New Oil Sands Technology Debuts in Utah

 

In the northeastern desert of Utah, a new type of oil sands extraction technology has been born. The company behind it claims the process is the most cost-effective and environmentally sound way to develop oil sands.

“Nothing goes out onto the ground, nothing goes up into the air, and there is no water involved,” said Gerald Bailey, the chief executive officer of MCW Energy Group. “We finish up with 99.9% clean sand that you can just lay out on the ground.”

Bailey said the efficiency of the technology is backed up by permits issued by the US Environmental Protection Agency allowing MCW to reintroduce the sands to the source area. Oil sands surface mining has become a controversial extraction method because it results in large quantities of hydrocarbon and chemical-laced tailing ponds that can take decades to remediate. Another method, steam-assisted gravity drainage does not come with the environmental drawbacks of surface mining, but it does require large volumes of water and energy, usually from natural gas, to generate steam for the in-situ production process.

The key to the emerging technology is MCW’s solvent that acts as a surfactant. Made from a strain of common organic alcohols, Bailey said the solvent strips more than 99% of the hydrocarbons from the oil sands, which have an original content of 12% oil. The quality of Utah’s oil sands is approximately 22° API, considered the upper limit of heavy oil by the US Energy Information Administration.

MCW’s also says it extraction technology requires no water for the process, emits no greenhouse gases, and does not require high pressures or temperatures to separate the hydrocarbons from the oil sands. The process is continuous but it can be turned off and on with the flick of a switch.  “There is no decline curve. It is not a well depletes,” Bailey said. “You are just taking a raw material, putting it in a chemical, and getting oil.”

The company is currently raising USD 80 million to build a 5,000 B/D facility with two 2,500 B/D contact towers and separation units. Located 5 miles from the pilot facility, the company is buying a 3,000-acre oil sands lease for USD 10 million for a new facility, which would eliminate hauling costs. The prospective area contains 70 million bbl in proven reserves, Bailey said, adding that he hopes to break ground in the first quarter of the year and have the facility achieve first oil in 2016.

Companies have tried for years to profit off the abundant oil sands in Utah, where an estimated 55% of the total US deposits are found, according to the Utah Mining Association, but with little success. The owners of the lease that MCW is looking to acquire use the oil sands as an asphalt feedstock for paving roads. Bailey said the accumulation of large piles of the feedstock will mean that the company will not have to mine it out for some time. Utah’s oil sands run as deep as 300 ft.

Bailey, who holds a doctorate in chemistry and spent much of his 52-year career in the oil and gas industry as the president of Exxon Arabian Gulf, said he took the helm of MCW about 3 years ago after realizing the potential of the technology that the company had acquired. Its core business has been distributing gasoline to gas stations in southern California, but that business is now being spun off so the company can focus on its future in oil sands, he said.

The solvent was invented in Russia by a scientist looking for ways to clean up oil-polluted soils on the outskirts of Moscow. When Russian companies took a pass on the remediation technology, the rights and patents were sold to Glendale, California-based MCW. Bailey said the composition of solvent was altered to optimize it for the Utah oil sands, which differ from Canada’s oil sands in that they are hydrocarbon wet as opposed to water wet.

The extraction method begins with the scooping up of oil sands from the surface using a front-loader tractor that loads the oil sands into a truck. Once the sands are delivered to the facility, it is placed onto a conveyer belt and fed into what MCW calls a contact tower.

The oil sands are then heated into a slurry at a temperature of approximately 130°F and introduced to the solvent. With the help of a mechanical agitator, the oil is released from the sand and placed into a separation tank. About 95% of the solvent is separated and recycled into the system and the rest is left in the oil to facilitate its transportation to refineries.

The production costs are around USD 38 per bbl, which includes trucking in the oil sands and USD 3 per bbl of the solvent. MCW’s current oil sands lease has an estimated 50 million bbl of oil reserves.

In an ironic twist, some of the newfound interest in the technology has come from Russia. Interest has also been sparked in China, believed to have the most oil sands in the world, along with a host of other oil sands-bearing nations, including Canada, Kazakhstan, the Dominican Republic, Trinidad, and Namibia. If coupled with a crushing stage, the technology could also be used to process oil shale.

Bailey believes that the technology can also be used to clean up tailing ponds, which contain leftover hydrocarbons, in Canada. “We could dewater a lot of that stuff and treat it with our chemical and our process,” he said.

