Petroteq prepares to launch Utah oil sands project
September 25, 2018
Petroteq Energy is talking up its new technology as it prepares to launch commercial operations in Utah’s oil sands, writes Anna Kachkova
What: Petroteq says its new technology can produce oil sands crude in an environmentally friendly manner. Why: The company claims its low-cost, solvent-based method of separating oil from rocks results in no pollution. What next: The project’s success could encourage other developers to target Utah’s oil sands.
Petroteq Energy has been making headlines over the past week with claims that it has developed a new technology that will allow it to tap Utah’s oil sands reserves in a more environmentally friendly manner than the processes used in Canada. If the company’s plans proceed as expected, it will be a major boost for Utah, which holds the largest oil sands reserves in the US but has not been able to exploit them to date.
Indeed, Canada’s recent experience with its oil sands did not bode well for Utah. A combination of low oil prices and mounting environmental concerns over the development of the resource led to a number of international majors exiting their Canadian oil sands operations last year. Even now, with higher oil prices, NewsBase Research (NBR) does not anticipate any major new Canadian oil sands projects going ahead in the near future, as their costs remain prohibitive. In the US, meanwhile, a flood of comparatively cheap oil production from shale formations has pushed more complex, costly or environmentally hazardous projects to the back burner.
Now, though, Canadian-based Petroteq is confident that it has found ways to overcome the various hurdles involved and is moving towards continuous operations at its project in Utah.
“We have a very disruptive technology,” Petroteq’s CEO, David Sealock, said in comments reported by the New York Times last week. “There was a treasure chest here that didn’t have a key, and this technology is the key.”
Cracking the code
Utah’s oil sands are estimated by the Utah Geological Survey to contain enough bitumen to produce 15 billion barrels of oil, or potentially more. They are located at shallower depths than Canadian deposits, and Petrotec’s operation is a small-scale one.
According to Sealock, the company’s process involves a cocktail of solvents that can separate oil from rocks at a low cost and with no water or air pollution. Petroteq mines and crushes the oil-saturated sands into small pieces, then moves them into a tank where they are mixed with solvents. The mix is then transferred to a second tank, where a centrifuge separates the oil from the sands. Clean sand is moved to a reclamation landfill, while the solvents are distilled out of the liquid and recycled.
The company claims that virtually no chemicals are left in the sand that is put back, and has noted that its operations have passed all regulatory procedures.
“What’s in Canada is an environmental nightmare,” Petroteq’s president and director, Jerry Bailey, told the New York Times. “With our operation, nothing goes in the air, nothing goes in the ground, and there is no water involved.”
Environmentalists remain sceptical, however, and it seems likely that the project will stir up opposition. For example, Utah Tar Sands Resistance has described the production of oil sands in the state as “a story of false claims and impossible promises”. The group specifically calls some of Petroteq’s claims into question on its website. Other environmental groups have also continued to question the project’s environmental credentials. A Center for Biological Diversity public land campaigner, Taylor McKinnon, warned last week that the group had its eye on Petroteq’s project, which suggests the scheme could become the target of protests.
But the company is pushing on undeterred, and if it is able to demonstrate the success of its processes, this may encourage other developers to move into the region.
Petroteq’s first pilot plant produced 250 bpd. When the newly expanded plant begins commercial operations – which the company is aiming to achieve by early September – its production will be 1,000 bpd. This output will be shipped by truck to nearby refineries in Salt Lake City for processing into diesel fuel. This circumvents another hurdle that Canadian oil sands producers have been grappling with – the fact that new pipeline projects out of the region are being delayed. In Utah, the small scale of Petroteq’s operation and the fact that it will serve the local market gives the company more transportation flexibility.
The company is aiming to ramp up production at its plant to 5,000 bpd in three years. Earlier this month, it said it had completed continuity testing at the new plant, which is located in Asphalt Ridge, and was in the process of making the final arrangements for continuous operations and marketing activities.
“While the pricing and structure of the sales production/marketing strategy are yet to be finalised, Petroteq management is confident that operational costs and related discounts will be much lower than the discount on Canada’s heavy crude, which reached a nearly five-year high last week,” Sealock said in a statement.
Petroteq says its breakeven price is US$32 per barrel, including all costs and taxes, making the project all the more economically attractive as WTI inches above US$70 per barrel.
However, all of Petroteq’s claims about its oil sands venture still need to be put to the test through the launch of commercial operations. If the technology and breakeven costs can be demonstrated, other producers could be encouraged to consider the possibility of tapping Utah’s oil sands. But with the project under close scrutiny by environmentalists, anything that goes wrong following the launch of commercial operations could come as a significant blow and make additional projects less likely.
The volume of output due to come from Asphalt Ridge may seem insignificant, especially compared with oil sands projects north of the border. If the project is successful, though, it will demonstrate the potential for technological advances that unlock new resources and methods of production.