in reports that we file
under the  Exchange  Act, is  gathered,  reported,  processed,  summarized  and
reported  within the time  periods  specified  in the  Securities  and Exchange
Commissions  rules  and  forms  and  is  accumulated  and  communicated  to the
management  of Western Oil Sands,  including  the CEO and CFO, to allow  timely
decisions  regarding  required  disclosure as specified under Canadian and U.S.
securities laws.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Our  management  is  responsible  for  establishing  and  maintaining  adequate
internal  control over  financial  reporting as defined in Rules  13a-15(f) and
15d-15(f)  under the Securities  Exchange Act of 1934, as amended and in Canada
as defined in Multilateral  Instrument  52-109 - Certification of Disclosure in
Issuers'  Annual and Interim  Filings.  Our  internal  control  over  financial
reporting is designed to provide reasonable assurance regarding the reliability
of our financial  reporting and  preparation  of our financial  statements  for
external purposes in accordance with accounting  principles  generally accepted
in Canada.  Our  internal  control  over  financial  reporting  includes  those
policies and  procedures  that:  pertain to the  maintenance of records that in
reasonable   detail   accurately  and  fairly  reflect  our   transactions  and
disposition of the assets;  provide reasonable  assurance that transactions are
recorded as necessary to permit  preparation  of our  financial  statements  in
accordance with generally accepted accounting  principles and that receipts and
expenditures   of  our  assets  are  being   made  only  in   accordance   with
authorizations  of  our  management  and  directors;   and  provide  reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use or  disposition  of our assets  that  could  have a material  effect on our
financial  statements.  Because of its inherent  limitations,  internal control

<PAGE>

over  financial  reporting  may not  prevent  or  detect  misstatements.  Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate  because of changes in conditions,
or  that  the  degree  of  compliance  with  the  policies  or  procedures  may
deteriorate.

Our management,  with the participation of our principal  executive officer and
principal  financial  officer,  evaluated  the  effectiveness  of our  internal
control  over  financial  reporting  as of December  31,  2006.  In making this
evaluation,  management  used  the  criteria  set  forth  by the  Committee  of
Sponsoring   Organizations  of  the  Treadway  Commission  (COSO)  in  Internal
Control-Integrated Framework.

There was one exclusion from our evaluation. Our 20% undivided working interest
in the Alberta Oil Sands Project (the "AOSP"), was excluded from our evaluation
as we do not have the  ability  to  dictate or modify  this  entity's  internal
control over financial reporting,  and we do not have the ability, in practice,
to assess those controls.  However,  we have assessed our internal control over
financial  reporting with respect to the inclusion of our share of the AOSP and
its results of operations in our consolidated financial statements. For further
discussion of this  exclusion  from the scope of our  evaluation  see "Scope of
Management's Report on Internal Control over Financial Reporting" below.

Based on our evaluation,  management  concluded that our internal  control over
financial reporting was effective as of December 31, 2006.

Our management's  evaluation of the  effectiveness of our internal control over
financial reporting as of December 31, 2006, has been audited by PWC, as stated
in their report in Exhibit 2 of this Annual Report on Form 40-F.


SCOPE OF MANAGEMENT'S EVALUATION OF INTERNAL CONTROL OVER FINANCIAL REPORTING

Western  Oil Sands is the holder of a 20%  undivided  interest  in the AOSP and
conducts  the  operation  of the AOSP through a joint  venture  agreement  (the
"Agreement")  with Chevron Canada Limited,  the other 20% interest holder,  and
Shell Canada  Limited  ("Shell"),  the 60% interest  holder.  The  Agreement is
structured such that Shell, as the project  administrator and controller of the
executive committee of the AOSP, is delegated all managerial  responsibilities,
including the ability to control operations,  create accounts and keep internal
controls  over  the  AOSP.  Shell  charges  us our  proportionate  share of the
expenditures and provides us with our proportionate share of saleable synthetic
crude which we market directly to third parties.

Pursuant to the  Agreement,  and as described  below,  we have the  contractual
right to audit Shell's  determination  of our share of costs and outputs of the
AOSP.  During our 2006 fiscal year, our 20% undivided  working  interest in the
AOSP  comprised  96% of our  total  Property,  Plant  and  Equipment,  100%  of
Operating  Expenses,  54% of  Purchased  Feedstock,  and  64% of  Research  and
Business  Development  Expense as at and for the year ended  December 31, 2006.
However,  we do not have the right or ability to dictate or modify the internal
control over  financial  reporting of the AOSP, and we do not have the ability,
in practice, to evaluate those controls.  Further, we are not able to influence
the control  environment or control  evaluations  of the AOSP. As a result,  we
have excluded the AOSP from our  evaluation of internal  control over financial
reporting relating to the AOSP.

