Higher oil prices make southwest Missouri's heavy oil more attractive

Monday, January 14, 2008

DEERFIELD, Mo. -- People have known about Vernon County oil for years, but now that prices are hovering between $90 and $100 a barrel, the area's thick crude has become more attractive to companies looking to drill wells.

Doug Shupe, Vernon County recorder of deeds, said he wore out his photocopier checking records for those wanting to know who had oil and mineral rights in the area. Companies filed 96 oil and gas leases during the last year, he said.

Shupe, who has been the county recorder since 1991, said he hasn't seen anything similar since the 1980s.

"I used to be in the real estate auctioneer business and this happened in the late '60s and the '80s, but this is the first time in a long time," he said.

So far, MegaWest Energy Corp. in Canada is the only company drilling wells in Vernon County, but Shupe said at least two other companies -- Colt Energy in Iola, Kan., and Audubon Oil and Gas in Henderson, Ky. -- have filed oil and gas leases.

Jim Long, who owns some of the land where MegaWest is drilling, is overseeing the company's Missouri and Kansas operations.

Long said Vernon County oil is as thick as molasses, making it more difficult and more expensive to get it out of the ground. Steam is required to break up the so-called heavy oil.

Long said oil companies start to get interested in mining heavy oil areas when crude prices are above $35 a barrel. With prices now between $90 and $100 a barrel, companies are finally acting, he said.

Nick Powell, president of Colt Energy, said the company will drill 30 to 60 test holes on the more than 60,000 acres it leases. If the price of oil stays up, Powell said Colt Energy and other companies could be in Vernon County for as long as 20 years.

"There are differing reports as to how much oil is actually here, but it's somewhere between several hundred million barrels, up to a billion barrels," Powell said.

MegaWest expects to produce 100,000 barrels of oil over the next couple years, or 220 to 400 barrels of oil a day. MegaWest paid $800,000 and gave 4.75 million restricted common shares of the company to owners of the land or the mineral rights.

MegaWest also is drilling on 392 acres in Chetopa, Kan., a project that was started by Central Production Co. but that ran out of funds in 2004. The first load of oil from that site was shipped to the Coffeyville, Kan., refinery in June.

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