With only one pilot plant in operation, Bailey said that MCW is unable yet to export the nascent technology to so many places at once. Nonetheless, he said the technology is scalable.

“It is like a Lego set,” he said. “You just build more towers.”

The original source for this post can be found here.

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Halliburton In Talks To Buy Baker Hughes In A $75 Billion Combination

This afternoon, the financial press is reporting that Halliburton (HAL) is in talks to buy Baker Hughes (BHI) in what would arguably be the most significant combination in the history of oil service and drilling.

The deal would combine the world’s second and third largest oil service contractors, and the combined market cap would be in range of $75bn. Halliburton currently employs 80,000 people and Baker Hughes employs 61,000 (two of the highest totals in the entire O&G industry).

The Wall Street Journal cited people close to the deal as saying that the talks are moving quickly. An Oilpro member has told us that Halliburton is attending an investor conference this week, and they cancelled 1×1 meetings following their group presentation – an indication that there is fire under the smoke here.

Shares of Baker Hughes soared on the news and were halted in afternoon trading. In after hours trading, Baker shares were bid above $60 per share, up 26% from levels early today (near $49) as traders buy this news.

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With A $75 Billion Market Cap, The Combined Company Would Turn Competitive Dynamics Upside Down In Oilfield Services

This Deal Would Turn The Big 4 Into The Big 2
Based on current market values, the combined entity’s market cap would approach $75bn, still well below Schlumberger’s $124bn, but a lot closer. HAL’s market value today stands at $45bn and BHI’s is $25bn, and the deal would likely include a significant premium for BHI. By combining together, Baker and Halliburton would have the scale to challenge Schlumberger’s market leadership, which has been built through smaller acquisitions and internal investments in technology and organic growth.

With Weatherford at a market cap of about $12bn, this deal would effectively mean that the Big 4 service firms would become the Big 2 as the new HAL and SLB would be far larger than WFT once the deal is consummated.

Additional Consolidation Could Follow
Because of the drastic implications for competitive dynamics here, this deal could set off a round of oil service sector consolidation as companies look to build scale to improve competitiveness. Beyond the Big 4, there are basically no true diversified mid-cap service companies any longer – Superior Energy Services is probably the closest with a market cap of $3.6bn. Smaller companies may be forced to consolidate to offer a diverse package of services to compete with the integrated platforms of the Big 2 in this scenario.

Regulatory Approval Will Be A Big Hurdle For This Deal
Given the business overlap, particularly in the US onshore market, this deal will also likely receive some pretty serious scrutiny under the Hart-Scott-Rodino Act (HSR). The HSR act is anti-trust legislation designed to enable the Federal Trade Commission and the Department of Justice prevent business combinations that would create unfair competitive dynamics. A review process will be held before the deal is approved.

Interesting Timing

Should this deal move forward, one of the most interesting aspects is the timing. The oil service sector is arguably within reach of a multi-decade cyclical high.

Sure, shares of both Baker and Halliburton are down about 30% from recent highs due to the oil and broader equity market sell-off, but as shown below, shares are well above historical norms, as are most operating metrics.

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Historically, consolidation in the sector has been more prevalent (and successful) around cyclical lows rather than cyclical highs. And based on the oil price downdraft and commentary from operators, it would appear that the industry is on the verge of cyclical decline.

The timing also begs the question of how this deal would get done in the current market. Halliburton has an enterprise value of around $51bn. With just $2bn of cash, they will probably need to use a combination of equity and debt to finance the deal (Baker has an enterprise value of $29bn and an equity value of $25bn). The markets are skittish right now, and it will be interesting to see what sort of financing Halliburton decides to use to fund the deal. The consideration paid to Baker will likely be a combination of cash and shares in the combined entity, allowing Baker shareholders to continue to participate in the upside of the ongoing business.

The original source for this post can be found here.

Turkey needs better regulations for shale gas

Clearly, energy is Turkey’s vulnerable underbelly and it needs to be enhanced through new sources, including shale gas. The country is in dire need of energy supplies to fuel its rapidly growing economy – despite some difficulties Turkey’s GDP still grew 4 % to $826 billion last year.

However, the picture is not as rosy as it looks at first sight. Turkey’s balance of payments remains in red. The current account deficit increased from $49 billion in 2012 to $65 billion in 2013. This “financial gap” is mostly driven by the country’s “energy bill” – the country’s oil & gas imports alone reached $56 billion in 2013. Turkey buys from abroad up to 98 % of its demand in natural gas and up to 93 % of its oil consumption.

