Utah: Home of the Next Oil Sands Breakthrough?
When you see the term "oil sands," there is a good chance that you will associate it with the Canadian province Alberta. MCW Energy Group is trying to extend the geographical focus southward.
"Companies large and small have experimented and failed over 5 decades attempting to develop this valuable resource," said MCW’s communications spokesman Paul Davey, referring to oil sand and oil shale resources in Utah, Colorado and Wyoming. "All have ended in failure in terms of attempting to prove up a commercially viable extraction technology."
Last October MCW – founded by its CEO R.G. "Jerry" Bailey, a 50-year oil and gas industry veteran and former president of Exxon's Arabian Gulf operations – deployed its first oil sands extraction plant in Vernal, Utah, located in the Uinta Basin nearly 200 miles southeast of Salt Lake City. The plant applies the company's continuous-flow, closed-loop method of extracting oil from oil sands. Billing the facility as "America's First Environmentally Friendly Oil Sands Extraction Project," MCW contends its process uses no water or heat and leaves behind only "99 percent clean" sand. Moreover, the company asserts that its per-barrel processing costs are dramatically lower: $30 compared to an average of $75 in Alberta. The efficiency of MCW’s extraction technology is extremely high with an energy returned on energy invested (EROEI) of 22:1 as compared to Alberta’s steam-assisted gravity drainage (SAGD) efficiency average of 4:1, according to MCW.
MCW is delivering its maiden plant's relatively small production volumes to refineries near Salt Lake City, but the company is working to scale up the process with a 5,000 barrels per day (bpd) extraction plant and – it hopes – many others at oil sands and oil shale sites in the region and beyond. DownstreamToday recently caught up with Davey to learn about MCW's plans for its technology. Excerpts from the interview follow.
DownstreamToday: Briefly, please describe how your technology works? Also, is it only designed to break down bitumen or could it also be tailored for other, less viscous heavy oil deposits?
Paul Davey: MCW has developed a unique, environmentally friendly, continuous flow, closed-loop oil sands extraction technology. It may be applied to both water-wet and oil-wet hydrocarbon deposits. It may also be used for remedial projects, such as cleaning up tailings ponds. It uses no water in the extraction process, produces no greenhouse gases and requires no high temperatures or pressures. It extracts up to 99 percent of all hydrocarbons.
In simple terms, here's how the technology works:
- Preparatory Stage: Mining and crushing of the feedstock to prepare for processing. Standard strip mining procedures are used to deliver the feedstock to the extraction plant's conveyor system.
- Stage 1: Crushed ore is delivered into the patented, fluidized bed extraction. The extraction process is performed at temperatures between 50 to 60 degrees Celsius (122 to 140 degrees Fahrenheit).
- Stage 2: The solvent composition with extracted oil bitumen is delivered from the extraction column to the evaporator and then to the distillation column.
- Stage 3: Hydrocarbons are extracted from the solvent in the distillation column and pumped to the storage tank.
- Stage 4: The solvent is (99.9-percent) retained, warmed up and retuned back to the extractor within the continuous flow, closed-loop system.
- Stage 5: The purified sands leave the extractor and go through the drying process.
At this point, the extracted crude oil is free of sand and solvents. It is then pumped out of the system and into a storage tank. The sand exits the extraction system as clean, dry sands. These sands may be sold as fracking sand/construction purposed or returned to their origin on the developed lease.
DownstreamToday: What can you tell me about your solvent?
Paul Davey: MCW's proprietary solvent composition consists of hydrophobic, hydrophilic and polycyclic hydrocarbons. These solvents form an azeotropic mixture which has a very low boiling point of 70 to 75 degrees Celsius (158 to 167 degrees Fahrenheit). MCW has several patents on the solvent mixtures and composition. Because these solvents remain in the closed-loop extraction system, there's no need for tailings ponds.
DownstreamToday: What do you consider your target market, and is the niche you're looking to carve out for yourself exclusively small-scale?
Davey: Our target market is initially the U.S. We currently have a local distributor who will purchase all of our production. At this juncture, all of our production would be delivered by tanker truck to the refineries in Salt Lake City, approximately 200 miles to the northwest. Several of these refineries are capable of processing our production which averages 14 API (gravity), although there are plans to increase the API to 21 or more by leaving a quantity of solvents in the crude oil produced. This will enhance market value. There are future plans by the state of Utah to build a pipeline to the Salt Lake refineries, which will dovetail well with MCW's expanded production plans.
MCW's technology is by no means limited to small scale production. The design plans have been carefully formatted for easy scale-up to extraction plants with daily capacities of 2,000 to 5,000 bpd.
DownstreamToday: Why are you initially focusing on Utah, and where else in North America – and beyond – do you see growth potential?
Davey: Utah has over 50 percent of America's oil sands resources, with over 30 billion barrels of oil which is relatively easy to develop – surface to 400 feet. There are other oil sands opportunities in Colorado and Wyoming. In addition, there are over 1 billion barrels of oil in Colorado in the form of oil shale, which can utilize MCW's technology once the shale is crushed for processing.
DownstreamToday: Please tell me a bit about the specs of the crude oil emerging from the plant, and is the crude simply trucked to a nearby refinery?
Davey: As described above, the crude oil is approximately 14 API and is very low in sulfur content – a benefit to refineries which will be processing the oil (less cost to extract). As mentioned, the API level may be enhanced to improve viscosity and easier transport, as well as higher prices at the refinery level. Even at 14 API, the oil is easily transported via truck transport.
DownstreamToday: MCW is looking to expand the technology's reach via licenses and joint ventures. If someone reading this article is interested in possibly setting up one of your plants, what can they expect in terms of investment, operations, etc.?
Davey: There are unlimited opportunities for MCW to expand into other countries that possess extensive oil sands deposits. Agreements in the form of joint venture partners, together with upfront royalties, will be integral revenue streams for the company almost immediately. MCW has already received inquiries from several countries and we have tested (laboratory environment) several oil sand and oil shale samples successfully. There have also been several inquiries from companies in the U.S. which have lease holdings of oil sands/oil shale.
As far as costs for interested parties desiring to set up their own plants on their oil sands leases, the costs would vary greatly depending on the capacity of the plant(s). A 1,000-bpd plant may cost in the range of $15-18 million. Plants in the 2,500 bpd range may cost approximately $35 million. Presently, MCW is costing a 5,000-bpd plant for its own lease location which looks like a $70 million investment – a very favorable comparison to SAGD technology infrastructure, which tends to be extremely expensive at around $3-9 billion, depending on capacities.
DownstreamToday: When you formally introduced your technology in October 2014, the WTI crude oil benchmark was trading in the range of $80-90. It's since fallen below $50 but has rebounded slightly in recent weeks. How has the recent oil price drop affected your outlook for the oil sands technology, and do you see any opportunities despite the current slump?
Davey: Recently MCW conducted an internal costing review on our costs in the face of depleted world oil prices. We discovered that associated petroleum products that we use in the extraction process have also experienced lower prices from 40 to 50 percent. These solvents include diesel fuel, propane and gas condensates. Our costs would currently stand at under $30 per barrel (bbl), which is probably one of the most efficient costs in the industry when applied to $50/bbl oil prices. An independent report by Chapman Petroleum Engineering provided costs ranging from $24.51 to $34.04 US bbl, a costing that reflects on excellent feedstock price on contract from a local long-term supplier.
Matthew V. Veazey has written about the oil and gas industry since 2000. Email Matthew at email@example.com. Twitter: @Matthew_Veazey