1.5 Billion Barrel Oil Discovery in Israel?
August 19, 2010 by admin
News reports out Israel of a 1.5 billion barrel oil discovery lit up websites and news postings yesterday. Israeli oil exploration company Givot Olam announced to the Tel Aviv Stock Exchange (TASE) on Tuesday that, “Production test drilling at Givot Olam’s Meged 5 site near Rosh Ha’ayin indicated it holds 1.525 billion barrels’ worth of oil.” And boy did it start a stir!
Givot Olam stock shot up 69% at one point, before finally settling out at a 19.7% gain … meanwhile trading was suspended and the Israel Securities Authority demanded clarifications of the report from Givot Olam – who didn’t have anything to add. They said a full report would be available in September.
According to Israeli newspaper Haaretz, “This is not the first time Givot has issued partial and less than definitive information.” If you visit the Givot Olam website (http://www.givot.co.il/english/index.php) today you’ll read about the 2 billion barrels they “discovered” (but never produced) in 2004. The truth behind this week’s “discovery” is that their tests don’t show how much oil they can produce or how much the discovery may be worth financially. What they do know is that even if there is 1.5 billion barrels down there, only a small percentage of it is recoverable; estimates range from 10% to 25%.
Givot Olam has been pumping oil mixed with gas and water from the Meged 5 test well for about a week and a half, averaging about 380 barrels per day. Israel consumes 235,000 barrels of oil per day. At the rate the Meged 5 is pumping now the well would supply less than two tenths of one percent of Israel’s daily consumption. If just 10% of Givot Olam’s “discovery” was recoverable (150 million barrels), the Meged 5 would have to maintain its current pace for over a thousand years to harvest the field. Israel burns through 150 million barrels in less than two years.
Haaretz reports: A geophysicist in the field, however, called the most recent announcement “speculative” and said the 1.525 billion figure appeared “exaggerated.”
“The bottom line is that I want to see the well’s capacity of barrels per day over time,” he said. “How much the drilling site can produce – that’s what will answer questions regarding its economic viability. Regarding the reserves, I don’t think they can be assessed at the moment. It’s a very rough estimate and everything gets into the range of probabilities.”
That’s what the geophysicists in Israel (the guys who know) are saying. It’s the same thing they told me after Givot Olam announced its 2 billion barrel “discovery” in 2004.
Bottom Line: Givot Olam’s announcement of a 1.5 billion barrel discovery is highly speculative and most likely exaggerated. A “discovery” doesn’t mean how many barrels a company can actually commercially produce (2004′s 2 billion barrel “discovery” commercially produced exactly zilch). We’ll need to wait until Givot Olam submits their definitive report in September and watch production on the Meged 5. Yesterday’s announcement created a lot of hoopla, but nobody, including Givot Olam, knows the substantive reality of the “discovery” at this point.
But that didn’t stop some Israeli news agencies and Christian websites (Joel Rosenberg’s included) from running the headline “1.5 BILLION BARRELS OF OIL DISCOVERED IN ISRAEL” with few, if any, facts to back up the headline.
So why am I raining on everyone’s parade? Here’s why: the truth. There’s nobody that believes Israel will discover oil in a big way more than I do (except maybe John Brown of Zion Oil and Tovia Luskin of Givot Olam). And I believe the Bible (Torah) points to that discovery (so do John Brown and Tovia Luskin). But sensational headlines taken from unsubstantiated announcements don’t forward the search. When sensational headlines (like the 2 billion barrel “discovery” in 2004) don’ t pass the test of reality, they only disappoint the folks who believed them in the first place and hurt the credibility of those who ran the headline. That said, here are the facts:
■The Bible (Torah) states that Jacob (Israel) would “suck honey out of the rock, and oil out of the flinty rock.” (Deut 32:13) Of Joseph (Ephraim and Manasseh) it states: “Blessed of the LORD be his land, for the precious things of heaven, for the dew, and for the deep that coucheth beneath, And for the precious fruits brought forth by the sun, and for the precious things put forth by the moon, And for the chief things of the ancient mountains, and for the precious things of the lasting hills, And for the precious things of the earth and fulness thereof …. (Deut. 33:13-16). That Zebulun and Issachar “shall suck of the abundance of the seas, and of treasures hid in the sand.” (Deut 33:19) And that Asher would “dip his foot in oil.” (Duet 33:24)
■Tovia Luskin and John Brown founded their oil exploration companies based on their belief that scripture points to a major oil discovery in Israel.
■Zion Oil & Gas and Givot Olam have proven that oil exists deep below the territories the Bible (Torah) said it would be found. Givot Olam has pumped more than 3,000 barrels of it in the last week and a half.
■Serious geological studies by the Geophysical Institute in Israel and the US Geological Survey have backed up Luskin’s and Brown’s belief by stating that they estimate a mean of 1.7 billion barrels of oil and 122 trillion cubic feet of natural gas are recoverable in the Levant Basin, which includes onshore and offshore Israel.
■Enough natural gas to supply all of Israel’s needs into the foreseeable future has already been discovered off the coast of Northern Israel.
The facts are enough. Israel has discovered huge quantities of natural gas, they’ve discovered oil right where the Bible said it would be, and I believe Israel is on the cusp of discovering major quantities of producible oil, both onshore and offshore – enough to supply them into the foreseeable future. It’s happening now, but it hasn’t happened yet. The prophecy of Israel’s oil, I believe, is being fulfilled before our eyes, but it hasn’t been fulfilled yet. Misleading headlines aside, Givot Olam’s discovery is a part of that fulfillment. I’ll report the facts to you as we see them unfold. In the meantime here’s a more balanced article on the subject from the Israeli newspaper Haaretz: http://www.haaretz.com/print-edition/business/givot-olam-meged-has-1-5b-barrels-of-oil-1.308683
Wednesday, October 19, 2011
Sunday, August 7, 2011
The development of a profitable oil shale industry offers large economic benefits
The development of a profitable oil shale industry offers large economic benefits
Summary
The development of a profitable oil shale industry offers large economic benefits to investors and workers in firms associated with oil shale development, production, (The Strategic Significance of Oil Shale 33) and supporting industries. In addition, oil consumers in the United States, as well as abroad, will likely experience lower oil prices.
Developing a quantitative estimate of these benefits is difficult, requiring
assumptions far into the future regarding OPEC production and pricing behavior,
the demand and price for crude oil, the costs of producing shale oil, and the nature of investments that would be taken in the absence of a domestic oil shale option. If low-cost shale oil production methods can be realized, direct economic profits in the $20 billion per year range are possible for an oil shale industry producing 3 million barrels per day. Conservative assumptions regarding supply and demand elasticities yield an additional annual benefit to American consumers of between $15 billion and $45 billion per year because of reductions in the world oil price.
A manifestation of the economic benefits of shale oil production is an increase
in employment in regions where shale oil production occurs or in regions that contain industries that provide inputs to the production process. While it is difficult to predict the employment gain, it is possible to estimate that a few hundred thousand jobs will be associated, directly and indirectly, with a 3 million barrel per day industry.
The net effect on nationwide employment is uncertain, however, because
increases in employment caused by shale oil production could be partially offset by reductions in employment in other parts of the country.
OPEC production or lower world oil prices should also result in limited national security benefits. In this case, the principal value of oil shale production would be as a contribution to a portfolio of measures intended to decrease to reduce
revenues of oil producing nations.
In deciding to provide access to federally owned lands bearing oil shale, these
are the benefits that will eventually accrue from full-scale development and which
offset costs associated with land use and adverse environmental impacts that cannot be mitigated.
It is relevant to note that a portion of the benefits—namely, those economic
and national security benefits associated with lower oil prices—would occur whether the additional production occurs within the United States or in some other country that is not a member of or colluding with OPEC.
Summary
The development of a profitable oil shale industry offers large economic benefits to investors and workers in firms associated with oil shale development, production, (The Strategic Significance of Oil Shale 33) and supporting industries. In addition, oil consumers in the United States, as well as abroad, will likely experience lower oil prices.
Developing a quantitative estimate of these benefits is difficult, requiring
assumptions far into the future regarding OPEC production and pricing behavior,
the demand and price for crude oil, the costs of producing shale oil, and the nature of investments that would be taken in the absence of a domestic oil shale option. If low-cost shale oil production methods can be realized, direct economic profits in the $20 billion per year range are possible for an oil shale industry producing 3 million barrels per day. Conservative assumptions regarding supply and demand elasticities yield an additional annual benefit to American consumers of between $15 billion and $45 billion per year because of reductions in the world oil price.
A manifestation of the economic benefits of shale oil production is an increase
in employment in regions where shale oil production occurs or in regions that contain industries that provide inputs to the production process. While it is difficult to predict the employment gain, it is possible to estimate that a few hundred thousand jobs will be associated, directly and indirectly, with a 3 million barrel per day industry.
The net effect on nationwide employment is uncertain, however, because
increases in employment caused by shale oil production could be partially offset by reductions in employment in other parts of the country.
OPEC production or lower world oil prices should also result in limited national security benefits. In this case, the principal value of oil shale production would be as a contribution to a portfolio of measures intended to decrease to reduce
revenues of oil producing nations.
In deciding to provide access to federally owned lands bearing oil shale, these
are the benefits that will eventually accrue from full-scale development and which
offset costs associated with land use and adverse environmental impacts that cannot be mitigated.
It is relevant to note that a portion of the benefits—namely, those economic
and national security benefits associated with lower oil prices—would occur whether the additional production occurs within the United States or in some other country that is not a member of or colluding with OPEC.
U.S. HAS MASSIVE OIL RESERVES
U.S. HAS MASSIVE OIL RESERVES
SHALE REMAINS UNTAPPED AFTER DECADES OF FAILURE
There is an estimated 2 trillion barrels of oil buried beneath parts of Colorado, Utah and Wyoming. Geologists, petroleum companies and the federal government have known about these massive deposits for nearly a century. The trouble has always been: how do you get at it?
It is believed that the shale deposits in the Green River region of Colorado, Utah and Wyoming are holding the equivalent of approximately 1.5 trillion to 1.8 trillion barrels of oil. Called “oil shale” or “shale oil,” according to scientists and petroleum companies, much of it cannot be recovered with current technology due to the costly processing involved and the depth of the deposits buried beneath the Rocky Mountains.
Still, if only half can be extracted, scientists believe the amount is nearly triple the oil reserves of Saudi Arabia.
There has been quite a bit of hype surrounding the shale oil deposits of late. The problem with this, however, is that the type of oil in the western United States is contained in fine-grained sedimentary rocks—hence the name “shale oil.”
NOT REALLY OIL
Technically, it is not really oil at this stage, say geologists. It’s kerogen—sort of an oil-like substance that, when heated in an expensive, laborious process, can be turned into a lower-grade oil, which can then be used in cars.
Walter Youngquist, a geologist from Eugene, Ore., published an article on the web site of the World Energy Council which delves into this subject. Youngquist put it this way:
The term “oil shale” is a misnomer. It does not contain oil nor is it commonly shale. The organic material is chiefly kerogen, and the “shale” is usually a relatively hard rock, called marl. Properly processed, kerogen can be converted into a substance somewhat similar to petroleum. However, it has not gone through the “oil window” of heat (nature’s way of producing oil) and therefore, to be changed into an oil-like substance, it must be heated to a high temperature. By this process the organic material is converted into a liquid, which must be further processed to produce an oil which is said to be better than the lowest grade of oil produced from conventional oil deposits, but of lower quality than the upper grades of conventional oil.
There are currently two main processes for refining shale oil, both of which are capital and labor intensive. In one method, the shale is broken down on-site and heated. The gases and liquids can then be extracted. In the second, the shale oil is removed and transported to facilities where it is then heated and refined.
NO SECRET
It is no secret that there is a potential oil bonanza in Colorado, Utah and Wyoming. The Association of Petroleum Geologists (APG) reports that in the 1900s, oil companies began looking into the deposits in this part of the United States.
In fact, in the 1920s, thousands of so-called “oil placer claims” were filed on public lands following a rules change by the federal government that allowed private companies to lease government-managed land and extract the natural resources there.
Large deposits of shale oil are also not unique to the United States. In fact, there are huge reserves of the substance all around the world, from China to Australia to Scotland to South Africa. But, once again, the problem rests with the expense of getting to it and processing it. In the mid-to-late 19th century, France and Scotland extracted large deposits and processed it for their own purposes.
