The rise in oil prices has resulted in relentless drilling and booming production in the U.S. shale plays, and the Permian in West Texas is attracting the most drillers, analysts, and media attention.
But some bold wildcatters—encouraged by the higher oil prices—have set their sights on projects to squeeze oil out of the rocks in Utah, where lead times are much longer and costs are higher. But oil production can be sustained for decades, bringing in potential vast profits to those who manage to start and keep up production from the sands in Utah—the state holding the largest oil sands resources in the United States.
According to the Utah Geological Survey, the state’s oil sand deposits contain 14 to 15 billion barrels of measured oil in place, and bitumen can be seen “bleeding” in some places like the Navajo Sandstone in the Whiterocks deposit in the Uinta Basin.
Utah also has an Alternative Energy Development Incentive (AEDI)—a fixed post-performance credit of 75 percent of all newly generated state revenues for 20 years, and despite its ‘alternative’ wording, the incentive also includes energy derived from oil sands or oil shale.
Despite the promise of vast resources and the state tax credits, no one has yet successfully unlocked the oil riches, because of the challenge to extract the oil.
Encouraged by the higher oil prices and boasting environmentally friendly technology to squeeze oil out of the oil sands, now several companies are trying.
Petroteq Energy Inc. is one of those firms, and it has developed a proprietary closed-loop technology to extract oil from oil sands.
Canada’s oil sands, for example, contain a lot of water, while Utah’s oil sands have very little water and are ‘oil-wet’, not ‘water-wet’ like the oil sands in Alberta.
The Petroteq technology utilizes no water in the extraction process, produces no greenhouse gases, and requires no high temperatures/pressures, the company says. Petroteq expects to recycle over 99 percent of the solvents it uses in its extraction technology, and the only elements that leave the closed-loop system is the extracted crude oil and the cleaned sands. The sands can be placed back in the earth or sold as clean sand for construction or fracking purposes, the company says.
In June, Petroteq unveiled its heavy oil processing and extraction plant at the Asphalt Ridge in Uintah Basin in Utah, where it plans to produce 1,000 bpd. Subject to having sufficient capital, Petroteq says the plant could produce as much as 2,000 bpd by the end of 2019 and 5,000 bpd by the end of 2020.
“We have enough oil here to produce 10,000 barrels a day for over 25 years,” Petroteq chief executive David Sealock told Bloomberg.
By some standards 10,000 bpd may be negligible, but it’s not insignificant compared to Utah’s total crude oil production for 2017—at 91,000 bpd. Related: World’s Biggest Oil Trader Launches Renewables Fund
Another company that looks to develop Utah’s resources is London-listed Rose Petroleum, which plans to drill into a naturally fractured reservoir, and plans to spud its first well this fall.
“Money gets attracted to big things as long as people think the oil price is going to stay where it is,” Rose Petroleum’s CEO Matthew Idiens told Bloomberg.
At oil prices staying where they are, Petroteq might start turning profits because it targets a breakeven price of $30 a barrel.
That’s half the average breakeven price in Alberta’s oil sands where production breaks even at $65-70 a barrel, according to IHS Markit’s analyst Kevin Birn. If capital costs are excluded, a $32 a barrel break-even is conceivable, Birn told Bloomberg.
Despite warnings from other industry executives that this attempt at unlocking Utah’s oil sands reserves will fail again, Petroteq is optimistic, and its president Jerry Bailey told Bloomberg: “Someone has to be first.”
By Tsvetana Paraskova for Oilprice.com
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Eventually, it will be mined. But oil will have to stay over $100 a barrel to make it profitable. That is coming in a few more years.