Ankara knows how to cope with this challenge. Drastic reduction of hydrocarbon imports is one of the three major energy goals for the decade to come. While Turkey is unlikely to become energy self-sufficient in the near future, the new sources of imported and domestically produced energy supplies are vital for sustaining the Turkish economy’s growth and competitiveness.

Domestic production – both conventional and unconventional – is, therefore, crucial for Turkey’s energy security. Unconventional hydrocarbon total reserve bases could potentially reach 5.8 trillion cubic meters in three provinces.

There is already a significant presence of foreign companies, knowledgeable on unconventional production: TransAtlantic Petroleum Ltd. has already drilled 31 horizontal and deviated wells, while Shell and TPAO are jointly drilling into the Dadas shale formation in eastern Turkey.

At this point, it is difficult to forecast Turkey’s shale gas “break-even price” – each of unconventional wells has de facto its own “geology” and “economics.” While shale gas might not be cheaper than Russian or Azeri imports, it might be less expensive than Iranian gas and LNG cargos and will be produced at home.

However, environmental and regulatory challenges seem to be, at present, the biggest barrier on the way to Turkey’s potential “unconventional revolution.”

Environment and water issues

The issue of water usage and water/aquifer pollution is particularly important for the unconventional gas industry. Hydraulic fracturing is a water intensive process. Certain wells require the usage of more than 10 million liters of water during their lifetime, which rarely extends longer than 5 years. The amount of water used (and wasted water produced) explains public concerns, especially in water-scarce areas.

Countries are considered water-rich if their annual per capita water consumption exceeds 10,000 cubic meters, while in Turkey this number barely reaches 1,500 cubic meters and the country just cannot afford to deal with polluted aquifers. Turkey is already facing serious problems caused by the water deficit and high soil salinity.

Turkey’s lakes’ surface continues to diminish in the face of unregulated irrigation, lack of long-term water management policy and climate change. Turkey’s alimentary sector is also heavily dependent on constant freshwater supplies and national agricultural productivity is primarily dependent upon sustainable irrigation.

Current debates in the U.S. show the water usage issue might be a particularly sensitive topic – both from a political and environmental point of view. It can affect political campaigns and change the fate of politicians. This issue, therefore, should not be neglected.

What tools are necessary to deal with the water issue? – Technology and regulations, with regulations possibly being more important than the purely technological component. The regulation of shale gas is an evolving landscape, as the industry has developed so rapidly that it has often outpaced the availability of information for regulators to develop specific guidance.

Kingdom for a series of new regulations?

In principle, Turkey has all of the necessary legislation to proceed with the unconventional hydrocarbon production. A new version of the Petroleum Law, adopted in June 2013, has raised hopes for the country’s energy sector. Indeed, a combination of the relatively low Royalty Tax (12.5 %) and Corporate Tax (20 %) create an investor-friendly fiscal regime.

However, existing legislation is missing some important points – flexible fiscal regime – similar to the fiscal incentives offered in the U.K. or the U.S. – and specific fracking disclosure laws, securing safe development of unconventional hydrocarbons.

Land-owners in Turkey – unlike in the U.S. – do not own subsurface mineral resources and are only compensated for their land. This certainly reduces the interest level of local population in shale oil and gas production. Turkey also misses a special shale gas fiscal regime, with special incentives for the companies and local communities, similar to one recently proposed by the U.K.

So far, debates on fracking in Turkey have paid little attention to the development of a separate legal framework for shale gas. More precise regulation might be necessary to establish universally acceptable and mutually beneficial “rules of the game” for the unconventional oil and gas industry.
Commercially-based unconventional oil and gas production is in principle compatible with Turkey’s two key energy priorities – security of supply and access to affordable energy supplies, but is it compatible with the country’s environmental sustainability?

All will depend on a proper application of comprehensive and environmentally-sound project management mechanisms. This process will be also impacted by the population’s willingness to pay an “environmental premium,” future development of Turkey’s national energy mix, security of supply perceptions and availability of affordable energy imports.

 

The original source for this post can be found here.

XOM Eyes Shale In Turkey

The head of Turkey’s General Directorate of Petroleum Affairs (a division of the energy ministry), Selami Incedalci, said late Sunday that ExxonMobil is in talks with state-run Turkish Petroleum Corporation (TPAO) over a venture to explore for shale gas in the southeast and northwest of the country, Reuters reported on Monday.

enter image description hereSelami Incedalci, head of Turkey’s General Directorate of Petroleum Affairs

In 2012, the US O&G major held discussions with TPAO over a possible shale exploration partnership, but the talks were inconclusive. Since then, the deliberations have advanced and are likely to yield an agreement, Turkish officials said.