For the most part, the shale oil deposits in the United States were ignored in the United States up until the oil crisis of the late 1970s forced petroleum companies to begin thinking about alternative sources of oil. However, since then, the price of gas has been rock bottom so oil companies—motivated by huge profits and not the need to ensure that the United States is energy self-sufficient—have been avoiding spending the money to research new techniques for refining shale oil.
Today, as oil prices creep up again, petroleum companies are again looking at shale oil despite its high price tag, evidenced by the fact that the Bureau of Land Management (BLM) has requests from multinational oil conglomerates to extract shale oil in the Green River region.
But even with modern technology, the difficulties associated with extracting and processing shale oil have forced even some of the largest oil companies to drop out of the game.
An April 11 article in Colorado’s daily newspaper, The Rocky Mountain News, noted that the BLM began accepting proposals by companies to develop the shale oil in the Western part of the United States in the summer of 2005.
But BLM officials, citing various reasons, have already rejected bids put forth by 14 out of 18 companies, including an offer by Exxon Mobil.
The BLM said it dumped Exxon Mobil because it did not appear to be dedicating enough resources to shale oil research. But Exxon is reportedly notorious in that part of the country. According to The Rocky Mountain News, many Coloradans still remember “Black Sunday,” or May 2, 1982, when Exxon execs announced the closure of a shale oil processing facility that had been running for decades in western Colorado. The closure put 2,200 people out of work in that part of the state, resulting in a rash of bankruptcies and foreclosures, which hurt the locals for many years after.
Shell has reportedly been studying ways to extract oil shale on land in Colorado since the 1990s. The company said it hopes to have a full-blown operation by 2010.
Two others reportedly still in the running include Chevron and the Texas-based EGL Resources. Industry experts are optimistic that, with help from the government, new techniques can be developed to economically extract oil from the shale deposits and process it with relative ease.
SHALE REMAINS UNTAPPED AFTER DECADES OF FAILURE
There is an estimated 2 trillion barrels of oil buried beneath parts of Colorado, Utah and Wyoming. Geologists, petroleum companies and the federal government have known about these massive deposits for nearly a century. The trouble has always been: how do you get at it?
It is believed that the shale deposits in the Green River region of Colorado, Utah and Wyoming are holding the equivalent of approximately 1.5 trillion to 1.8 trillion barrels of oil. Called “oil shale” or “shale oil,” according to scientists and petroleum companies, much of it cannot be recovered with current technology due to the costly processing involved and the depth of the deposits buried beneath the Rocky Mountains.
Still, if only half can be extracted, scientists believe the amount is nearly triple the oil reserves of Saudi Arabia.
There has been quite a bit of hype surrounding the shale oil deposits of late. The problem with this, however, is that the type of oil in the western United States is contained in fine-grained sedimentary rocks—hence the name “shale oil.”
NOT REALLY OIL
Technically, it is not really oil at this stage, say geologists. It’s kerogen—sort of an oil-like substance that, when heated in an expensive, laborious process, can be turned into a lower-grade oil, which can then be used in cars.
Walter Youngquist, a geologist from Eugene, Ore., published an article on the web site of the World Energy Council which delves into this subject. Youngquist put it this way:
The term “oil shale” is a misnomer. It does not contain oil nor is it commonly shale. The organic material is chiefly kerogen, and the “shale” is usually a relatively hard rock, called marl. Properly processed, kerogen can be converted into a substance somewhat similar to petroleum. However, it has not gone through the “oil window” of heat (nature’s way of producing oil) and therefore, to be changed into an oil-like substance, it must be heated to a high temperature. By this process the organic material is converted into a liquid, which must be further processed to produce an oil which is said to be better than the lowest grade of oil produced from conventional oil deposits, but of lower quality than the upper grades of conventional oil.
There are currently two main processes for refining shale oil, both of which are capital and labor intensive. In one method, the shale is broken down on-site and heated. The gases and liquids can then be extracted. In the second, the shale oil is removed and transported to facilities where it is then heated and refined.
NO SECRET
It is no secret that there is a potential oil bonanza in Colorado, Utah and Wyoming. The Association of Petroleum Geologists (APG) reports that in the 1900s, oil companies began looking into the deposits in this part of the United States.
In fact, in the 1920s, thousands of so-called “oil placer claims” were filed on public lands following a rules change by the federal government that allowed private companies to lease government-managed land and extract the natural resources there.
Large deposits of shale oil are also not unique to the United States. In fact, there are huge reserves of the substance all around the world, from China to Australia to Scotland to South Africa. But, once again, the problem rests with the expense of getting to it and processing it. In the mid-to-late 19th century, France and Scotland extracted large deposits and processed it for their own purposes.
For the most part, the shale oil deposits in the United States were ignored in the United States up until the oil crisis of the late 1970s forced petroleum companies to begin thinking about alternative sources of oil. However, since then, the price of gas has been rock bottom so oil companies—motivated by huge profits and not the need to ensure that the United States is energy self-sufficient—have been avoiding spending the money to research new techniques for refining shale oil.
Today, as oil prices creep up again, petroleum companies are again looking at shale oil despite its high price tag, evidenced by the fact that the Bureau of Land Management (BLM) has requests from multinational oil conglomerates to extract shale oil in the Green River region.
But even with modern technology, the difficulties associated with extracting and processing shale oil have forced even some of the largest oil companies to drop out of the game.
An April 11 article in Colorado’s daily newspaper, The Rocky Mountain News, noted that the BLM began accepting proposals by companies to develop the shale oil in the Western part of the United States in the summer of 2005.
But BLM officials, citing various reasons, have already rejected bids put forth by 14 out of 18 companies, including an offer by Exxon Mobil.
The BLM said it dumped Exxon Mobil because it did not appear to be dedicating enough resources to shale oil research. But Exxon is reportedly notorious in that part of the country. According to The Rocky Mountain News, many Coloradans still remember “Black Sunday,” or May 2, 1982, when Exxon execs announced the closure of a shale oil processing facility that had been running for decades in western Colorado. The closure put 2,200 people out of work in that part of the state, resulting in a rash of bankruptcies and foreclosures, which hurt the locals for many years after.
Shell has reportedly been studying ways to extract oil shale on land in Colorado since the 1990s. The company said it hopes to have a full-blown operation by 2010.
Two others reportedly still in the running include Chevron and the Texas-based EGL Resources. Industry experts are optimistic that, with help from the government, new techniques can be developed to economically extract oil from the shale deposits and process it with relative ease.
About Oil Shale
About Oil Shale
Basic information on oil shale, oil shale resources, and recovery of oil from oil shale.
What Is Oil Shale?
Oil shale
The term oil shale generally refers to any sedimentary rock that contains solid bituminous materials (called kerogen) that are released as petroleum-like liquids when the rock is heated in the chemical process of pyrolysis. Oil shale was formed millions of years ago by deposition of silt and organic debris on lake beds and sea bottoms. Over long periods of time, heat and pressure transformed the materials into oil shale in a process similar to the process that forms oil; however, the heat and pressure were not as great. Oil shale generally contains enough oil that it will burn without any additional processing, and it is known as "the rock that burns".
Oil shale can be mined and processed to generate oil similar to oil pumped from conventional oil wells; however, extracting oil from oil shale is more complex than conventional oil recovery and currently is more expensive. The oil substances in oil shale are solid and cannot be pumped directly out of the ground. The oil shale must first be mined and then heated to a high temperature (a process called retorting); the resultant liquid must then be separated and collected. An alternative but currently experimental process referred to as in situ retorting involves heating the oil shale while it is still underground, and then pumping the resulting liquid to the surface.
See the Photos page for additional photos of oil shale.
Oil Shale Resources
Location of the Green River Formation Oil Shale and Its Main Basins
While oil shale is found in many places worldwide, by far the largest deposits in the world are found in the United States in the Green River Formation, which covers portions of Colorado, Utah, and Wyoming. Estimates of the oil resource in place within the Green River Formation range from 1.2 to 1.8 trillion barrels. Not all resources in place are recoverable; however, even a moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation is three times greater than the proven oil reserves of Saudi Arabia. Present U.S. demand for petroleum products is about 20 million barrels per day. If oil shale could be used to meet a quarter of that demand, the estimated 800 billion barrels of recoverable oil from the Green River Formation would last for more than 400 years1.
More than 70% of the total oil shale acreage in the Green River Formation, including the richest and thickest oil shale deposits, is under federally owned and managed lands. Thus, the federal government directly controls access to the most commercially attractive portions of the oil shale resource base.
See the Maps page for additional maps of oil shale resources in the Green River Formation.
The Oil Shale Industry
While oil shale has been used as fuel and as a source of oil in small quantities for many years, few countries currently produce oil from oil shale on a significant commercial level. Many countries do not have significant oil shale resources, but in those countries that do have significant oil shale resources, the oil shale industry has not developed because historically, the cost of oil derived from oil shale has been significantly higher than conventional pumped oil. The lack of commercial viability of oil shale-derived oil has in turn inhibited the development of better technologies that might reduce its cost.
Relatively high prices for conventional oil in the 1970s and 1980s stimulated interest and some development of better oil shale technology, but oil prices eventually fell, and major research and development activities largely ceased. More recently, prices for crude oil have again risen to levels that may make oil shale-based oil production commercially viable, and both governments and industry are interested in pursuing the development of oil shale as an alternative to conventional oil.
Oil Shale Mining and Processing
Oil shale can be mined using one of two methods: underground mining using the room-and-pillar method or surface mining. After mining, the oil shale is transported to a facility for retorting, a heating process that separates the oil fractions of oil shale from the mineral fraction.. The vessel in which retorting takes place is known as a retort. After retorting, the oil must be upgraded by further processing before it can be sent to a refinery, and the spent shale must be disposed of. Spent shale may be disposed of in surface impoundments, or as fill in graded areas; it may also be dispoed of in previously mined areas. Eventually, the mined land is reclaimed. Both mining and processing of oil shale involve a variety of environmental impacts, such as global warming and greenhouse gas emissions, disturbance of mined land, disposal of spent shale, use of water resources, and impacts on air and water quality. The development of a commercial oil shale industry in the United States would also have significant social and economic impacts on local communities. Other impediments to development of the oil shale industry in the United States include the relatively high cost of producing oil from oil shale (currently greater than $60 per barrel), and the lack of regulations to lease oil shale.
Surface Retorting
While current technologies are adequate for oil shale mining, the technology for surface retorting has not been successfully applied at a commercially viable level in the United States, although technical viability has been demonstrated. Further development and testing of surface retorting technology is needed before the method is likely to succeed on a commercial scale.
Stuart Oil Shale Facility, Queensland, Australia
Surface Retort
See the Photos page for additional photos of oil shale processing facilities.
In Situ Retorting
Shell Oil is currently developing an in situ conversion process (ICP). The process involves heating underground oil shale, using electric heaters placed in deep vertical holes drilled through a section of oil shale. The volume of oil shale is heated over a period of two to three years, until it reaches 650–700 °F, at which point oil is released from the shale. The released product is gathered in collection wells positioned within the heated zone.
Shell's current plan involves use of ground-freezing technology to establish an underground barrier called a "freeze wall" around the perimeter of the extraction zone. The freeze wall is created by pumping refrigerated fluid through a series of wells drilled around the extraction zone. The freeze wall prevents groundwater from entering the extraction zone, and keeps hydrocarbons and other products generated by the in-situ retorting from leaving the project perimeter.
Shell's process is currently unproven at a commercial scale, but is regarded by the U.S. Department of Energy as a very promising technology. Confirmation of the technical feasibility of the concept, however, hinges on the resolution of two major technical issues: controlling groundwater during production and preventing subsurface environmental problems, including groundwater impacts.1
Both mining and processing of oil shale involve a variety of environmental impacts, such as global warming and greenhouse gas emissions, disturbance of mined land; impacts on wildlife and air and water quality. The development of a commercial oil shale industry in the U.S. would also have significant social and economic impacts on local communities. Of special concern in the relatively arid western United States is the large amount of water required for oil shale processing; currently, oil shale extraction and processing require several barrels of water for each barrel of oil produced, though some of the water can be recycled.
1 RAND Corporation Oil Shale Development in the United States Prospects and Policy Issues. J. T. Bartis, T. LaTourrette, L. Dixon, D.J. Peterson, and G. Cecchine, MG-414-NETL, 2005.
For More Information
Additional information on oil shale is available through the Web. Visit the Links page to access sites with more information.
Basic information on oil shale, oil shale resources, and recovery of oil from oil shale.
What Is Oil Shale?
