Northeastern Utah is relatively unknown to the rest of the nation, unless one is an outdoors person, or perhaps a paleontologist. Each summer, tourists descend on the area to raft the river, enjoy world class fishing, and of course to see the fossils at the Dinosaur National Monument. The area is appropriately known as “Dinosaurland.” But the same life forms that draw the tourists to view their fossils also left their remains in the ground in the form of oil and natural gas.
After an energy boom that brought jobs, people, businesses and new homes to the area, the region is now looking at ways to deal with the downturn in oil and gas. But the energy industry is still hanging on. With the negative attention that fracking has received in recent years, companies such as U.S. Oil Sands have sought new approaches to extracting oil. And the oil sands in Utah are plentiful. According to the company’s data, Utah is home to over half of the country’s bitumen resources, and it contends that there are some 20 to 32 billion barrels of oil in place, with the bulk of it in northeastern and south central Utah.
What sets U.S. Oil Sands apart in terms of extraction is the process. It has developed a process that uses a biodegradable citrus solvent to separate the oil from the sands, which according to the company, is so effective that it avoids the tailings associated with oil sands extractions that have given the resource a toxic name in Canada. The company also notes that it is recycles as much as 95 percent of the water used in the extraction process.
In lieu of placing the waste product in tailing ponds, the company is able to return clean, dry sand to the extraction site. Also of note: the company states that because of its high rate of extraction of the bitumen, it can mine less ore for the process, and in its words maximize “the potential of the State's resource.” Additionally, the company claims that its reclamation process will mean a smaller footprint for operations.
As Dr. R. Gerald Bailey of the MCW group mentioned in an interview with Oilprice.com last year, Utah’s oil sands lie anywhere from just below the surface to approximately 400 feet down. Bailey contrasts this with the oil sands operations in Canada in which much deeper mining is required, along with steam in the process. That, says Bailey, makes the process much dirtier.
So now the question is whether or not oil sands’ toxic reputation in Canada will be a factor in the success or failure of oil sands extraction in the U.S., despite technological advances that purportedly make it all a lot cleaner.
Some contend that public opinion is shifting away from a favorable view of fossil fuels. Attorneys General of various states are turning threatening and litigious eyes toward oil companies, which they suspect of concealing environmental impact data. This is a point in history at which Saudi Arabia is diversifying its economy, Shell is divesting itself of some of its holdings, and oil continues to tease the market by dancing above and below the magic $50/barrel mark. Related: Saudi Arabia To Tax Foreign Residence As Oil Crisis Continues
Cameron Todd, CEO of U.S. Oil Sands, finds the sentiment that oil will not be a future part of the world’s energy supplies unrealistic. Citing data from the U.S. Department of Energy, Todd notes that the world is using around 96 million barrels of oil per day, which is the highest rate known in history. That number, says Todd, reflects a one-million-barrel increase from last year. He says that on average, the demand for oil has climbed by one million barrels per year, every year for the last 30 years. People are using more oil than ever before, he says.
Another mistake, Todd opines, is to look at oil use and markets through a North American lens. The U.S. is using a little less than 20 million barrels a day while demand has been relatively flat in the U.S. and Canada over the last five years. However, Todd says that in other nations such as China, India, Brazil and some African countries, the demand for oil has gone up. He draws a correlation between the increase in the standard of living in many of those nations with an increase in demand for oil. China, he notes, now buys more cars than the United States.
Todd says that on the production side, the world has been producing 1 to 2 million barrels of oil more than it needs over the last two to three years. That oil has been going into storage, which gave the impression of a great oil supply and fueled the dip in prices. That was based on a difference between supply and demand of 1 percent to 2 percent. Related: Lebanon Losing The Levant Basin Battle By Default
But now the oil price slide has hit hard at oil sands projects in Utah, rendering many projects financially unfeasible for the time being, though new processes are both simplifying extraction and reducing costs—so many would argue that there is a bright future here, once the ball really gets rolling.
According to Todd, the construction of the P.R. Springs project is over 95 percent complete and should be in full production by the end of the year, despite delays earlier this year over financial issues.
And in the meantime, while oil sands and environmental activists in Utah are for now strangers in the night who fear each other, oil sands companies operating in the area believe they are onto something good and that their new technology can extract cleanly and efficiently. When the two sides meet, Utah’s potential 32 billion barrels could render the state a new oil sands hub, missing the toxic trailing ponds.
By Lincoln Brown for Oilprice.com
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