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.

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.