Oil shale
The term oil shale generally refers to any sedimentary rock that contains solid bituminous materials (called kerogen) that are released as petroleum-like liquids when the rock is heated in the chemical process of pyrolysis. Oil shale was formed millions of years ago by deposition of silt and organic debris on lake beds and sea bottoms. Over long periods of time, heat and pressure transformed the materials into oil shale in a process similar to the process that forms oil; however, the heat and pressure were not as great. Oil shale generally contains enough oil that it will burn without any additional processing, and it is known as "the rock that burns".
Oil shale can be mined and processed to generate oil similar to oil pumped from conventional oil wells; however, extracting oil from oil shale is more complex than conventional oil recovery and currently is more expensive. The oil substances in oil shale are solid and cannot be pumped directly out of the ground. The oil shale must first be mined and then heated to a high temperature (a process called retorting); the resultant liquid must then be separated and collected. An alternative but currently experimental process referred to as in situ retorting involves heating the oil shale while it is still underground, and then pumping the resulting liquid to the surface.
See the Photos page for additional photos of oil shale.
Oil Shale Resources
Location of the Green River Formation Oil Shale and Its Main Basins
While oil shale is found in many places worldwide, by far the largest deposits in the world are found in the United States in the Green River Formation, which covers portions of Colorado, Utah, and Wyoming. Estimates of the oil resource in place within the Green River Formation range from 1.2 to 1.8 trillion barrels. Not all resources in place are recoverable; however, even a moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation is three times greater than the proven oil reserves of Saudi Arabia. Present U.S. demand for petroleum products is about 20 million barrels per day. If oil shale could be used to meet a quarter of that demand, the estimated 800 billion barrels of recoverable oil from the Green River Formation would last for more than 400 years1.
More than 70% of the total oil shale acreage in the Green River Formation, including the richest and thickest oil shale deposits, is under federally owned and managed lands. Thus, the federal government directly controls access to the most commercially attractive portions of the oil shale resource base.
See the Maps page for additional maps of oil shale resources in the Green River Formation.
The Oil Shale Industry
While oil shale has been used as fuel and as a source of oil in small quantities for many years, few countries currently produce oil from oil shale on a significant commercial level. Many countries do not have significant oil shale resources, but in those countries that do have significant oil shale resources, the oil shale industry has not developed because historically, the cost of oil derived from oil shale has been significantly higher than conventional pumped oil. The lack of commercial viability of oil shale-derived oil has in turn inhibited the development of better technologies that might reduce its cost.
Relatively high prices for conventional oil in the 1970s and 1980s stimulated interest and some development of better oil shale technology, but oil prices eventually fell, and major research and development activities largely ceased. More recently, prices for crude oil have again risen to levels that may make oil shale-based oil production commercially viable, and both governments and industry are interested in pursuing the development of oil shale as an alternative to conventional oil.
Oil Shale Mining and Processing
Oil shale can be mined using one of two methods: underground mining using the room-and-pillar method or surface mining. After mining, the oil shale is transported to a facility for retorting, a heating process that separates the oil fractions of oil shale from the mineral fraction.. The vessel in which retorting takes place is known as a retort. After retorting, the oil must be upgraded by further processing before it can be sent to a refinery, and the spent shale must be disposed of. Spent shale may be disposed of in surface impoundments, or as fill in graded areas; it may also be dispoed of in previously mined areas. Eventually, the mined land is reclaimed. Both mining and processing of oil shale involve a variety of environmental impacts, such as global warming and greenhouse gas emissions, disturbance of mined land, disposal of spent shale, use of water resources, and impacts on air and water quality. The development of a commercial oil shale industry in the United States would also have significant social and economic impacts on local communities. Other impediments to development of the oil shale industry in the United States include the relatively high cost of producing oil from oil shale (currently greater than $60 per barrel), and the lack of regulations to lease oil shale.
Surface Retorting
While current technologies are adequate for oil shale mining, the technology for surface retorting has not been successfully applied at a commercially viable level in the United States, although technical viability has been demonstrated. Further development and testing of surface retorting technology is needed before the method is likely to succeed on a commercial scale.
Stuart Oil Shale Facility, Queensland, Australia
Surface Retort
See the Photos page for additional photos of oil shale processing facilities.
In Situ Retorting
Shell Oil is currently developing an in situ conversion process (ICP). The process involves heating underground oil shale, using electric heaters placed in deep vertical holes drilled through a section of oil shale. The volume of oil shale is heated over a period of two to three years, until it reaches 650–700 °F, at which point oil is released from the shale. The released product is gathered in collection wells positioned within the heated zone.
Shell's current plan involves use of ground-freezing technology to establish an underground barrier called a "freeze wall" around the perimeter of the extraction zone. The freeze wall is created by pumping refrigerated fluid through a series of wells drilled around the extraction zone. The freeze wall prevents groundwater from entering the extraction zone, and keeps hydrocarbons and other products generated by the in-situ retorting from leaving the project perimeter.
Shell's process is currently unproven at a commercial scale, but is regarded by the U.S. Department of Energy as a very promising technology. Confirmation of the technical feasibility of the concept, however, hinges on the resolution of two major technical issues: controlling groundwater during production and preventing subsurface environmental problems, including groundwater impacts.1
Both mining and processing of oil shale involve a variety of environmental impacts, such as global warming and greenhouse gas emissions, disturbance of mined land; impacts on wildlife and air and water quality. The development of a commercial oil shale industry in the U.S. would also have significant social and economic impacts on local communities. Of special concern in the relatively arid western United States is the large amount of water required for oil shale processing; currently, oil shale extraction and processing require several barrels of water for each barrel of oil produced, though some of the water can be recycled.
1 RAND Corporation Oil Shale Development in the United States Prospects and Policy Issues. J. T. Bartis, T. LaTourrette, L. Dixon, D.J. Peterson, and G. Cecchine, MG-414-NETL, 2005.
For More Information
Additional information on oil shale is available through the Web. Visit the Links page to access sites with more information.
A Closer Look at Israeli Oil Shale Technology
A Closer Look at Israeli Oil Shale Technology
As promised, here is a primer on the oil shale technology that might help Israel become energy independent.
The technology was invented by the serendipitously named Dr. Harold Vinegar during his 32-year tenure at Royal Dutch Shell. Shell is exploring the use of the technology in Jordan, where there are also major oil shale deposits, but opted against exploration in Israel. Vinegar retired from Shell as Chief Scientist and made aliyah to Israel, where he began teaching petroleum science at Ben Gurion University. He then joined Israel Energy Initiatives (IEI), where he is now Chief Scientist. (I am meeting Dr. Vinegar soon and will give you a more detailed and personal account of this history.)
Before we get to the technology, a quick word on oil shale.
There are two general categories of oil: conventional and unconventional. Conventional oil is called crude, the stream of free-flowing hydrocarbons that are drawn out of the ground by the nodding, mantis-like pumps with which you’re familiar. Unconventional oil is oil produced from less easily tapped sources and by methods other than by traditional wells.
One unconventional oil source is extra-heavy crude, which flows about as easily as cold blackstrap molasses and will sink if you pour some into a glass of water. Tar sands, or bituminous sands, contain a particularly viscous variety of heavy crude. Getting it out is labor-intensive, to say the least, and the proportion of usable fuel to be generated from a barrel of tar sands is relatively low. Still, as oil prices rise, tar sand oil production becomes more commercially viable.
Another unconventional source is oil shale, which does not, in fact, contain oil. Oil shale is sedimentary rock containing kerogen, which is premature oil. The rock is the product of organic debris that has been cooking below the surface of the earth for millions of years. When the kerogen in the rock is heated, its long chains of carbons begin to break into smaller and smaller pieces. Eventually, oil — among other products — is released.
The oil derived from the shale through IEI’s process is a light synthetic condensate that is easier to refine than conventional crude. The challenge is on the upstream end — getting it out of the rock.
Until very recently, there were two ways of doing this. One is to mine the rock, bring it to the surface, crush it, and heat it in a furnace called a retort. The other — still in the piloting stage of development — is to heat the rock while it is underground to expel the oil and gas from the kerogen, and then pump the products to the surface (in situ retorting). IEI’s method is a variant of the latter technique.
Surface retorting requires copious amounts of water to clean shale waste, cool the retorts, and refine the shale oil. In situ retorting does not require such large quantities of water because no shale waste is generated, no retorts need to be cooled, and the hydrogen needed to refine the oil is generated during the process itself. There is still a water cost, however, when subsurface waters are diverted from their normal flow. And both methods, up to this point, have been more expensive to implement than conventional drilling.
A particular challenge in the US — where 70% of the world’s oil shale deposits are located — is the proximity of the aquifers to the shale. During extraction, the waters are vulnerable to contamination by the hydrocarbons and must be protected. The only way to do so is to construct a freeze wall around the extraction area to prevent contact. And a freeze wall, in addition to adding to overall expense, raises the technology’s carbon footprint.
Israel is a different story. Here, where the shale deposits are uniform, thick and rich, the aquifer is well below the oil shale; they are separated from one another by about 200 meters of impermeable rock. There is therefore no need for a freeze wall. And Dr. Vinegar’s technology, rather than using water to function, actually generates water: the shale contains 20% water, which is produced during the extraction process. According to Dana Kadmiel, the IEI environmental engineer I spoke with, this water can be treated and subsequently used for agriculture.
The hydrogeological conditions here thus yield multiple advantages: lower water consumption, higher energy efficiencies, lower greenhouse gas emissions, and lower costs. Dana estimates that the resource will be extractable at a cost of about $40 a barrel.
IEI’s version of in situ retorting works like this:
Uniformly spaced horizontal heater wells, six inches in diameter, are drilled into the target oil shale. The wells are heated, either by electricity or by a circulating heat transfer fluid, probably molten salts (salts that can be melted at a low temperature and then brought to a very high temperature). The heater wells are maintained at high temperatures for several years, cooking the shale to about 300 degrees Celsius.
Eventually, the heat causes the kerogen to expel several high-value products: oil, water, natural gas (methane and ethane), LPG, and hydrogen. Hydrogen sulfide, a toxic gas, is also produced. It will be immediately isolated and treated to make elemental sulfur for use in fertilizer.
Above ground, the gases will be separated from the liquids and the water and oil separated from one another. The water will be sent for treatment and the oil to one of Israel’s two refineries for conversion into fuel.
IEI is currently in an appraisal phase and will shortly move into the pilot phase. If they are able to prove that the technology works, is economic, and is environmentally sustainable, they’ll move into the commercial phase. The appraisal phase involves drilling out samples of oil shale using what amounts to an extremely long apple corer and then testing it in the lab. During the pilot phase, they will drill vertically and use electricity to heat the shale. Once they get to the commercial phase, they will drill horizontally rather than vertically and move from electricity to molten salts, which are much more efficient and environmentally friendly. Natural gas will be used to heat the salts.
Down the road, they’re interested in using the sun to heat the salts, if a way can be found to make solar more efficient and economic. In the meantime, they’ll be able to use the natural gas generated by the process itself for heating purposes.
As promised, here is a primer on the oil shale technology that might help Israel become energy independent.
The technology was invented by the serendipitously named Dr. Harold Vinegar during his 32-year tenure at Royal Dutch Shell. Shell is exploring the use of the technology in Jordan, where there are also major oil shale deposits, but opted against exploration in Israel. Vinegar retired from Shell as Chief Scientist and made aliyah to Israel, where he began teaching petroleum science at Ben Gurion University. He then joined Israel Energy Initiatives (IEI), where he is now Chief Scientist. (I am meeting Dr. Vinegar soon and will give you a more detailed and personal account of this history.)
Before we get to the technology, a quick word on oil shale.
There are two general categories of oil: conventional and unconventional. Conventional oil is called crude, the stream of free-flowing hydrocarbons that are drawn out of the ground by the nodding, mantis-like pumps with which you’re familiar. Unconventional oil is oil produced from less easily tapped sources and by methods other than by traditional wells.
One unconventional oil source is extra-heavy crude, which flows about as easily as cold blackstrap molasses and will sink if you pour some into a glass of water. Tar sands, or bituminous sands, contain a particularly viscous variety of heavy crude. Getting it out is labor-intensive, to say the least, and the proportion of usable fuel to be generated from a barrel of tar sands is relatively low. Still, as oil prices rise, tar sand oil production becomes more commercially viable.
Another unconventional source is oil shale, which does not, in fact, contain oil. Oil shale is sedimentary rock containing kerogen, which is premature oil. The rock is the product of organic debris that has been cooking below the surface of the earth for millions of years. When the kerogen in the rock is heated, its long chains of carbons begin to break into smaller and smaller pieces. Eventually, oil — among other products — is released.
