Rising cost of crude oil opens door to new opportunity for local projects

Saturday, December 1, 2007

Vernon County, Mo. -- With approximately 60,000 acres of Vernon County leased for oil exploration Colt Energy is serious about extracting the heavy crude that permeates the area.

The current operations aren't the first for the Kansas based energy company -- back in the 1980s, they had a project at Stotesbury, but extracting the substance is expensive. Now that the cost of crude oil has risen dramatically, it's more cost-effective to try to bring it from the ground.

To extract the oil Colt plans on heating the area of the well by running horizontal lines made possible with new techniques in drilling. Vertical wells will be drilled into the area being heated and the oil will be pumped as regular oil would be.

"We'll use horizontal wells for the steam injection, and vertical for the oil producing wells," Bleakley said. "It costs about $35 a barrel to extract it that way but the high prices make it profitable to do it. As long as the oil price stays up it makes economic sense."

"We have an engineer that worked on the Jones/Blair project at Stotesbury in the mid-'80s," David Bleakley, Colt Energy, said. "It was going well until oil prices dropped precipitously and made it economically infeasible."

Bleakley said oil production had changed all over the globe.

"There's a wave of new technology in the oil business," Bleakley said. "People all over the world have been using new technology to get oil out of formerly unproductive areas."

The oil coming from Vernon County is very heavy and as a result doesn't bring the high price of the benchmark of the oil world, West Texas Intermediate.

"West Texas Intermediate runs at 40 gravity," Bleakley said. "It's the oil equivalent of Dr. Pepper or Coca-Cola. If you pour it out it spreads out quickly. As you go down the scale the oil gets thicker. Oil in Vernon County runs around 18 to 21 or 22 gravity. It's very close to molasses, maybe even molasses in cold weather. You can pour it and it will pile up almost like sand."

"Above 45 and lower than 40 they dock you," Bleakley said. "I don't have the exact price but if WTI is $95 it could be $70 for oil at 18 gravity. It varies with the market. If they are full up the price goes down."

Bleakley wasn't sure just how much oil his company might produce because the Missouri Department of Natural Resources wasn't sure itself.

"There's quite a lot of difference in estimates," Bleakley said. "With exploration we'll know more. We'll be drilling some core samples and we'll be able to tell more after that. The cores will help us delineate where the oil is and what quality. Some areas might respond well to steam flooding and some might not."

Bleakley said one important difference made Colt Energy stand out from competitors working the area -- the fact that they are a relatively local company.

"We've got a headquarters in Iola, Kan.," Bleakley said. "We're very involved in local issues. The two other companies that are working in the area are from Colorado and Canada. People can get ahold of us very easily. We encourage that. Check out who you are going to be dealing with."

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