Extracting the Earth's bounty

submitted photo Operations manager Paul Krawchuck, operates a valve during the, March 15, start up of Mega West Energy, an oil extraction company new to Vernon County. [Click to enlarge]

Could Nevada be destined to a redesign, including oil wells and corner stores that sell pump jacks? According to Paul Krawchuck, production engineer for Mega West Energy Corp., it is very possible.

On, March 15, Mega West, an oil recovery company based in Calgary, Canada, began its operation, attempting to pick up where many left off some 20 years ago.

Mega West uses a staff of engineers who specialize in the extraction of thick, difficult to manage crude oil -- the only kind of oil found in Vernon County.

Krawchuck explained that a major drop-off in oil prices in the 1980s drove many oil drillers away from this area. However, with barrels of black gold selling at $100 apiece, Mega West is attempting to bring the industry back to Vernon County.

"Initially, there's a lot of old drillers logs and whatnot in the area that we've taken a look at, and there's been some previous production from Carmel," said Krawchuck. "So, we knew the oil was producible -- it's just that when the price of oil dipped in the mid '80s everyone got out of town. It's a little bit too pricey to generate the steam at $30 an oil (barrel). I guess the resource at Vernon County has just been overlooked for the last 20 years or so. With the high price of oil right now, we thought we'd go in and take another crack at it.

"There's this thick, heavy oil -- it's thick, shallow oil in Vernon County -- it's actually too thick to just drill a hole and pump it out of the ground. So, were generating steam and injecting it into the formation and what it does is two things. First of all, it helps to pressurize the formation to help push the oil out; but also, the heat of the steam reduces the viscosity of the oil, so it kind of changes it from how you would see molasses flowing to how water would flow. What that does is help it to push its way over from the steam injection well to the production wells."

The removal of this oil is no small feat either. A 50 million BTU per hour steam injector (similar to a boiler) will pump steam through 13 pipelines thinning out the oil to 40 production wells. The steam generator alone will use approximately 1.5 million cubic feet of gas per day, once the company is at 100-percent operation.

These steam generators have a major benefit over boilers, according to Krawchuck.

"It's very common to use these steam generators in the oil patch because you can take sort of poorer quality water and run it through them as compared to a boiler. So, we don't need fresh drinking water to be able to generate our steam."

The operation in Vernon County began with drillers logs and then moved into test drilling operations, according to Krawchuck.

He said, "As far as putting this particular plant in place, we set off with our test hole drilling program and basically just started punching holes in the ground all over our leased ground. Once we found a spot that looked prospective that had a thick enough pay-zone to possibly warrant putting a plant in place, we did some step-out drilling from that. What we did is determine the extent of the pay on those particular leases to see if there are enough pays in the area to warrant putting a plant on it. What we're looking for is not just to produce 10 acres, but to produce 10 acres at a time for 20 years or so, from one of these plants."

Currently, Mega West has one operational plant in the Deerfield area, named the Marmaton River Project, and owns leases on approximately 8,300 acres of undeveloped oil and gas producing land. The initial site includes 10 acres with 13 steam-flood injectors.

When asked how low the prices would have to be in order for Mega West to close up shop in the area Krawchuck explained that the operation could withstand a fairly significant drop in market prices should one occur.

"I think we can still get by on $50 a barrel oil," he said, but continued, "I don't see that happening in the near future. There may be some short spikes downward to that price level, but long term I don't see us getting below the $80 or $90 a barrel range for the foreseeable future."

In fact, Mega West is expecting to hit a peak production rate of 500 barrels of oil a day. At 80 to 85 percent of West Texas Intermediate's compensation for crude oil, they stand to make in the neighborhood of $15.5 million a year at maximum performance, operating seven days a week while crude oil remains at $100 a barrel. At average production Mega West expects to turn out around 300 barrels of oil a day.

Mega West is not the only party reaping the benefits of this operation though, according to Krawchuck, the owners of the land on which the company is drilling not only receives a mineral leasing fee, but also an approximate 12.5 percent in royalties.

The second phase of production, which is expected to begin within the next two or three months, will come in the form of another set of wells supplementing the existing wells, located adjacent to them. This will only be the beginning, though, according to Krawchuck.

"In addition we will likely begin construction on our next plant within the next couple of months as well. All I can really tell you about that well is it will be within Vernon County, not probably within 10 miles of where we are right now," he said. "We want to be producing a few thousand barrels a day out of Vernon County. We have got a bunch of steam generators we're just waiting to find the right spots to build a plant around them."

With all the new construction and manufacturing Mega West says they expect to hire between five and six employees per plant in addition to the nine they have working at the newly built refinery and 20 plus area contractors used to construct it.

However, Krawchuck spoke even more highly of his hopes that Nevada will take a cue from this new product and begin looking into oil related businesses.

"I've been talking to some of the folks in Nevada, some different business owners," he said. "The bigger push that I would like to see is, a lot of the oil field equipment I'm currently buying out of Kansas right now, because they have a developed oil industry; but I would like to see Nevada more into the oil, becoming an oil servicing town not just for us but for everyone who is planning on starting up facilities out here. That could go from anything from manufacturing tanks to pump jacks to your general oil field supply stores. That's sort of the additional benefits I see to the community, the spin-off jobs that it could create."

Mega West is headquartered out of Calgary, Canada the "Houston of Canada" according to Mega West employees and its CEO is located in Houston. They have four major projects in the United States including sites in Missouri and Kansas, Montana, Texas and Kentucky. All of these plants operate similarly to the one in Deerfield and extract heavy, thick crude.

"In all of these areas we're more or less going after this unconventional oil which is not the sort of light sweet crude that you would have in most parts, but this heavy stuff that requires enhanced recovery to get out of the ground, said Krawchuck. "That is sort of where our technical team has its expertise. All of us have worked extensively on heavy oil projects, oil much heavier than Missouri oil in the Canadian oil sands, where at room temperature it's a solid.

Mega West has a Web site with specific information about the Marmaton River Project at www.megawestenergy.com.

They will also be holding an open house on, May 3, where tours of the facility and other information will be available to the public.