The oil derived from the shale through IEI’s process is a light synthetic condensate that is easier to refine than conventional crude. The challenge is on the upstream end — getting it out of the rock.
Until very recently, there were two ways of doing this. One is to mine the rock, bring it to the surface, crush it, and heat it in a furnace called a retort. The other — still in the piloting stage of development — is to heat the rock while it is underground to expel the oil and gas from the kerogen, and then pump the products to the surface (in situ retorting). IEI’s method is a variant of the latter technique.
Surface retorting requires copious amounts of water to clean shale waste, cool the retorts, and refine the shale oil. In situ retorting does not require such large quantities of water because no shale waste is generated, no retorts need to be cooled, and the hydrogen needed to refine the oil is generated during the process itself. There is still a water cost, however, when subsurface waters are diverted from their normal flow. And both methods, up to this point, have been more expensive to implement than conventional drilling.
A particular challenge in the US — where 70% of the world’s oil shale deposits are located — is the proximity of the aquifers to the shale. During extraction, the waters are vulnerable to contamination by the hydrocarbons and must be protected. The only way to do so is to construct a freeze wall around the extraction area to prevent contact. And a freeze wall, in addition to adding to overall expense, raises the technology’s carbon footprint.
Israel is a different story. Here, where the shale deposits are uniform, thick and rich, the aquifer is well below the oil shale; they are separated from one another by about 200 meters of impermeable rock. There is therefore no need for a freeze wall. And Dr. Vinegar’s technology, rather than using water to function, actually generates water: the shale contains 20% water, which is produced during the extraction process. According to Dana Kadmiel, the IEI environmental engineer I spoke with, this water can be treated and subsequently used for agriculture.
The hydrogeological conditions here thus yield multiple advantages: lower water consumption, higher energy efficiencies, lower greenhouse gas emissions, and lower costs. Dana estimates that the resource will be extractable at a cost of about $40 a barrel.
IEI’s version of in situ retorting works like this:
Uniformly spaced horizontal heater wells, six inches in diameter, are drilled into the target oil shale. The wells are heated, either by electricity or by a circulating heat transfer fluid, probably molten salts (salts that can be melted at a low temperature and then brought to a very high temperature). The heater wells are maintained at high temperatures for several years, cooking the shale to about 300 degrees Celsius.
Eventually, the heat causes the kerogen to expel several high-value products: oil, water, natural gas (methane and ethane), LPG, and hydrogen. Hydrogen sulfide, a toxic gas, is also produced. It will be immediately isolated and treated to make elemental sulfur for use in fertilizer.
Above ground, the gases will be separated from the liquids and the water and oil separated from one another. The water will be sent for treatment and the oil to one of Israel’s two refineries for conversion into fuel.
IEI is currently in an appraisal phase and will shortly move into the pilot phase. If they are able to prove that the technology works, is economic, and is environmentally sustainable, they’ll move into the commercial phase. The appraisal phase involves drilling out samples of oil shale using what amounts to an extremely long apple corer and then testing it in the lab. During the pilot phase, they will drill vertically and use electricity to heat the shale. Once they get to the commercial phase, they will drill horizontally rather than vertically and move from electricity to molten salts, which are much more efficient and environmentally friendly. Natural gas will be used to heat the salts.
Down the road, they’re interested in using the sun to heat the salts, if a way can be found to make solar more efficient and economic. In the meantime, they’ll be able to use the natural gas generated by the process itself for heating purposes.
Oil Shale Reserves
Oil Shale Reserves
Oil Shale Reserves: Stinky Water, Sweet Oil
You won’t think much of Rio Blanco County if you ever drive through it. In fact, unless you take a right turn off Interstate-70 West at Rifle, head north on Railroad Avenue and then west on Government road to Colorado state highway number thirteen, odds are you’ll never even step foot in Rio Blanco County.
But even if you keep heading west toward Grand Junction, through the town of Parachute and the shuttered oil shale refineries from the 1970s, you’ll see the Book Cliffs geologic formation on your right. For miles and miles. It’s a bleak landscape. Almost lunar. At first glance, it’s the kind of land you’d never want to explore, much less settle down in.
Oil Shale Reserves : America’s Strategic Future
In the small world of geologists, though, the region is well-known. In fact, you might even say it’s the single
most important patch of undeveloped, unloved, and desolate looking land in America. But you’d never guess this particular corner of the Great American Desert may play an integral role in America’s strategic future just by looking at it. You’d never guess that the whole stretch of brown, red, and orange land contains enough recoverable oil and gas to make you forget about the Middle East for the rest of time.
There are places in Rio Blanco County like Stinking Water Creek, named after the smelly mix of oil and water the first white settlers found there, that tell you oil’s always been around the Rocky Mountains. It’s just not always been easy to find. It’s one thing to find oil that bubbles out of the ground in liquid form. It’s quite another to drill a thousand feet down, and encounter oil locked up tight inside a greasy rock.
The first seeping pools of oil were discovered in Western Colorado as far back as 1876, the year the state entered the Union. But exploration didn’t get serious until drillers settled in the town of Rangely in Rio Blanco County.
By 1903, thirteen different drillers had come and gone in Rangely. According to the local museum, the only six wells that actually struck oil were producing just two to ten barrels of oil a day. Hardly a Spindeltop, the gusher that launched the Texas oil-boom on January 10th, 1901, and immediately began producing 100,000 barrels per day.
The energy reserves of the Piceance Basin, upon which Rio Blanco County sits, contain massive petroleum reserves of a very unusual nature: Oil shale.
Oil Shale Reserves : A Congressional Legacy
Most of the nation’s oil shale reserves rest under the control of the U.S. government – a legacy of a 95-year old Congressional Act. In 1910, Congress passed the Pickett Act, which authorized President Taft to set aside oil- bearing land in California and Wyoming as potential sources of fuel for the U.S. Navy. Taft did so right away. The Navy was in the process of switching from coal burning ships to oil burning ships. And the U.S. military, conscious of the expanding role of America in the world, needed a dependable supply of fuel in case of a national emergency.
From 1910 to 1925 the Navy developed the Naval Petroleum and Oil Shale Reserves Program. The program became official in 1927 and President Roosevelt even expanded the scope of the program in 1942 as the U.S. geared up for war with Japan and Germany.
Several of the oil fields set aside for the nation’s first strategic reserve, particularly Elk Hills in California,
would go on to produce oil for the U.S. government. Elk Hills was eventually sold off to Occidental Petroleum for $3.65 billion in 1998 in the largest privatization in U.S. history. The shale reserves, however, still remain, locked 1,000 feet underground in the Colorado desert.
Unlocking The Future
The destruction of Hurricane Katrina shows the importance of a strategic petroleum reserve, or, more accurately, a strategic energy reserve. But the SPR in Louisiana only holds about 800 million barrels of emergency, enough to get the country through about 90 days of regular oil usage. That’s barely a band-aid for a country that faces a potential energy heart attack.
In other words, the future of oil shale may have finally arrived. Extracting oil from shale is no simple task, which is why the reserves remain almost completely undeveloped. But an emerging new technology promises to unlock the awesome potential of the oil shale.
“The technical groundwork may be in place for a fundamental shift in oil shale economics,” the Rand Corporation recently declared. “Advances in thermally conductive in-situ conversion may enable shale-derived oil to be competitive with crude oil at prices below $40 per barrel. If this becomes the case, oil shale development may soon occupy a very prominent position in the national energy agenda.”
Estimated U.S. oil shale reserves total an astonishing 1.5 trillion barrels of oil – or more than five times the
stated reserves of Saudi Arabia. This energy bounty is simply too large to ignore any longer, assuming that the reserves are economically viable. And yet, oil shale lies far from the radar screen of most investors.
But we here at The Daily Reckoning are on the case. Just yesterday, I caught a first-hand glimpse of a cutting-edge oil shale project spearheaded by Shell. I trekked out to a barren moonscape in Colorado to tour the facility with Shell geologists. To summarize my findings, oil shale holds tremendous promise, but the technologies that promise to unlock this promise remain somewhat experimental. But sooner or later, the oil trapped in the shale of Colorado will flow to the surface. And when it does, it will enrich investors who arrive early to the scene.
Can Oil Shale Change The World?
America’s oil shale reserves are enormous, totaling at least 1.5 trillion barrels of oil. That’s five times the
reserves of Saudi Arabia! And yet, no one is producing commercial quantities of oil from these vast deposits. All that oil is still sitting right where God left it, buried under the vast landscapes of Colorado and Wyoming.
Obviously, there are some very real obstacles to oil production from shale. After all, if it was such a good
thing, we’d be doing it already, right? “Oil shale is the fuel of the future, and always will be,” goes a popular
saying in Western Colorado.
But what if we could safely and economically get our hands on all that oil? Imagine how the world might change. The U.S. would instantly have the world’s largest oil reserves. Imagine…having so much oil we’d never have to worry about Saudi Arabia again, or Hugo Chavez, or the mullahs in Tehran. And instead of ships lined up in L.A.’s port to unload cheap Chinese goods, we might see oil tankers lined up waiting to export America’s tremendous oil bounty to the rest of the world. The entire geopolitical and economic map of the world would change…and the companies in the vanguard of oil shale development might make hundreds of billions of dollars as they convert America’s untapped shale reserves into a brand new energy revolution.
Presidents Gerald Ford and Jimmy Carter may have been entertaining similar ambitions in the late 1970s when they encouraged and funded the development of the West’s shale deposits. A shale-boom ensued, although not much oil flowed. The government spent billions and so did Exxon Mobil. New boomtowns sprung up in Rifle, Parachute, Rangely, and Meeker here in Colorado.
And then came Black Monday. May 2, 1982. The day Exxon shut down its $5 billion Colony Oil Shale project. The refineries closed. The jobs left (the American oil industry has lost nearly as many jobs in the last ten years as the automobile and steel industries.) And the energy locked in Colorado’s vast shale deposits sat untouched and unrefined.
Oil Shale Technology – Old & New
Extracting oil from the shale is no simple task. The earliest attempts to extract the oil utilized an environmentally unfriendly process known as “retorting.” Stated simply, retorting required mining the shale, hauling it to a processing facility that crushed the rock into small chunks, then extracted a petroleum substance called kerogen, then upgraded the kerogen through a process of hydrogenation (which requires lots of water) and refined it into gasoline or jet fuel.
But the difficulties of retorting do not end there, as my colleague, Byron King explains:
“After you retort the rock to derive the kerogen (not oil), the heating process has desiccated the shale (OK, that means that it is dried out). Sad to say, the volume of desiccated shale that you have to dispose of is now greater than that of the hole from which you dug and mined it in the first place. Any takers for trainloads of dried, dusty, gunky shale residue, rife with low levels of heavy metal residue and other toxic, but now chemically-activated crap? (Well, it makes for enough crap that when it rains, the toxic stuff will leach out and contaminate all of the water supplies to which gravity can reach, which is essentially all of ‘em. Yeah, right. I sure want that stuff blowin’ in my wind.) Add up all of the capital investment to build the retorting mechanisms, cost of energy required, cost of water, costs of transport, costs of environmental compliance, costs of refining, and you have some relatively costly end-product.”
But a new technology has emerged that may begin to tap the oil shale’s potential. Royal Dutch Shell, in fact, has recently completed a demonstration project (The Mahogany Ridge project) in which it produced 1,400 barrels of oil from shale in the ground, without mining the shale at all.
Instead, Shell utilized a process called “in situ” mining, which heats the shale while it’s still in the ground, to
the point where the oil leaches from the rock. Shell’s Terry O’Connor described the breakthrough in testimony before Congress earlier this summer (And Congress may have an acute interest in the topic, since the U.S. government controls 72% of all U.S. oil shale acreage):
“Some 23 years ago, Shell commenced laboratory and field research on a promising in ground conversion and recovery process. This technology is called the In-situ Conversion Process, or ICP. In 1996, Shell successfully carried out its first small field test on its privately owned Mahogany property in Rio Blanco County, Colorado some 200 miles west of Denver. Since then, Shell has carried out four additional related field tests at nearby sites. The most recent test was carried out over the past several months and produced in excess of 1,400 barrels of light oil plus associated gas from a very small test plot using the ICP technology…
“Most of the petroleum products we consume today are derived from conventional oil fields that produce oil and gas that have been naturally matured in the subsurface by being subjected to heat and pressure over very long periods of time. In general terms, the In-situ Conversion Process (ICP) accelerates this natural process of oil and gas maturation by literally tens of millions of years. This is accomplished by slow sub-surface heating of petroleum source rock containing kerogen, the precursor to oil and gas. This acceleration of natural processes is achieved by drilling holes into the resource, inserting electric resistance heaters into those heater holes and heating the subsurface to around 650-700F, over a 3 to 4 year period.