Incedalci said ExxonMobil has expressed interest in onshore exploration in Thrace, located in northwestern Turkey, as well as in the southeastern region of the country.

enter image description hereTurkey Shale Map; Source: shaleexperts.com

Turkey is seeking to cut its annual energy bill of roughly $60 billion by reinvigorating efforts to develop domestic resources including coal, solar, nuclear and wind energy.

Given that Turkey’s domestic gas consumption is increasing, as well as its geographical placement that makes it an ideal location from whence to supply global markets, significant exploitable shale reserves could likely be a game changer for Turkey’s economy.

Incedalci also said that US, Canadian and European investors have also expressed interest in Turkey’s shale oil and gas. The energy ministry, he added, is planning to conduct talks with potential investors in October.

So far, Canada’s TransAtlantic Petroleum and the Anglo-Dutch major Shell are conducting exploration activities in the area around the southeastern city of Diyarbakir.

Current estimates as to how large Turkey’s shale gas reserves vary significantly.

One energy official told Reuters that data from some international agencies indicate Turkey could hold a large 20 trillion cubic meters (cbm) of total reserves. Another expert told the news agency that proven reserves thus far were significantly lower, at 6-7 cbm.

TPAO currently has operations in Iraq, Azerbaijan, Libya, Kazakhstan and Colombia.

Why Turkey Is A Key Player

According to the IEA, energy use will continue to increase at an annual growth rate of about 4.5% from 2015 to 2030, approximately doubling over the next decade.

Turkey is a key player in O&G supplies movement from Russia, the Caspian region and the Middle East to Europe, the EIA recently said in its annual country analysis. The country has been a major transit point for seaborne-traded oil and is becoming more important for pipeline-traded oil and natural gas.

Currently, growing volumes of Caspian and Russian oil are being sent by tanker via the Turkish Straits to Western markets, while a terminal on the country’s Mediterranean coast of Ceyhan serves as an outlete for oil exports from the Kurdish region of northern Iraq (currently beset with conflict) and for both O&G exports from Azerbaijan.

As of the beginning of this year, the Oil & Gas Journal (OGJ) estimated Turkey’s proved oil reserves at 295 million barrels, located principally in the southeast region.

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In 1991, Turkey’s oil production peaked at 85,000 bbl/d, but it subsequently declined each year and reached its nadir in 2004 at 43,000 bbl/d. Although Turkey’s production of liquid fuels has slightly increased since 2004, it is far shy of what the country consumes annually.

In 2010 and 2011, Turkey’s economy was one of the fastest growing in the world at more than 8% annually. The country’s oil consumption grew with this economic expansion. However, while economic growth slowed in 2012 and Turkey’s economy grew at just over 2% from the previous year, total consumption of liquid fuels rose by 6% in 2012.

In 2013, Turkey’s economy grew by 4%, and total consumption of liquid fuels increased by another 6%. Turkey’s domestic production, however, shows no indications of any significant growth in the short-term future.

Some analysts speculate that offshore reserves may emerge as a future source of Turkey’s oil supply. A significant volume of reserves may be located under the Aegean Sea, although this has not been confirmed because of an ongoing territorial dispute with Greece. Additionally, the Black Sea may hold significant oil reserves. TPAO has increased its exploration activities in the Turkish region of the Black Sea, which could hold between 7 and 10 billion barrels of oil. The offshore region is being explored with TPAO, which has formed joint ventures with ExxonMobil and Brazil’s Petrobras. Turkey’s ministry of energy plans to commence commercial production in the Black Sea by 2016.

Last year, the country’s total liquid fuels consumption averaged 734,800 bbl/d. In excess of 90% of crude oil consumption and significant quantities of petroleum products came from imports.

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The IEA recently revealed that Turkey’s crude oil imports are expected to double over the next decade. In 2012, most of Turkey’s crude oil imports came from Iran, which supplied 35% of Turkey’s crude oil. Russia has fallen behind Middle East suppliers in terms of volume and is now the fourth-largest supplier of crude oil to Turkey. Russia was until recent years the largest source country of Turkey’s crude oil.