Pursuant to the Agreement,  we have a control  structure which includes,  among
other things, the following:

     o   the right to  participate  in the committee  that grants the authority
         under which all other committees operate including the approval of the
         annual budget;

     o   the right to participate in the committee that reviews  operations and
         capital  spending  as well as the  approval  of certain  spending  and
         contracts;

     o   the right to participate in quarterly  accounting and audit  committee
         meetings; and

     o   the  right to  participate  in other  committees  and work  groups  as
         needed.

In addition,  we have and we exercise our right to audit,  on a routine  basis,
Shell's  determination  of our share of costs as noted and outputs of the AOSP.
Although  these  activities do not provide the ability to evaluate the internal
control  over  financial  reporting  of the AOSP,  the  foregoing  constitute a
control  environment  for the purposes of evaluating our internal  control over
financial  reporting.  Accordingly,  despite the exclusion of the AOSP from our

<PAGE>

management's  review,  our management  has evaluated our internal  control over
financial  reporting with respect to the inclusion of our share of the AOSP and
its results in our consolidated financial statements.


CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No changes were made in our internal  control over financial  reporting  during
the year  ended  December  31,  2006,  that have  materially  affected,  or are
reasonably likely to affect, our internal control over financial reporting.


AUDIT COMMITTEE FINANCIAL EXPERT

Western Oil Sands'  Board of  Directors  has  determined  that  Messrs.  Robert
Puchniak,  Randall  Oliphant,  Oyvind  Hushovd and Fred Dyment (Mr.  Dyment was
appointed  to the Audit  Committee  on  January  1,  2007) are audit  committee
financial  experts (as defined in paragraph  8(b) of General  Instruction  B to
Form 40-F)  serving on its audit  committee.  Pursuant to paragraph  8(a)(2) of
General  Instruction  B to Form 40-F,  the Board has applied the  definition of
independence  applicable to the audit  committee  members of the New York Stock
Exchange ("NYSE") listed  companies.  All above mentioned members are corporate
directors and meet the NYSE  definition of  independence.  For a description of
the Audit Committee member's relevant experience in financial matters,  see the
section  "Directors and Officers" in the Registrant's  Annual  Information Form
for the year ended  December 31,  2006,  which is included as Exhibit 1 to this
Annual Report on Form 40-F.

IDENTIFICATION OF THE AUDIT COMMITTEE

Western  Oil  Sands  has  a  separately  designated  standing  audit  committee
established  in accordance  with section  3(a)(58)(A)  of the Exchange Act. The
members of the Audit Committee are Messrs. Robert G. Puchniak, Randall Oliphant
and Oyvind Hushovd . Mr. Puchniak chairs the Audit Committee.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

PWC have been the  auditors  of  Western  Oil Sands  since  Western  Oil Sands'
inception.  The aggregate amounts billed by PWC for each of the last two fiscal
years  for  audit  fees,  audit-related  fees,  tax  fees and all  other  fees,
including expenses, are set forth below.

         AUDIT FEES:  The aggregate fees billed for each of the last two fiscal
years of Western Oil Sands ending  December 31, 2006 and December 31, 2005, for
professional services rendered by PWC for the audit of its consolidated audited
financial  statements,  review  of  the  Annual  Information  Form,  Management
Discussion and Analysis,  completion of limited reviews of quarterly  financial
information  and for services  that are normally  provided by PWC in connection
with debt and  equity  financings  for those  fiscal  years were  $136,529  and
$146,396,  respectively.  The  aggregate  fees  billed for each of the last two
fiscal  years of Western Oil Sands  ending  December  31, 2006 and December 31,
2005, for professional  services  rendered by PWC for costs related to the 2006
audit  (first year of  adoption)  of Western Oil Sands'  internal  control over
financial reporting were $160,000 and nil, respectively.

         TAX FEES:  The  aggregate  fees billed for each of the last two fiscal
years of Western Oil Sands, ending December 31, 2006 and December 31, 2005, for
professional  services rendered by PWC for tax-related  services  consisting of
advice and  assistance  with tax filings and tax audits were nil and  $133,108,
respectively.  Western Oil Sands'  Audit  Committee  approved  all of the noted
services.