“During this time, very dense oil and gas is expelled from the kerogen and undergoes a series of changes. These changes include the shearing of lighter components from the dense carbon compounds, concentration of available hydrogen into these lighter compounds, and changing of phase of those lighter, more hydrogen rich compounds from liquid to gas. In gaseous phase, these lighter fractions are now far more mobile and can move in the subsurface through existing or induced fractures to conventional producing wells from which they are brought to the surface. The process results in the production of about 65 to 70% of the original “carbon” in place in the subsurface.
“The ICP process is clearly energy-intensive, as its driving force is the injection of heat into the subsurface.
However, for each unit of energy used to generate power to provide heat for the ICP process, when calculated on a life cycle basis, about 3.5 units of energy are produced and treated for sales to the consumer market. This energy efficiency compares favorably with many conventional heavy oil fields that for decades have used steam injection to help coax more oil out of the reservoir. The produced hydrocarbon mix is very different from traditional crude oils. It is much lighter and contains almost no heavy ends.
“However, because the ICP process occurs below ground, special care must be taken to keep the products of the process from escaping into groundwater flows. Shell has adapted a long recognized and established mining and construction ice wall technology to isolate the active ICP area and thus accomplish these objectives and to safe guard the environment. For years, freezing of groundwater to form a subsurface ice barrier has been used to isolate areas being tunneled and to reduce natural water flows into mines. Shell has successfully tested the freezing technology and determined that the development of a freeze wall prevents the loss of contaminants from the heated zone.”
It may seem, as O’Conner said, counter-intuitive to freeze the water around a shale deposit, and then heat up the contents within the deposit. It’s energy-intensive. And it’s a lot of work. What’s more, there’s no proof yet it can work on a commercial scale.
Yet both technologies, the freeze wall and the heating of shale, have been proven in the field to work. The freeze wall was used most recently in Boston’s Big Dig project. It was also used to prevent ground water from seeping into the salt caverns at the Strategic Petroleum reserve in Weeks Island, LA.
But still, you may be wondering, does it really make sense to heat the ground up a thousand feet down for three or four years and wait? Of course it does. In case you missed O’Conner’s math, Shell could harvest up to a million barrels per acre, or a billion barrels per square mile, on an area covering over a thousand square miles.
It’s still early days in the oil shale fields of Colorado and Wyoming, but it looks to me like someone’s gonna make a lot of money out there. I’m working hard to discover how we outside investors can play along.
Shell’s Mahogany Ridge
Last week, I paid a visit to Royal Dutch Shell’s oil shale project in Colorado. The visit left me with more questions than answers, but I came away from the place with the sense that this opportunity is very real…or, at least, it soon will be.
After driving across a vast expanse of “Nowhere,” Colorado, my brother and I met up with a few geologists from Shell. Of course it’s just those large, unpopulated tracts of high desert that make the area so appealing from a geopolitical point of view. Tapping into the oil shale 2,000 feet underground isn’t going to bother too many people. And there are no spotted owls around either. If the technology to turn shale into oil works, the entire area will become a new American boom patch.
Soon after we arrived, the geologists escorted us around the facility, chatting all the while about the successes and challenges of their venture.
The two trickiest aspects of oil shale development, as the geologists and engineers explained, are heating the shale to extreme temperatures, while simultaneously surrounding the heated area with a subterranean ice wall. Shell doesn’t know, or isn’t saying, which part of the project will be the most challenging. If you were about to change the world by making it economic to tap into as much as 2 trillion barrels of oil under the Colorado plateau, you’d be pretty careful about showing your competitors how you were going to do it.
First, anything that heats up rock around it to around 600 or 700 degrees Fahrenheit has to conduct electrically generated heat well. The most conductive metals on the Periodic Table of Elements are, in order, silver, copper, and gold. Naturally, the number of heaters you put in a place affects the amount of time it takes to turn the shale goo into API 34 crude. The more heaters, the more cost, though.
And given the fact that Shell does not know yet if the heaters will be recoverable, you can see that sticking
silver, copper, or gold heaters 2000 meters underground and then leaving them there once the kerogen has been pumped has a serious effect on the economics of your operation.
At the moment, Shell is not sure what the optimal size of production zones ought to be. The big issue here is how big can a freeze-wall be to be effective and freezing the groundwater surrounding a shale deposit? The test projects, as you can see, were quite small. Shell doesn’t know, or isn’t saying, what the optimum size is for a each “pod” or “cell”. That’s what they’ll have to figure out at the next stage…and the picture with the dirt is a football field sized project….where rather than creating the freeze-wall at 50 meters down…they will do it at 1,000 ft. down…. with 2,000 being the desired and necessary depth for commercial viability. I’m not sure anyone has ever created a freeze-wall at that depth….neither is shell. But we’ll find out. The oil itself that comes from the process looks like…oil. No heavy refining needed.
Shell thinks the whole thing is economic at a crude price of $30. So barring a major reversal of geopolitical trends, they’re forging ahead.
Since the Bureau of Land Management owns about 80% of the oil shale acreage in Colorado, there is no investment play on private companies that might own land with rich shale deposits. Although, if Shell and the DOE are right that you can recover a million barrels of oil per acre…it wouldn’t take much land to make a man rich out here.
Oil Shale: Testing Public Lands
The Bureau of Land Management recently received ten applications (by eight companies) for a pilot program to develop Colorado’s shale reserves. The program allows the companies access to public lands for the purpose of testing shale-extraction technologies. You see below an interesting mix of large, publicly traded oil giants and small, privately held innovators.
•Natural Soda, Inc. of Rifle, Colorado.
•EGL Resources Inc. of Midland, Texas.
•Salt Lake City-based Kennecott Exploration Company.
•Independent Energy Partners of Denver, Colorado
•Denver-based Phoenix Wyoming, Inc.
•Chevron Shale Oil Company.
•Exxon Mobil Corporation.
•Shell Frontier Oil and Gas Inc
There is dispute within the industry over how long, if ever, demonstration extraction technologies can become commercially viable. I’ve spoken with some of the smaller companies that have applied for leases from the BLM. Some of them will have to raise money to conduct the project. And some of them have been less than forthcoming about how exactly their extraction technology is different or better than previous methods.
How will it all unfold? Well, for starters, it could all utterly fail. To me, Shell’s in-situ process looks the most
promising. It also makes the most sense economically. There may be a better, less energy-intensive way to heat up the ground than what Shell has come up with. But Shell, Chevron, and Exxon Mobil clearly have the resources to scoop up any private or small firm that makes a breakthrough.
And there are a host of smaller firms involved with the refining and drilling process that figure to play a key
role in the development of the industry, should that development pick up pace.
The Energy Policy Act of 2005, otherwise known as a listless piece of legislation without any strategic vision, does, at least, make provision for encouraging research into the development of shale. But government works slow, when it works at all. It’s going to take an external shock to the economy to really ratchet up interest and development of the nation’s energy reserves…say…something like a nuclear Iran.
Read more: Oil Shale Reserves http://dailyreckoning.com/oil-shale-reserves/#ixzz1UMOZmKtr
Oil Shale Reserves: Stinky Water, Sweet Oil
You won’t think much of Rio Blanco County if you ever drive through it. In fact, unless you take a right turn off Interstate-70 West at Rifle, head north on Railroad Avenue and then west on Government road to Colorado state highway number thirteen, odds are you’ll never even step foot in Rio Blanco County.
But even if you keep heading west toward Grand Junction, through the town of Parachute and the shuttered oil shale refineries from the 1970s, you’ll see the Book Cliffs geologic formation on your right. For miles and miles. It’s a bleak landscape. Almost lunar. At first glance, it’s the kind of land you’d never want to explore, much less settle down in.
Oil Shale Reserves : America’s Strategic Future
In the small world of geologists, though, the region is well-known. In fact, you might even say it’s the single
most important patch of undeveloped, unloved, and desolate looking land in America. But you’d never guess this particular corner of the Great American Desert may play an integral role in America’s strategic future just by looking at it. You’d never guess that the whole stretch of brown, red, and orange land contains enough recoverable oil and gas to make you forget about the Middle East for the rest of time.
There are places in Rio Blanco County like Stinking Water Creek, named after the smelly mix of oil and water the first white settlers found there, that tell you oil’s always been around the Rocky Mountains. It’s just not always been easy to find. It’s one thing to find oil that bubbles out of the ground in liquid form. It’s quite another to drill a thousand feet down, and encounter oil locked up tight inside a greasy rock.
The first seeping pools of oil were discovered in Western Colorado as far back as 1876, the year the state entered the Union. But exploration didn’t get serious until drillers settled in the town of Rangely in Rio Blanco County.
By 1903, thirteen different drillers had come and gone in Rangely. According to the local museum, the only six wells that actually struck oil were producing just two to ten barrels of oil a day. Hardly a Spindeltop, the gusher that launched the Texas oil-boom on January 10th, 1901, and immediately began producing 100,000 barrels per day.
The energy reserves of the Piceance Basin, upon which Rio Blanco County sits, contain massive petroleum reserves of a very unusual nature: Oil shale.
Oil Shale Reserves : A Congressional Legacy
Most of the nation’s oil shale reserves rest under the control of the U.S. government – a legacy of a 95-year old Congressional Act. In 1910, Congress passed the Pickett Act, which authorized President Taft to set aside oil- bearing land in California and Wyoming as potential sources of fuel for the U.S. Navy. Taft did so right away. The Navy was in the process of switching from coal burning ships to oil burning ships. And the U.S. military, conscious of the expanding role of America in the world, needed a dependable supply of fuel in case of a national emergency.
From 1910 to 1925 the Navy developed the Naval Petroleum and Oil Shale Reserves Program. The program became official in 1927 and President Roosevelt even expanded the scope of the program in 1942 as the U.S. geared up for war with Japan and Germany.
Several of the oil fields set aside for the nation’s first strategic reserve, particularly Elk Hills in California,
would go on to produce oil for the U.S. government. Elk Hills was eventually sold off to Occidental Petroleum for $3.65 billion in 1998 in the largest privatization in U.S. history. The shale reserves, however, still remain, locked 1,000 feet underground in the Colorado desert.
Unlocking The Future
The destruction of Hurricane Katrina shows the importance of a strategic petroleum reserve, or, more accurately, a strategic energy reserve. But the SPR in Louisiana only holds about 800 million barrels of emergency, enough to get the country through about 90 days of regular oil usage. That’s barely a band-aid for a country that faces a potential energy heart attack.
In other words, the future of oil shale may have finally arrived. Extracting oil from shale is no simple task, which is why the reserves remain almost completely undeveloped. But an emerging new technology promises to unlock the awesome potential of the oil shale.
“The technical groundwork may be in place for a fundamental shift in oil shale economics,” the Rand Corporation recently declared. “Advances in thermally conductive in-situ conversion may enable shale-derived oil to be competitive with crude oil at prices below $40 per barrel. If this becomes the case, oil shale development may soon occupy a very prominent position in the national energy agenda.”
Estimated U.S. oil shale reserves total an astonishing 1.5 trillion barrels of oil – or more than five times the
stated reserves of Saudi Arabia. This energy bounty is simply too large to ignore any longer, assuming that the reserves are economically viable. And yet, oil shale lies far from the radar screen of most investors.
But we here at The Daily Reckoning are on the case. Just yesterday, I caught a first-hand glimpse of a cutting-edge oil shale project spearheaded by Shell. I trekked out to a barren moonscape in Colorado to tour the facility with Shell geologists. To summarize my findings, oil shale holds tremendous promise, but the technologies that promise to unlock this promise remain somewhat experimental. But sooner or later, the oil trapped in the shale of Colorado will flow to the surface. And when it does, it will enrich investors who arrive early to the scene.
Can Oil Shale Change The World?
America’s oil shale reserves are enormous, totaling at least 1.5 trillion barrels of oil. That’s five times the
reserves of Saudi Arabia! And yet, no one is producing commercial quantities of oil from these vast deposits. All that oil is still sitting right where God left it, buried under the vast landscapes of Colorado and Wyoming.
