Canadian oil sands producer ready to begin digging pits in the US

The company’s pioneering process uses a citrus extract called d-Limonene as a solvent to separate bitumen from sand.

Canada’s U.S. Oil Sands (TSX-V:USO) is fine tuning details to open its mine in eastern Utah, one of the first commercial oil sands operations in the United States.

Beginning this fall, the company will start digging the first in a series of pits, each the size of a football stadium, about 265km (165 miles) from Salt Lake City.

Although the development is being touted as ‘the first oil sands mine in the US,’” truth is that another Canadian company, MCW Energy Group (CVE:MCW), already runs a processing plant in Asphalt Ridge in the Uinta Basin, one of Utah’s eight major oil sands deposits. The Toronto-based company is using an alternative technology to the one applied in Canada, as it doesn’t utilize water for extracting crude.

U.S. Oil Sands is also developing a new technology and has already invested nearly $100 million over a decade to get permits, buy equipment and develop an unconventional extracting method.

Regardless of its “green” approach, the company has been the target of protests, AP reports:

Demonstrators who have been camping out all summer near the site gathered outside the front gate on a recent day to show their opposition. Some wore chipmunk masks. Other banged drums. Some held signs with messages such as “Dirty Energy Kills.”

Opponents also worry the mine will attract more companies to the area, until now a common destination for hikers, campers and hunters.

U.S. Oil Sands claims says its approach eliminates need for tailings ponds, requires 50% less energy input than traditional oil sands projects, recycles 95% of the water used and has small above ground footprint.

The company’s pioneering process uses a citrus extract called d-Limonene as a solvent to separate bitumen from sand. d-Limonene oil from orange rind is used industrial cleansers.

The Utah mine is being built at roughly a third of the capital cost of larger oil sands mines in northern Alberta, where new capacity is added for about $100,000 per barrel.

Bad timing?

A new report released this week by TD Securities shows it is not the best time to venture in the oil business. According to the research, more than 75% of Canada’s daily output of 2.2 million barrels of crude from oil sands is being produced at a loss at current prices.

Every thermal oil sands player is bleeding cash on every barrel produced with U.S. crude around $41 and the Canadian heavy benchmark, Western Canada Select (WCS), around $24 a barrel, according to a report released by the bank on Wednesday.

That means only around 450,000 barrels per day of oil sands production is in the black, a bleak picture for the region, which holds the world’s third-largest oil reserves but is also saddled with high operating costs.

Utah may seem an unlikely choice for a Canadian company to have an oil sands mine. However, the state accounts for the lion’s share of U.S. oil sands deposits that the U.S. Geological Survey estimates hold 57 billion barrels of oil, only a fraction of which can ever be recovered.