         ALL OTHER  FEES:  There were no other fees billed for each of the last
two fiscal years of Western Oil Sands ending December 31, 2005 and December 31,
2004.

<PAGE>

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

Western Oil Sands has not yet  established  set  policies  and  procedures  for
pre-approval  of  audit  and  non-audit  related  services   conducted  by  the
Registrant's accountant. At the present time, all such services are approved by
the Chair of the Audit Committee before an engagement is executed.

OFF-BALANCE SHEET ARRANGEMENTS

Western Oil Sands has no off-balance sheet arrangements that require disclosure.

CONTRACTUAL OBLIGATIONS

Western Oil Sands has assumed  various  contractual  obligations  in the normal
course  of  its  operations.   Summarized  below  are  significant  contractual
obligations  that are known as of December 31, 2006, and which represent future
cash  payments  that Western Oil Sands will be required to make under  existing
contractual  agreements  that it has  entered  into  either  directly,  or as a
partner in the AOSP. The following information can also be found in Western Oil
Sands' Management Discussion and Analysis attached as Exhibit 3.

<TABLE>
<CAPTION>
                                                     Payments Due By Period (in Thousands)
                                      <1 Year      1-3 Years   4-5 Years      After5 Years          Total
---------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>          <C>            <C>            <C>
US$450 Million Senior Secured Notes $       -      $       -    $       -      $   524,385    $   524,385
Revolving Credit Facility (1)               -              -            -           77,000         77,000
Obligations Under Capital Lease         1,341          2,680        2,680           42,227         48,928
Option Premium Liability               25,971         69,775            -                -         95,426
Feedstocks                            106,352         39,612       20,726           58,727        225,417
Pipelines and Utilities                33,300         78,801       86,347          558,641        757,089
Mobile Equipment Lease                  5,242         32,174        8,625                -         46,041
Exploration Work                        8,728            500            -                -          9,228
---------------------------------------------------------------------------------------------------------
Total Contractual Obligations       $ 180,434      $ 223,542    $ 118,378      $ 1,260,980    $ 1,783,334
---------------------------------------------------------------------------------------------------------
</TABLE>
(1)  THE  REVOLVING  CREDIT  FACILITY  IS A 3-YEAR  BANK  FACILITY  MATURING ON
     OCTOBER  31,  2009,   EXTENDABLE  ANNUALLY  AT  THE  LENDERS'  DISCRETION.
     MANAGEMENT CONSIDERS THIS TO BE PART OF OUR LONG-TERM CAPITAL STRUCTURE.
(2)  IN  ADDITION,  WE  HAVE  AN  OBLIGATION  TO FUND  WESTERN'S  SHARE  OF THE
     PROJECT'S  PENSION  FUND AND HAVE  MADE  COMMITMENTS  RELATED  TO OUR RISK
     MANAGEMENT PROGRAM: SEE NOTES 17 AND 18, RESPECTIVELY, OF THE CONSOLIDATED
     FINANCIAL STATEMENTS.

CODE OF ETHICS

The Board has  adopted a written  Code of  Ethics  and  Business  Conduct  (the
"Code") for  directors,  officers  and  employees  of Western Oil Sands and its
subsidiaries.  A copy of the  Code  was  filed  on  November  24,  2006  and is
accessible  through  SEDAR  at  www.sedar.com.  A copy of the  Code may also be
obtained  upon request by contacting  Western Oil Sands at Suite 2400,  Ernst &
Young Tower,  440 Second Avenue S.W.,  Calgary,  Alberta,  T2P 5E9,  telephone:
(403) 233-1700.

         The Code provides that directors,  officers and employees must,  among
other things:  (a) avoid  situations that may result in a conflict or perceived
conflict  between personal  interests of directors,  officers and employees and
the interests of Western Oil Sands;  (b) provide full  disclosure of any actual
or potential  conflicts of interest in accordance with applicable  legislation;
(c) at all times comply fully with applicable law and avoid any situation which
could be perceived as improper or unethical;  (d) maintain the  confidentiality
of all non-public  information  relating to Western Oil Sands;  (e) protect the
property  of  Western  Oil  Sands  and use such  property  only for  authorized
business purposes; and (f) not hold any significant financial interest,  either
directly  or  indirectly,  in an  organization  which has a  relationship  with
Western Oil Sands.