Obviously, there are some very real obstacles to oil production from shale. After all, if it was such a good
thing, we’d be doing it already, right? “Oil shale is the fuel of the future, and always will be,” goes a popular
saying in Western Colorado.
But what if we could safely and economically get our hands on all that oil? Imagine how the world might change. The U.S. would instantly have the world’s largest oil reserves. Imagine…having so much oil we’d never have to worry about Saudi Arabia again, or Hugo Chavez, or the mullahs in Tehran. And instead of ships lined up in L.A.’s port to unload cheap Chinese goods, we might see oil tankers lined up waiting to export America’s tremendous oil bounty to the rest of the world. The entire geopolitical and economic map of the world would change…and the companies in the vanguard of oil shale development might make hundreds of billions of dollars as they convert America’s untapped shale reserves into a brand new energy revolution.
Presidents Gerald Ford and Jimmy Carter may have been entertaining similar ambitions in the late 1970s when they encouraged and funded the development of the West’s shale deposits. A shale-boom ensued, although not much oil flowed. The government spent billions and so did Exxon Mobil. New boomtowns sprung up in Rifle, Parachute, Rangely, and Meeker here in Colorado.
And then came Black Monday. May 2, 1982. The day Exxon shut down its $5 billion Colony Oil Shale project. The refineries closed. The jobs left (the American oil industry has lost nearly as many jobs in the last ten years as the automobile and steel industries.) And the energy locked in Colorado’s vast shale deposits sat untouched and unrefined.
Oil Shale Technology – Old & New
Extracting oil from the shale is no simple task. The earliest attempts to extract the oil utilized an environmentally unfriendly process known as “retorting.” Stated simply, retorting required mining the shale, hauling it to a processing facility that crushed the rock into small chunks, then extracted a petroleum substance called kerogen, then upgraded the kerogen through a process of hydrogenation (which requires lots of water) and refined it into gasoline or jet fuel.
But the difficulties of retorting do not end there, as my colleague, Byron King explains:
“After you retort the rock to derive the kerogen (not oil), the heating process has desiccated the shale (OK, that means that it is dried out). Sad to say, the volume of desiccated shale that you have to dispose of is now greater than that of the hole from which you dug and mined it in the first place. Any takers for trainloads of dried, dusty, gunky shale residue, rife with low levels of heavy metal residue and other toxic, but now chemically-activated crap? (Well, it makes for enough crap that when it rains, the toxic stuff will leach out and contaminate all of the water supplies to which gravity can reach, which is essentially all of ‘em. Yeah, right. I sure want that stuff blowin’ in my wind.) Add up all of the capital investment to build the retorting mechanisms, cost of energy required, cost of water, costs of transport, costs of environmental compliance, costs of refining, and you have some relatively costly end-product.”
But a new technology has emerged that may begin to tap the oil shale’s potential. Royal Dutch Shell, in fact, has recently completed a demonstration project (The Mahogany Ridge project) in which it produced 1,400 barrels of oil from shale in the ground, without mining the shale at all.
Instead, Shell utilized a process called “in situ” mining, which heats the shale while it’s still in the ground, to
the point where the oil leaches from the rock. Shell’s Terry O’Connor described the breakthrough in testimony before Congress earlier this summer (And Congress may have an acute interest in the topic, since the U.S. government controls 72% of all U.S. oil shale acreage):
“Some 23 years ago, Shell commenced laboratory and field research on a promising in ground conversion and recovery process. This technology is called the In-situ Conversion Process, or ICP. In 1996, Shell successfully carried out its first small field test on its privately owned Mahogany property in Rio Blanco County, Colorado some 200 miles west of Denver. Since then, Shell has carried out four additional related field tests at nearby sites. The most recent test was carried out over the past several months and produced in excess of 1,400 barrels of light oil plus associated gas from a very small test plot using the ICP technology…
“Most of the petroleum products we consume today are derived from conventional oil fields that produce oil and gas that have been naturally matured in the subsurface by being subjected to heat and pressure over very long periods of time. In general terms, the In-situ Conversion Process (ICP) accelerates this natural process of oil and gas maturation by literally tens of millions of years. This is accomplished by slow sub-surface heating of petroleum source rock containing kerogen, the precursor to oil and gas. This acceleration of natural processes is achieved by drilling holes into the resource, inserting electric resistance heaters into those heater holes and heating the subsurface to around 650-700F, over a 3 to 4 year period.
“During this time, very dense oil and gas is expelled from the kerogen and undergoes a series of changes. These changes include the shearing of lighter components from the dense carbon compounds, concentration of available hydrogen into these lighter compounds, and changing of phase of those lighter, more hydrogen rich compounds from liquid to gas. In gaseous phase, these lighter fractions are now far more mobile and can move in the subsurface through existing or induced fractures to conventional producing wells from which they are brought to the surface. The process results in the production of about 65 to 70% of the original “carbon” in place in the subsurface.
“The ICP process is clearly energy-intensive, as its driving force is the injection of heat into the subsurface.
However, for each unit of energy used to generate power to provide heat for the ICP process, when calculated on a life cycle basis, about 3.5 units of energy are produced and treated for sales to the consumer market. This energy efficiency compares favorably with many conventional heavy oil fields that for decades have used steam injection to help coax more oil out of the reservoir. The produced hydrocarbon mix is very different from traditional crude oils. It is much lighter and contains almost no heavy ends.
“However, because the ICP process occurs below ground, special care must be taken to keep the products of the process from escaping into groundwater flows. Shell has adapted a long recognized and established mining and construction ice wall technology to isolate the active ICP area and thus accomplish these objectives and to safe guard the environment. For years, freezing of groundwater to form a subsurface ice barrier has been used to isolate areas being tunneled and to reduce natural water flows into mines. Shell has successfully tested the freezing technology and determined that the development of a freeze wall prevents the loss of contaminants from the heated zone.”
It may seem, as O’Conner said, counter-intuitive to freeze the water around a shale deposit, and then heat up the contents within the deposit. It’s energy-intensive. And it’s a lot of work. What’s more, there’s no proof yet it can work on a commercial scale.
Yet both technologies, the freeze wall and the heating of shale, have been proven in the field to work. The freeze wall was used most recently in Boston’s Big Dig project. It was also used to prevent ground water from seeping into the salt caverns at the Strategic Petroleum reserve in Weeks Island, LA.
But still, you may be wondering, does it really make sense to heat the ground up a thousand feet down for three or four years and wait? Of course it does. In case you missed O’Conner’s math, Shell could harvest up to a million barrels per acre, or a billion barrels per square mile, on an area covering over a thousand square miles.
It’s still early days in the oil shale fields of Colorado and Wyoming, but it looks to me like someone’s gonna make a lot of money out there. I’m working hard to discover how we outside investors can play along.
Shell’s Mahogany Ridge
Last week, I paid a visit to Royal Dutch Shell’s oil shale project in Colorado. The visit left me with more questions than answers, but I came away from the place with the sense that this opportunity is very real…or, at least, it soon will be.
After driving across a vast expanse of “Nowhere,” Colorado, my brother and I met up with a few geologists from Shell. Of course it’s just those large, unpopulated tracts of high desert that make the area so appealing from a geopolitical point of view. Tapping into the oil shale 2,000 feet underground isn’t going to bother too many people. And there are no spotted owls around either. If the technology to turn shale into oil works, the entire area will become a new American boom patch.
Soon after we arrived, the geologists escorted us around the facility, chatting all the while about the successes and challenges of their venture.
The two trickiest aspects of oil shale development, as the geologists and engineers explained, are heating the shale to extreme temperatures, while simultaneously surrounding the heated area with a subterranean ice wall. Shell doesn’t know, or isn’t saying, which part of the project will be the most challenging. If you were about to change the world by making it economic to tap into as much as 2 trillion barrels of oil under the Colorado plateau, you’d be pretty careful about showing your competitors how you were going to do it.
First, anything that heats up rock around it to around 600 or 700 degrees Fahrenheit has to conduct electrically generated heat well. The most conductive metals on the Periodic Table of Elements are, in order, silver, copper, and gold. Naturally, the number of heaters you put in a place affects the amount of time it takes to turn the shale goo into API 34 crude. The more heaters, the more cost, though.
And given the fact that Shell does not know yet if the heaters will be recoverable, you can see that sticking
silver, copper, or gold heaters 2000 meters underground and then leaving them there once the kerogen has been pumped has a serious effect on the economics of your operation.
At the moment, Shell is not sure what the optimal size of production zones ought to be. The big issue here is how big can a freeze-wall be to be effective and freezing the groundwater surrounding a shale deposit? The test projects, as you can see, were quite small. Shell doesn’t know, or isn’t saying, what the optimum size is for a each “pod” or “cell”. That’s what they’ll have to figure out at the next stage…and the picture with the dirt is a football field sized project….where rather than creating the freeze-wall at 50 meters down…they will do it at 1,000 ft. down…. with 2,000 being the desired and necessary depth for commercial viability. I’m not sure anyone has ever created a freeze-wall at that depth….neither is shell. But we’ll find out. The oil itself that comes from the process looks like…oil. No heavy refining needed.
Shell thinks the whole thing is economic at a crude price of $30. So barring a major reversal of geopolitical trends, they’re forging ahead.
Since the Bureau of Land Management owns about 80% of the oil shale acreage in Colorado, there is no investment play on private companies that might own land with rich shale deposits. Although, if Shell and the DOE are right that you can recover a million barrels of oil per acre…it wouldn’t take much land to make a man rich out here.
Oil Shale: Testing Public Lands
The Bureau of Land Management recently received ten applications (by eight companies) for a pilot program to develop Colorado’s shale reserves. The program allows the companies access to public lands for the purpose of testing shale-extraction technologies. You see below an interesting mix of large, publicly traded oil giants and small, privately held innovators.
•Natural Soda, Inc. of Rifle, Colorado.
•EGL Resources Inc. of Midland, Texas.
•Salt Lake City-based Kennecott Exploration Company.
•Independent Energy Partners of Denver, Colorado
•Denver-based Phoenix Wyoming, Inc.
•Chevron Shale Oil Company.
•Exxon Mobil Corporation.
•Shell Frontier Oil and Gas Inc
There is dispute within the industry over how long, if ever, demonstration extraction technologies can become commercially viable. I’ve spoken with some of the smaller companies that have applied for leases from the BLM. Some of them will have to raise money to conduct the project. And some of them have been less than forthcoming about how exactly their extraction technology is different or better than previous methods.
How will it all unfold? Well, for starters, it could all utterly fail. To me, Shell’s in-situ process looks the most
promising. It also makes the most sense economically. There may be a better, less energy-intensive way to heat up the ground than what Shell has come up with. But Shell, Chevron, and Exxon Mobil clearly have the resources to scoop up any private or small firm that makes a breakthrough.
And there are a host of smaller firms involved with the refining and drilling process that figure to play a key
role in the development of the industry, should that development pick up pace.
The Energy Policy Act of 2005, otherwise known as a listless piece of legislation without any strategic vision, does, at least, make provision for encouraging research into the development of shale. But government works slow, when it works at all. It’s going to take an external shock to the economy to really ratchet up interest and development of the nation’s energy reserves…say…something like a nuclear Iran.
Read more: Oil Shale Reserves http://dailyreckoning.com/oil-shale-reserves/#ixzz1UMOZmKtr
Oil shale — Colorado, Utah deposits rival OPEC reserve
Oil shale — Colorado, Utah deposits rival OPEC reserve
Colorado and Utah have as much oil as Saudi Arabia, Iran, Iraq, Venezuela, Nigeria, Kuwait, Libya, Angola, Algeria, Indonesia, Qatar and the United Arab Emirates combined.
That's not science fiction. Trapped in limestone up to 200 feet thick in the two Rocky Mountain states is enough so-called shale oil to rival OPEC and supply the U.S. for a century.
Exxon Mobil Corp. and Chevron Corp., the two biggest U.S. energy companies, and Royal Dutch Shell Plc are spending $100 million a year testing new methods to separate the oil from the stone for as little as $30 a barrel. A growing number of industry executives and analysts say new technology and persistently high prices make the idea feasible.
"The breakthrough is that now the oil companies have a way of getting this oil out of the ground without the massive energy and manpower costs that killed these projects in the 1970s," said Pete Stark, an analyst at IHS Inc., an Englewood, Colo., research firm. "All the shale rocks in the world are going to be revisited now to see how much oil they contain."
