At a time when global oil prices are slumping, the death knell sounds for Keystone XL, and major oil sands projects are scrapped, America’s first-ever environmentally-friendly oil sands project in Utah surges ahead with trend-defying low-cost production that returns clean sand to the earth.
U.S. President Barack Obama’s decision to kill Keystone XL was an economic one: With the major oil sands projects that were to supply the pipeline going under, it no longer makes sense.
Adding to the growing list of cancelled or halted oil sands programs, Shell in late October moved to scrap its 80,000-barrel/day Carmon Creek project. Earlier this year, three major Canadian energy companies said they would stop new or expanded oil-sands ventures, and last year French Total SA and Norway’s Statoil also scrapped oil sands plans. Other major players like Suncor and Cenovus have reportedly been downsizing investments in Alberta.
Overall, some $60 billion in Canadian oil sands projects are in big trouble, unable to withstand high production costs in today’s slumping oil price market.
While these oil sands projects don’t make economic sense, there is one that does—and it’s debuted in the U.S. state of Utah, offering not only low production costs that can withstand price volatility, but also offering what no one ever thought oil sands could bring to the table: a clean way to produce oil sands.
These doomed oil sands projects require $80 oil to break even and Western Canadian Select is only trading at $30 per barrel. Compare this to MCW Energy Group’s (MCWEF:OTCQB; TSV:MCW.V) clean oil sands extraction plant at Asphalt Ridge, Utah, which is producing 250 barrels per day for $27-$30 per barrel—low enough to turn a profit even today. And when the company finishes building its second 5,000/bpd plant, we’re looking at costs closer to $20 per barrel.
MCW’s processing costs will also be proportionately reduced due to lower costs for propane, condensate and diesel fuel required to process feedstock.
And the plant’s location, in the heart of Utah’s Green River Formation at Asphalt Ridge adds the promise of much more gains for clean oil sands extraction. Asphalt Ridge alone is believed to hold some 1 billion barrels of recoverable oil.
Experts estimate that production using this new technology in Utah is more profitable than any other oil sands project in North America, and more profitable than today’s shale.
The oil that comes out of this clean sands project is at a low 20 API gravity, but refiners can upgrade it. It’s not the lightest oil, with a high bitumen content, but neither is it the heaviest. It sells for close to the WTI price, but has a discount because of the bitumen, which varies depending on demand. In the worst case scenario, there is a 20% discount for this medium-weight oil, and in the best case scenario, it’s close to WTI. At the end of the day, it’s a good enough price to turn a profit even in this market.
For five decades, companies have been trying to replicate Alberta’s oil sands success in Utah, but without the high cost, and significantly—without turning the state into a toxic wasteland.
This combination of clean and profitable is what attracted the former Exxon president of Arabian Gulf operations, Dr. R Gerald Bailey, to the western U.S. state, where today he is the CEO of MCW Energy.
That the Asphalt Ridge extraction process is clean is of major importance in today’s market. It’s not only economics and Keystone that has brought down Alberta’s oil sands: Environmental activism and lobbying have thrown some serious wrenches in big plans. This means that turning out clean oil sands for the first time ever in America ensures stability.
How does it work? According to Dr. Bailey, “It is really simple. In the same way that soap washes grease from plates, with the grease adhering to the soap and pulling it off, so new technology in the form of an innovative solvent can pull the oil out of oil sands.”
Oil sands are typically black and dirty looking. However, once washed with the solvent, the sand comes out 99.9% clean before it is returned to the Earth, according to Dr. Bailey. “If we throw it back on the Earth, it is no longer contaminated with oil and you can grow plants on it.”
At the end of the day, while many massively expensive and dirty oil sands projects are falling by the wayside, Asphalt Ridge is rising, having provided a game-changing technology that can handle depressed oil prices, cleans up oil sands, doesn’t use any water in the process and emits no greenhouse gases. It’s an oil sands revolution that makes sense to everyone from investors to environmentalists.
By James Burgess of Oilprice.com
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