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Is MCW Oil Sands The Lowest Cost Unconventional Oil Play In North America?

MCW Energy Group, Inc. (MCWEF) updated the market Monday Dec 26th on their new oil sands production plant in Vernal Utah and progress on major joint venture projects globally.

In addition, some back-of-the-napkin math updating their of their oil production cost assumptions makes MCW Oil Sands Recovery by far the lowest cost unconventional oil producer in North America…and quite possibly the world ex-Venezuela.

First, MCW Oil Sands Recovery LLC reports they have begun the final phase of commercial oil production mode which will have an anticipated capacity of at least 250 bbl/day. An exemption for an Air Quality Permit has been filed and, with a closed loop oil recovery system (i.e., negligible release of anything from their system other than steam), permission is expected quickly.

A Groundwater Permit Application has also been completed and again, and again with little or no groundwater used in their patented closed loop system, expeditious approval is expected.

These permits from Utah will authorize the plant's operation up to an anticipated production capacity of 250 bbl/day or greater depending on final production tests.

MCW expects that these permits will be in place during the month of January, 2015. Additional control and automation systems have been purchased and installed in order that the Company's extraction plant will be completely ready for full scale production of a 250 bbl/day capacity commencing in late January, 2015.

Multiple Global Joint/Venture Opportunities Now Proceeding.

Subsequent to MCW's successful demonstration of its proprietary extraction plant and technology in October, the Company reports multiple contacts by several companies interested in $100 million+ joint venture opportunities in their respective oil sands deposits in China, Asia, Dominican Republic and the Middle East.

MCW also reported continued final stage discussions with institutional project finance groups for their planned 5,000 bbl/day extraction unit. This two phase project (two identical 2500 bbl/day plants side-by-side) will be designed, fabricated and installed either on its own Asphalt Ridge, Utah lease or on the nearby Temple Mountain Energy lease site, which is the source of MCW's feedstock supply.

Up To 30% LOWER Cost-per-Barrel Production Cost Makes MCW North America’s Lowest Cost Unconventional Oil Producer.

By our rough calculations, the total cost of oil from these plants will be significantly lower than management originally forecast at their plant grand opening in October.

Firstly, $50 WTI oil  means significantly lower production/OPEX costs per barrel based on 50%+ lower input costs for the propane, diesel fuel and gas condensate used in the MCW oil shale recovery process.

Next, any cost born or accounted for by MCW to upgrade their 32 API oil to the 42+ API grade oil needed for transport to local refineries is reduced roughly 40-50% at $50 WTI from the original $90-100 WTI price assumptions expressed from management at the October Pilot Plant opening in early October.

As mentioned in a previous article, MCWEF management assumed much lower API oil (22-24) from their oil sands plant versus the light sweet 32API crude they are actually producing. Major improvements in their oil recovery formula paid off handsomely.

In addition, MCW’s planned acquisition of the estimated 800 million bbl oil sands feedstock supply at Temple Mountain, Utah would take their per barrel production costs even lower with lease costs and on-going commercial royalties eliminated.

All in…based on 50%+ lower production energy input costs, $60 average blending oil and 32 API oil coming out of the MCW recovery plants, our new updated estimate of fully loaded CAPEX/OPEX cost per produced bbl is now roughly just $28-$30 per barrel of oil delivered to local Salt Lake City petroleum refiners.

Compared to the high recovery cost Canadian oil sands operations (list a few tickers here), Gulf of Mexico offshore plays (a few tickers) and/or oil fracking fully loaded E&P costs in the Bakken, Permian Basin and Eagle Ford (EOG, Anadarko, Pioneer), our estimates for MCW’s total OPEX/CAPEX cost of oil produced ranges from 25% to 70% lower per barrel than their North American unconventional oil producing brethren.

In today’s world with <$50 WTI oil pricing and $10-$12 per barrel discounts to Bakken Oil prices for refinery transportation costs, a fully loaded $28-$30 cost of oil produced is indeed a blessing.

By. James Burgess of Oilprice.com

Legal Disclaimer/Disclosure: MCW Energy is an Oilprice.com client. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. No information in this Report should be construed as individualized investment advice. A licensed financial advisor should be consulted prior to making any investment decision. We make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Oilprice.com only and are subject to change without notice. Oilprice.com assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

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Leave a comment
  • Ralph Doncaster on January 05 2015 said:
    Suncor's latest quarter results showed production costs of ~$32/bbl. With an 85c loonies, that's $27/bbl.
  • someoilguy on January 18 2015 said:
    The article reports 250 barrels per day. This still at the level of a very small pilot plant. Build a 10,000 barrel per day plant and then that will be more serious. For now, this is all very interesting reading but largely pie in the sky.
  • CJ on February 12 2015 said:
    You need a low, mobile footprint with high capacity ie ability to process about 240,000 tons of sand per day at each excavation site.

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