The U.S. imports two-thirds of its oil, spending $300 billion a year, or 40 percent of the record trade deficit. Every $10 increase in a barrel of crude costs an American household $700 a year, according to the Rand Corp., founded in 1946 to provide research for the U.S. military. Oil prices have risen 63 percent since 2004, and higher fuel costs have slowed growth in the world's largest economy to the lowest in four years.
The last effort to exploit the Colorado and Utah shale fields foundered in the 1980s after crude prices tumbled 72 percent, resulting in a multibillion-dollar loss for Exxon. Techniques developed to coax crude from tar sands in Alberta, 1,600 miles to the north, may help the U.S. projects' engineers.
"The potential for shale is large," said Joseph Stanislaw, senior energy adviser for Deloitte & Touche LLP and co-author with oil analyst Daniel Yergin of "The Commanding Heights: The Battle for the World Economy" (Simon & Schuster, 464 pages, $26). "Assuming the technology proves out, the size and scale of the reserves are significant."
Energy providers are investing in shale oil production because the reserves are large enough to generate higher returns than smaller fields in Oklahoma and Texas, where output is declining after eight decades.
Shale is also a more attractive investment than new U.S. refineries, which Shell and Chevron say may lose money as rising use of crop-based fuels such as ethanol lowers domestic gasoline demand. Exxon says it isn't interested in building new fuel plants in the U.S. because the company expects North American fuel consumption to peak by 2025.
"You're going to build refineries where demand is increasing, and that's the developing world," Scott Nauman, Exxon's manager of economics and energy planning, said in a May 18 presentation at a University of Chicago oil conference.
Shell's project
In the high desert near Rifle, Colo., Shell engineers are burying hundreds of steel rods 2,000 feet underground that will heat the shale to 700 degrees Fahrenheit, a temperature at which Teflon melts.
The heat will be applied for the next four years to convert the hydrocarbons from dead plants and plankton, once part of a prehistoric lake, into high-quality crude that is equal parts jet fuel, diesel and naphtha, the main ingredient in gasoline.
Chevron, which helped build the Saudi Arabian energy industry when it struck oil in the kingdom in 1938, plans to shatter 200-foot thick layers of shale deep underground, said Robert Lestz, the company's oil-shale technology manager.
Rather than using heat to transform the shale into crude, Chevron plans to saturate the rubble with chemicals to convert it. The method will reduce power needs and production costs, Lestz said in a May 24 interview. Using chemical reactions to get oil from shale also means fewer byproducts such as ash and fewer greenhouse gases, he said.
Chevron scientists are working with researchers at the Los Alamos National Laboratory in New Mexico to determine which chemicals work best for converting shale to crude oil. Shell's heating technique amounts to "a brute-force approach," said Lestz, who is based in Houston.
Raytheon Co., the maker of Tomahawk missiles and the first microwave ovens, is developing a process that would use radio waves to cook the shale.
Exxon Mobil, based in Irving, Texas, plans to shoot particles of petroleum coke, a waste by-product of oil refining, into cracks in the shale. The coke will be electrically charged to create a subterranean hot plate that will cook the shale until it turns into crude. The company declined to discuss the progress of its oil shale tests.
'Oil is here'
"These are quite remarkable technological approaches," said Jeremy Boak, a geologist at the Colorado School of Mines in Golden, Colo., who spent 11 years cleaning up radioactive waste and disposing of weapons-grade plutonium at U.S. government sites. "The oil companies don't have the exploration problem of finding resources to drill. We know the oil is here. It's just a matter of getting it out."
U.S. oil shale deposits likely hold 1.5 trillion barrels of oil, according to Jack Dyni, a geologist emeritus at the U.S. Geological Survey. All 12 OPEC countries combined have proved crude oil reserves of about 911 billion barrels, led by Saudi Arabia, with 264.2 billion barrels, according to statistics compiled by BP Plc.
Skeptics of the potential for shale oil include Cathy Kay, an organizer for the environmental group Western Colorado Congress, who says the techniques will drain water supplies, scar the landscape and require so much power the skies will be choked with smoke from coal-fed generators.
"They are going to do absolutely massive environmental damage," said Kay, a South Africa native who's been spearheading the Grand Junction, Colo., group's anti-shale campaign since September.
"Why don't these companies invest these giant sums of money developing the cheapest, cleverest solar panel or geothermal process, instead of chasing this elusive oil?" Kay asked.
Shell, based in the Hague, estimates it can extract oil from Colorado shale for $30 a barrel, less than half the recent price of about $66 for benchmark New York futures.
Shell's process includes surrounding each shale field with an underground wall of ice. The so-called freeze walls are to prevent groundwater from swamping the heating rods and to protect the local water supply from contamination as the organic material in the rocks turns to oil, according to Terry O'Connor, the Shell vice president in charge of the company's Colorado shale project.
500,000 barrels
"There's a lot of testing to be done," O'Connor said in a May 24 interview. "We're proceeding cautiously."
O'Connor declined to say how much oil Shell expects it could produce from shale. Stark at IHS and other analysts said Shell expects to get 500,000 barrels a day from its project, 25 percent more than comes from Alaska's Prudhoe Bay, the largest U.S. oil field.
"This is an amazing resource," said James Bartis, an oil analyst at Rand, based in Santa Monica, Calif. Bartis says that success in the Rockies could cut crude prices by 5 percent, saving American consumers $20 billion a year.
"It's been raised before as a panacea for impending shortages, but never before has it been shown to be competitive with conventional oil," Bartis said.
Drillers, pipe-makers and metal fabricators such as Nabors Industries Ltd. and closely held UOP LLC will be the first to profit as Shell, Chevron and Exxon drill thousands of wells a half-mile underground by 2011.
The oil companies may begin pumping commercial quantities of oil from Colorado shale within a decade, about as long as Chevron will need to develop the 500 million-barrel Jack prospect in the deepwater Gulf of Mexico, according to Stark, who is a former Mobil Corp. geologist.
"Given the state of the oil market, more and more effort is being put into making shale a viable source," said Stanislaw. He estimated it will take six to eight years before oil companies perfect their extraction methods. "The timeframe is very long," he said.
In the 1970s, oil shale efforts involved mile-wide strip mines and factory-size cookers to boil giant limestone boulders. This time, no company expects to bring in front-loaders, heavy-duty dump trucks or thousands of miners to haul shale from open pits.
"The old technique required them to dig the equivalent of a new Panama Canal every month," said former Colorado Gov. Richard Lamm, whose tenure from 1975 to 1987 included the last attempt to extract oil from shale.
'More sane process'
"This new approach is a much more sane process, but that's all relative," Lamm said in an interview. "They're doing this in an immensely fragile area where wagon ruts from the Oregon Trail in the 1840s are still visible. It doesn't excite me because I think they're about to indelibly change our state."
Local residents are also leery, recalling the ghost towns and job losses left behind from the last shale boom and bust.
Battlement Mesa, Colo., a town Exxon built to house an expected 25,000 shale workers, was abandoned when the company shut its mine on May 2, 1982, a day locals still refer to as "Black Sunday." The town is now a retirement community.
"I don't think this is going to go anywhere," said John Savage, an attorney in Rifle whose father started a shale-oil company in 1956. "It's just too tough to get that oil out of the ground. There's trillions of barrels down there, but there's too much rock on top of it."
Oil companies also are exploring shale fields in Jordan, Morocco and Australia, though preliminary assessments indicate none is as oil-rich as the Colorado and Utah deposits. The final approval for full-scale projects in the U.S. won't be made until after 2010.
"If we waited a few million years, all this stuff would turn to oil," Rand's Bartis says. "Some people don't want to wait that long."
Colorado and Utah have as much oil as Saudi Arabia, Iran, Iraq, Venezuela, Nigeria, Kuwait, Libya, Angola, Algeria, Indonesia, Qatar and the United Arab Emirates combined.
That's not science fiction. Trapped in limestone up to 200 feet thick in the two Rocky Mountain states is enough so-called shale oil to rival OPEC and supply the U.S. for a century.
Exxon Mobil Corp. and Chevron Corp., the two biggest U.S. energy companies, and Royal Dutch Shell Plc are spending $100 million a year testing new methods to separate the oil from the stone for as little as $30 a barrel. A growing number of industry executives and analysts say new technology and persistently high prices make the idea feasible.
"The breakthrough is that now the oil companies have a way of getting this oil out of the ground without the massive energy and manpower costs that killed these projects in the 1970s," said Pete Stark, an analyst at IHS Inc., an Englewood, Colo., research firm. "All the shale rocks in the world are going to be revisited now to see how much oil they contain."
The U.S. imports two-thirds of its oil, spending $300 billion a year, or 40 percent of the record trade deficit. Every $10 increase in a barrel of crude costs an American household $700 a year, according to the Rand Corp., founded in 1946 to provide research for the U.S. military. Oil prices have risen 63 percent since 2004, and higher fuel costs have slowed growth in the world's largest economy to the lowest in four years.
The last effort to exploit the Colorado and Utah shale fields foundered in the 1980s after crude prices tumbled 72 percent, resulting in a multibillion-dollar loss for Exxon. Techniques developed to coax crude from tar sands in Alberta, 1,600 miles to the north, may help the U.S. projects' engineers.
"The potential for shale is large," said Joseph Stanislaw, senior energy adviser for Deloitte & Touche LLP and co-author with oil analyst Daniel Yergin of "The Commanding Heights: The Battle for the World Economy" (Simon & Schuster, 464 pages, $26). "Assuming the technology proves out, the size and scale of the reserves are significant."
Energy providers are investing in shale oil production because the reserves are large enough to generate higher returns than smaller fields in Oklahoma and Texas, where output is declining after eight decades.
Shale is also a more attractive investment than new U.S. refineries, which Shell and Chevron say may lose money as rising use of crop-based fuels such as ethanol lowers domestic gasoline demand. Exxon says it isn't interested in building new fuel plants in the U.S. because the company expects North American fuel consumption to peak by 2025.
"You're going to build refineries where demand is increasing, and that's the developing world," Scott Nauman, Exxon's manager of economics and energy planning, said in a May 18 presentation at a University of Chicago oil conference.
Shell's project
In the high desert near Rifle, Colo., Shell engineers are burying hundreds of steel rods 2,000 feet underground that will heat the shale to 700 degrees Fahrenheit, a temperature at which Teflon melts.
The heat will be applied for the next four years to convert the hydrocarbons from dead plants and plankton, once part of a prehistoric lake, into high-quality crude that is equal parts jet fuel, diesel and naphtha, the main ingredient in gasoline.
Chevron, which helped build the Saudi Arabian energy industry when it struck oil in the kingdom in 1938, plans to shatter 200-foot thick layers of shale deep underground, said Robert Lestz, the company's oil-shale technology manager.
Rather than using heat to transform the shale into crude, Chevron plans to saturate the rubble with chemicals to convert it. The method will reduce power needs and production costs, Lestz said in a May 24 interview. Using chemical reactions to get oil from shale also means fewer byproducts such as ash and fewer greenhouse gases, he said.
Chevron scientists are working with researchers at the Los Alamos National Laboratory in New Mexico to determine which chemicals work best for converting shale to crude oil. Shell's heating technique amounts to "a brute-force approach," said Lestz, who is based in Houston.
Raytheon Co., the maker of Tomahawk missiles and the first microwave ovens, is developing a process that would use radio waves to cook the shale.
Exxon Mobil, based in Irving, Texas, plans to shoot particles of petroleum coke, a waste by-product of oil refining, into cracks in the shale. The coke will be electrically charged to create a subterranean hot plate that will cook the shale until it turns into crude. The company declined to discuss the progress of its oil shale tests.
'Oil is here'
"These are quite remarkable technological approaches," said Jeremy Boak, a geologist at the Colorado School of Mines in Golden, Colo., who spent 11 years cleaning up radioactive waste and disposing of weapons-grade plutonium at U.S. government sites. "The oil companies don't have the exploration problem of finding resources to drill. We know the oil is here. It's just a matter of getting it out."
U.S. oil shale deposits likely hold 1.5 trillion barrels of oil, according to Jack Dyni, a geologist emeritus at the U.S. Geological Survey. All 12 OPEC countries combined have proved crude oil reserves of about 911 billion barrels, led by Saudi Arabia, with 264.2 billion barrels, according to statistics compiled by BP Plc.
Skeptics of the potential for shale oil include Cathy Kay, an organizer for the environmental group Western Colorado Congress, who says the techniques will drain water supplies, scar the landscape and require so much power the skies will be choked with smoke from coal-fed generators.
"They are going to do absolutely massive environmental damage," said Kay, a South Africa native who's been spearheading the Grand Junction, Colo., group's anti-shale campaign since September.
