The secret to business is buy low and sell high. Canadian holding company MCW Energy Group hopes to do that by economically separating the petroleum from oil sands and then selling it at market rates of double to triple the processing costs.
The company uses a patented closed-loop technology that treats the sands with a solvent that helps remove the oil. The oil and solvent are separated, with the latter recycled for the next batch of production. According to CEO Gerald Bailey, the finished sand is 99.9 percent clean and can be put back on the ground.
The company currently has 1,000 acres in Vernal, Utah, about a 173-mile drive east of Salt Lake City. "Those sands run about 12 percent oil," said Bailey, who has a doctorate in chemical engineering. "It looks like black sand. You can pick it up and it's dry, but it's dirty with oil in it."
An $8 million plant using the process can produce 250 barrels of oil a day at a cost of between $30 and $35 a barrel. "Conventional oils typically will run up to $20 a barrel," he said. Although crude oil prices have plummeted from almost $100 a barrel to about $75 since September, that would still let MCW make a significant profit.
"There are hundreds of little oil companies that make a good living off of 250 barrels a day," Bailey said. But MCW sees its first plant as a proof of concept and is currently raising money to build a $70 million plant that could produce 5,000 barrels daily.
In 2006, MCW acquired a Southern California oil distribution business that dates back to the 1930s, which brought products from refineries to gas stations. The business grossed more than $400 million last year, according to Bailey.
"A couple of the founders also came across the technology for oil sands extraction out of some operations being done by the government in Russia," Bailey said. The Russians had developed a process to remove oil from sand as a way to remediate environmental problems like oil spills.
MCW realized that a variation on the technology could also produce oil from the sands. Because it uses a closed-loop system, it generates no by-products to cause environmental hazards, like the pools of waste water left in Western Canada after tar sands extraction.
At the heart of the process is an organic solvent called a surfactant. It reduces the surface tension between the oil and sand, much the way a dish detergent reduces the bond between a spot of grease and a plate. Heat exchangers warm the slurry (like using hot water when doing the dishes). The sand drops to the bottom, and the oil and solvent mixture are piped to a tank where they are separated.
The solvent is then used for the next batch of sand, while the oil is piped to a tanker and brought to a refinery. MCW returns the cleaned sand to the ground, although in theory it could be sold as an additional by-product.
Although oil sands are sometimes compared to Canadian tar sands, there are some significant differences. The oil sands are on the surface, rather than underground, so they don't require mining and injection of water to force the oil to the surface. Bailey also said production costs in Canada are between $55 and $60 per barrel, 70 percent higher than MCW's process.
The company plans on acquiring another 3,000 acres of land in Utah that has an estimated 80 million barrels of oil available. It's also in contact with a number of countries that have oil sands and are potentially interested in their own refineries.