         Compliance  with the Code is monitored by the Board.  Where a director
or officer has any interest in or a perceived  conflict involving a contract or
business  relationship  with  Western  Oil Sands,  that  director or officer is
excluded  from all  discussions  and  deliberations  regarding  the contract or
relationship and such director abstains from voting in respect thereof. Members
of the Board and  executive  officers  have  disclosed to Western Oil Sands all

<PAGE>

directorships held by such member and the existence and nature of any interests
that could result in a conflict situation with Western Oil Sands.

         The  Board has also  adopted a policy  relating  to the  reporting  of
inappropriate  activity to encourage and promote a culture of ethical  business
conduct.  This policy is intended to encourage and  facilitate the reporting of
(a)  questionable  accounting,  internal  accounting  controls  and/or auditing
matters, (b) the reporting of fraudulent financial information to shareholders,
regulatory authorities and the financial markets, and (c) conduct which results
in a violation of law by Western Oil Sands or in substantial  mismanagement  of
Western Oil Sands'  resources  that,  if proven,  would  constitute  a criminal
offence or  reasonable  grounds for  dismissal  of the person  engaging in this
conduct,  without the fear of recrimination,  retaliation or harassment.  Since
the  adoption of the Code,  there have not been any  amendments  to the Code or
waivers,  including  implicit  waivers,  from any  provisions  in the Code.  In
addition, to the knowledge of the Board, there have been no departures from the
Code during the year ended December 31, 2006 that would require the filing of a
material change report under Canadian security laws.

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS


UNDERTAKING

Western Oil Sands  undertakes  to make  available,  in person or by  telephone,
representatives  to respond to inquiries made by the Commission  staff,  and to
furnish promptly, when requested to do so by the Commission staff,  information
relating to: the securities registered pursuant to Form 40-F; the securities in
relation to which the  obligation to file an annual report on Form 40-F arises;
or transactions in said securities.

CONSENT TO SERVICE OF PROCESS

The Company has  previously  filed a Form F-X in  connection  with the class of
securities in relation to which the obligation to file this report arises.

Any  change to the name or  address  of the agent for  service  of  process  of
Western  Oil Sands  shall be  communicated  promptly  to the  Commission  by an
amendment  to the  Form  F-X  referencing  the  file  number  of  the  relevant
registration statement.


<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Exchange  Act,  Western  Oil Sands Inc.
certifies that it meets all of the requirements for filing on Form 40-F and has
duly caused this Annual  Report to be signed on its behalf by the  undersigned,
thereto duly authorized.

Dated this 22nd day of February, 2007.

                                              WESTERN OIL SANDS INC.



                                              By:  /s/ David A. Dyck
                                                  ------------------------------
                                                  Name:   David A. Dyck
                                                  Title:  Senior Vice President,
                                                          Finance, and Chief
                                                          Financial Officer











<PAGE>

Documents filed as part of this report:

                                  EXHIBIT INDEX

EXHIBIT
  NO.               DESCRIPTION
-------             -----------


1.    Annual Information Form for the fiscal year ended December 31, 2006.

2.    Consolidated Financial Statements for the fiscal years ended December 31,
      2006 and 2005 including U.S. GAAP reconciliation  note, together with the
      auditors' report thereon.

3.    Management's  Discussion  and Analysis for the fiscal year ended December
      31, 2006.

4.    Certification  of Chief Executive  Officer  pursuant to Rule 13a-14(a) or
      15d-14 of the Securities Exchange Act of 1934.

5.    Certification  of Chief Financial  Officer  pursuant to Rule 13a-14(a) or
      15d-14 of the Securities Exchange Act of 1934.

6.    Certification of Chief Executive Officer pursuant to Rule 13(a)-14(b) and
      Section  1350 of  Chapter 63 of Title 18 of the  United  States  Code (18
      U.S.C. 1350).

7.    Certification of Chief Financial Officer pursuant to Rule 13(a)-14(b) and
      Section  1350 of  Chapter 63 of Title 18 of the  United  States  Code (18
      U.S.C. 1350).

8.    Consent of PricewaterhouseCoopers LLP, independent chartered accountants.

9.    Consent  of  GLJ  Petroleum   Consultants  Ltd.,   independent  petroleum
      engineering consultants.

10.   Consent   of  Norwest   Corporation,   independent   mining   engineering
      consultants.