"Why don't these companies invest these giant sums of money developing the cheapest, cleverest solar panel or geothermal process, instead of chasing this elusive oil?" Kay asked.
Shell, based in the Hague, estimates it can extract oil from Colorado shale for $30 a barrel, less than half the recent price of about $66 for benchmark New York futures.
Shell's process includes surrounding each shale field with an underground wall of ice. The so-called freeze walls are to prevent groundwater from swamping the heating rods and to protect the local water supply from contamination as the organic material in the rocks turns to oil, according to Terry O'Connor, the Shell vice president in charge of the company's Colorado shale project.
500,000 barrels
"There's a lot of testing to be done," O'Connor said in a May 24 interview. "We're proceeding cautiously."
O'Connor declined to say how much oil Shell expects it could produce from shale. Stark at IHS and other analysts said Shell expects to get 500,000 barrels a day from its project, 25 percent more than comes from Alaska's Prudhoe Bay, the largest U.S. oil field.
"This is an amazing resource," said James Bartis, an oil analyst at Rand, based in Santa Monica, Calif. Bartis says that success in the Rockies could cut crude prices by 5 percent, saving American consumers $20 billion a year.
"It's been raised before as a panacea for impending shortages, but never before has it been shown to be competitive with conventional oil," Bartis said.
Drillers, pipe-makers and metal fabricators such as Nabors Industries Ltd. and closely held UOP LLC will be the first to profit as Shell, Chevron and Exxon drill thousands of wells a half-mile underground by 2011.
The oil companies may begin pumping commercial quantities of oil from Colorado shale within a decade, about as long as Chevron will need to develop the 500 million-barrel Jack prospect in the deepwater Gulf of Mexico, according to Stark, who is a former Mobil Corp. geologist.
"Given the state of the oil market, more and more effort is being put into making shale a viable source," said Stanislaw. He estimated it will take six to eight years before oil companies perfect their extraction methods. "The timeframe is very long," he said.
In the 1970s, oil shale efforts involved mile-wide strip mines and factory-size cookers to boil giant limestone boulders. This time, no company expects to bring in front-loaders, heavy-duty dump trucks or thousands of miners to haul shale from open pits.
"The old technique required them to dig the equivalent of a new Panama Canal every month," said former Colorado Gov. Richard Lamm, whose tenure from 1975 to 1987 included the last attempt to extract oil from shale.
'More sane process'
"This new approach is a much more sane process, but that's all relative," Lamm said in an interview. "They're doing this in an immensely fragile area where wagon ruts from the Oregon Trail in the 1840s are still visible. It doesn't excite me because I think they're about to indelibly change our state."
Local residents are also leery, recalling the ghost towns and job losses left behind from the last shale boom and bust.
Battlement Mesa, Colo., a town Exxon built to house an expected 25,000 shale workers, was abandoned when the company shut its mine on May 2, 1982, a day locals still refer to as "Black Sunday." The town is now a retirement community.
"I don't think this is going to go anywhere," said John Savage, an attorney in Rifle whose father started a shale-oil company in 1956. "It's just too tough to get that oil out of the ground. There's trillions of barrels down there, but there's too much rock on top of it."
Oil companies also are exploring shale fields in Jordan, Morocco and Australia, though preliminary assessments indicate none is as oil-rich as the Colorado and Utah deposits. The final approval for full-scale projects in the U.S. won't be made until after 2010.
"If we waited a few million years, all this stuff would turn to oil," Rand's Bartis says. "Some people don't want to wait that long."
Oil Shale
Oil Shale
Oil shales ranging from Cambrian to Tertiary in age occur in many parts of the world. Deposits range from small occurrences of little or no economic value to those of enormous size that occupy thousands of square miles and contain many billions of barrels of potentially extractable shale oil. Total world resources of oil shale are conservatively estimated at 2.6 trillion barrels. However, petroleum-based crude oil is cheaper to produce today than shale oil because of the additional costs of mining and extracting the energy from oil shale. Because of these higher costs, only a few deposits of oil shale are currently being exploited in China, Brazil, and Estonia. However, with the continuing decline of petroleum supplies, accompanied by increasing costs of petroleum-based products, oil shale presents opportunities for supplying some of the fossil energy needs of the world in the years ahead.
Definition of oil shale
Most oil shales are fine-grained sedimentary rocks containing relatively large amounts of organic matter from which significant amounts of shale oil and combustible gas can be extracted by destructive distillation. Included in most definitions of "oil shale", either stated or implied, is the potential for the profitable extraction of shale oil and combustible gas or for burning as a fuel. Oil shale differs from coal whereby the organic matter in coal has a lower atomic H:C ratio and the OM:MM ratio of coal is usually greater than 4.75:5.
Origin of oil shale
Oil shales were deposited in a wide variety of environments including freshwater to saline ponds and lakes, epicontinental marine basins and related subtidal shelves. They were also deposited in shallow ponds or lakes associated with coal-forming peat in limnic and coastal swamp depositional environments. It is not surprising, therefore, that oil shales exhibit a wide range in organic and mineral composition. Most oil shales contain organic matter derived from varied types of marine and lacustrine algae, with some debris of land plants, depending upon the depositional environment and sediment sources.
History of the oil shale industry
The use of oil shale can be traced back to ancient times. By the seventeenth century, oil shales were being exploited in several countries. One of the interesting oil shales is the Swedish alum shale of Cambrian and Ordovician age that is noted for its alum content and high concentrations of metals including uranium and vanadium. As early as 1637, the alum shales were roasted over wood fires to extract potassium aluminum sulfate, a salt used in tanning leather and for fixing colors in fabrics. Late in the 1800s, the alum shales were retorted on a small scale for hydrocarbons. Production continued through World War II but ceased in 1966 because of the availability of cheaper supplies of petroleum crude oil.
An oil shale deposit at Autun, France, was exploited commercially as early as 1839. The Scottish oil shale industry began about 1859, the year that Colonel Drake drilled his pioneer well at Titusville, Pennsylvania. As many as 20 beds of oil shale were mined at different times. Mining continued during the 1800s and by 1881 oil shale production had reached one million metric tons per year. With the exception of the World War II years, between 1 and 4 million metric tons of oil shale were mined yearly in Scotland from 1881 to 1955 when production began to decline, then ceased in 1962. Canada produced some shale oil from deposits in New Brunswick and Ontario in the mid-1800s.
Common products made from oil shale from these early operations were kerosene and lamp oil, paraffin, fuel oil, lubricating oil and grease, and amonium sulfate.
With the introduction of the mass production of automobiles and trucks in the early 1900s, the supposed shortage of gasoline encouraged the exploitation of oil shale deposits for transportation fuels. Many companies were formed to develop the oil shale deposits of the Green River Formation in western United States, especially in Colorado. Oil placer claims were filed by the thousands on public lands in western United States. The Mineral Leasing Act of 1920 removed oil shale and certain other fossil fuels and minerals on public lands administered by the Federal Government from the status of locatable to leaseable minerals.
Several oil shale leases on Federal lands in Colorado and Utah were issued to private companies in the 1970s. Large-scale mine facilities were developed on the properties and experimental underground "modified in situ" retorting was carried out on one of the lease tracts. However, all work has ceased and the leases have been relinquished to the Federal Government. Unocal operated the last large-scale experimental mining and retorting facility in western United States from 1980 until its closure in 1991. Unocal produced 4.5 million barrels of oil from oil shale averaging 34 gallons of shale oil per ton of rock over the life of the project.
Recoverable resources
The amount of shale oil that can be recovered from a given deposit depends upon many factors. Some deposits or portions thereof, such as large areas of the Devonian black shales in eastern United States, may be too deeply buried to economically mine in the foreseeable future. Surface land uses may greatly restrict the availability of some oil shale deposits for development, especially those in the industrial western countries. The bottom line in developing a large oil shale industry will be governed by the price of petroleum-based crude oil. When the price of shale oil is comparable to that of crude oil because of diminishing resources of crude, then shale oil may find a place in the world fossil energy mix.
Oil shales ranging from Cambrian to Tertiary in age occur in many parts of the world. Deposits range from small occurrences of little or no economic value to those of enormous size that occupy thousands of square miles and contain many billions of barrels of potentially extractable shale oil. Total world resources of oil shale are conservatively estimated at 2.6 trillion barrels. However, petroleum-based crude oil is cheaper to produce today than shale oil because of the additional costs of mining and extracting the energy from oil shale. Because of these higher costs, only a few deposits of oil shale are currently being exploited in China, Brazil, and Estonia. However, with the continuing decline of petroleum supplies, accompanied by increasing costs of petroleum-based products, oil shale presents opportunities for supplying some of the fossil energy needs of the world in the years ahead.
Definition of oil shale
Most oil shales are fine-grained sedimentary rocks containing relatively large amounts of organic matter from which significant amounts of shale oil and combustible gas can be extracted by destructive distillation. Included in most definitions of "oil shale", either stated or implied, is the potential for the profitable extraction of shale oil and combustible gas or for burning as a fuel. Oil shale differs from coal whereby the organic matter in coal has a lower atomic H:C ratio and the OM:MM ratio of coal is usually greater than 4.75:5.
Origin of oil shale
Oil shales were deposited in a wide variety of environments including freshwater to saline ponds and lakes, epicontinental marine basins and related subtidal shelves. They were also deposited in shallow ponds or lakes associated with coal-forming peat in limnic and coastal swamp depositional environments. It is not surprising, therefore, that oil shales exhibit a wide range in organic and mineral composition. Most oil shales contain organic matter derived from varied types of marine and lacustrine algae, with some debris of land plants, depending upon the depositional environment and sediment sources.
History of the oil shale industry
The use of oil shale can be traced back to ancient times. By the seventeenth century, oil shales were being exploited in several countries. One of the interesting oil shales is the Swedish alum shale of Cambrian and Ordovician age that is noted for its alum content and high concentrations of metals including uranium and vanadium. As early as 1637, the alum shales were roasted over wood fires to extract potassium aluminum sulfate, a salt used in tanning leather and for fixing colors in fabrics. Late in the 1800s, the alum shales were retorted on a small scale for hydrocarbons. Production continued through World War II but ceased in 1966 because of the availability of cheaper supplies of petroleum crude oil.
An oil shale deposit at Autun, France, was exploited commercially as early as 1839. The Scottish oil shale industry began about 1859, the year that Colonel Drake drilled his pioneer well at Titusville, Pennsylvania. As many as 20 beds of oil shale were mined at different times. Mining continued during the 1800s and by 1881 oil shale production had reached one million metric tons per year. With the exception of the World War II years, between 1 and 4 million metric tons of oil shale were mined yearly in Scotland from 1881 to 1955 when production began to decline, then ceased in 1962. Canada produced some shale oil from deposits in New Brunswick and Ontario in the mid-1800s.
Common products made from oil shale from these early operations were kerosene and lamp oil, paraffin, fuel oil, lubricating oil and grease, and amonium sulfate.
With the introduction of the mass production of automobiles and trucks in the early 1900s, the supposed shortage of gasoline encouraged the exploitation of oil shale deposits for transportation fuels. Many companies were formed to develop the oil shale deposits of the Green River Formation in western United States, especially in Colorado. Oil placer claims were filed by the thousands on public lands in western United States. The Mineral Leasing Act of 1920 removed oil shale and certain other fossil fuels and minerals on public lands administered by the Federal Government from the status of locatable to leaseable minerals.
Several oil shale leases on Federal lands in Colorado and Utah were issued to private companies in the 1970s. Large-scale mine facilities were developed on the properties and experimental underground "modified in situ" retorting was carried out on one of the lease tracts. However, all work has ceased and the leases have been relinquished to the Federal Government. Unocal operated the last large-scale experimental mining and retorting facility in western United States from 1980 until its closure in 1991. Unocal produced 4.5 million barrels of oil from oil shale averaging 34 gallons of shale oil per ton of rock over the life of the project.
Recoverable resources
The amount of shale oil that can be recovered from a given deposit depends upon many factors. Some deposits or portions thereof, such as large areas of the Devonian black shales in eastern United States, may be too deeply buried to economically mine in the foreseeable future. Surface land uses may greatly restrict the availability of some oil shale deposits for development, especially those in the industrial western countries. The bottom line in developing a large oil shale industry will be governed by the price of petroleum-based crude oil. When the price of shale oil is comparable to that of crude oil because of diminishing resources of crude, then shale oil may find a place in the world fossil energy mix.
Subscribe to:
Comments (Atom)