Natural Gas Overtakes Oil As Most Important Fuel Consumed

In terms of natural gas, Turkey’s natural gas reserves as of the beginning of 2014 stood at 241 Bcf, according to the OGJ. In 2012, the country produced 22 Bcf of natural gas, depending almost exclusively on imports to meet domestic demand. Turkey’s growth in energy demand has been among the most rapid in the world in 2010 and 2011, although decelerated economic growth in 2012 has dampened the natural gas consumption increase to some extent.

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In terms of the volume of fuel consumed in Turkey, natural gas has overtaken oil and continues to account for an increasing share of the energy mix in Turkey.

 

The original source for this post can be found here.

Here Are The World’s Five Most Important Oil Fields

1.  Ghawar (Saudi Arabia) The legendary Ghawar field has been churning out oil since the early 1950s, allowing Saudi Arabia to claim the mantle as the world’s largest oil producer and the only country with sufficient spare capacity to act as a swing producer. Holding an estimated 70 billion barrels of remaining reserves, Ghawar alone has more oil reserves than all but seven other countries, according to the Energy Information Administration. Some oil analysts believe that Ghawar passed its peak perhaps a decade ago, but Saudi Arabia’s infamous lack of transparency keeps everyone guessing. Nevertheless, it remains the world’s largest oil field, both in terms of reserves and production. It continues to produce 5 million barrels per day (bpd).

2.  Burgan (Kuwait) Just behind Ghawar is another massive oil field located in the Middle East. The Burgan field was originally discovered in 1938, but production didn’t begin until a decade later. The field holds an estimated 66 to 72 billion barrels of reserves, which accounts for more than half of Kuwait’s total, and it produces between 1.1 and 1.3 million bpd.

3.  Safaniya (Saudi Arabia) The Safaniya field is the world’s largest offshore oil field. Located in the Persian Gulf, the Safaniya field is thought to hold more than 50 billion barrels of oil. It is Saudi Arabia’s second largest producing field behind Ghawar, churning out 1.5 million bpd. Like Saudi Arabia’s other fields, Safaniya is very mature as it has been producing for nearly 60 years, but Saudi Aramco is working hard to extend its operating life.

4.  Rumaila (Iraq) Iraq’s largest oil field is the Rumaila, which holds an estimated 17.8 billion barrels of oil. Located in southern Iraq, Rumaila was highly sought after when the Iraqi government put blocks up for bid in 2009. BP and the China National Petroleum Corporation (CNPC) are working together to develop the giant field along with Iraq’s state-owned South Oil Company. The field now produces around 1.5 million bpd, but its operators have plans to boost that production to 2.85 million bpd over the next couple of years.

5.  West Qurna-2 (Iraq) Also located in southern Iraq, the West Qurna-2 field is Iraq’s second largest, holding nearly 13 billion barrels of oil reserves. The West Qurna field was divided in two and auctioned off to international oil companies. Russia’s Lukoil took control of West Qurna-2 and successfully began production earlier this year at an initial 120,000 bpd. Lukoil plans on lifting production to 1.2 million bpd by the end of 2017. The neighboring West Qurna-1 field – operated by a partnership of ExxonMobil, BP, Eni SpA, and PetroChina – holds 8.6 billion barrels of oil reserves. They hope to increase production from 300,000 bpd to more than 2.3 million bpd over the next half-decade.

It’s clear that the Middle East is still the center of the universe when it comes to oil. Despite their age, these supergiants remain the oil fields of tomorrow. And as the tight oil revolution in the U.S. plays out, these fields will remain, and the world will continue to depend heavily on the fortunes of a few countries in the Middle East.

The original source for this post can be found here.

New York City Street Lights to Get LED Overhaul

New York City might look a little different in the near future, thanks to a small, subtle update coming to its street lights.

The city’s current streetlight bulbs will soon be replaced with newer, energy-saving LED lights. New York Mayor Michael Bloomberg’s official website published a statement about the PlaNYC initiative, calling it a “comprehensive, long-term sustainability program” that “aims to reduce greenhouse gas emissions from City government operations 30% by 2017.”

The LED lights will save $14 million in taxpayer dollars, according to the release. About $6 million of that will be saved in energy costs and $8 million in maintenance costs.

LED lights can last roughly 20 years, a great lifespan in comparison to the high-pressure sodium lights currently installed, which need replacing around every six years.

The transition will take place in three phrases, with the first scheduled to be completed in 2015. If all goes according to plan, the LED lights (for 250,000 street lights) will be in place by 2017. Some energy-efficient pedestrian lights have already been installed in Central Park.

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