Shale Oil

[Clandestino]

Squeezing Oil From a Stone
Energy Quest Again
Leads to Shale, but
Challenges Remain
By BEN CASSELMAN
July 18, 2008

The nation's frantic search for crude-oil sources is leading to one of the oldest, richest and most-elusive prizes in the petroleum industry: oil shale.

The U.S. has the largest known reserves of the coal-like rock, 80% of which lie beneath federal lands. By some estimates, U.S. oil-shale reserves could yield 800 billion barrels of oil, triple the current proven reserves of Saudi Arabia.

But tapping that potential requires heating rocks buried deep beneath the earth to hundreds of degrees Fahrenheit. Oil companies are racing to find ways to do so economically, but their solutions are years away from commercial use.


Associated Press
Oil shale rock burns on its own when lit with a torch.
That means oil shale is like many other potential solutions to the nation's energy woes: a resource of staggering potential that is a decade too far. Oil beneath the Alaskan wilderness or the California coast could add billions of barrels to U.S. production but will take years to access. Wind power is contributing to the power grid in a handful of areas, but technical and logistical hurdles must be overcome before it can play more than a bit part is the broader energy picture. Next-generation nuclear plants, cellulosic ethanol, solar power and other technologies all face similar challenges.

Such lengthy time horizons haven't stopped politicians from seizing on oil shale's potential. President George W. Bush, who earlier this week lifted an executive ban on offshore drilling to try to spur domestic oil production, is pushing Congress to lift a moratorium on leasing government-owned land for oil-shale development. Last month, Mr. Bush touted oil shale's potential to replace a century's worth of oil imports.

But there have been a century's worth of failed efforts to tap this vast resource.

Oil shale is found across a swath of Colorado, Utah and Wyoming. In the past, companies have tried bringing the rock to the surface to heat it, but that has proved too costly.

Now the industry is trying again. Companies including Chevron Corp. and Royal Dutch S PLC say high prices have made the production of oil from shale feasible and are pouring cash into pilot projects. They are trying new technologies to cut the costs, including experimenting with heating the shale while it is still buried.

Oil shale's fortunes have risen and fallen before. Interest ed in the 1920s, the 1950s and the 1970s as high oil prices made oil shale's challenges seem worth trying to overcome. When prices fell, the investments dried up.

Many in Rifle, Colo., still remember what they call Black Sunday, the day in 1982 when Exxon Corp. closed a billion-dollar oil-shale project, which cost 2,000 jobs. "There was a bad taste left in the mouths of a lot of people," says Keith Lambert, the town's current mayor.

Industry leaders argue that the price collapses that undermined previous efforts won't be repeated this time because of rising demand for oil in India and China and the increasing difficulty of finding new supplies. But they say most commercial production is a decade away.

Skeptics argue that new production techniques are too complex to be practical, that environmental concerns will drive costs up even further and that oil shale's history of failing to meet expectations are causes for caution.

"We can technically put a man on Jupiter," says Houston investment banker Matthew Simmons, a well-known proponent of the theory that global oil production may already have peaked. "Being technically practical and technically possible are two very different things."

The "oil" in oil shale is kerogen, a precursor to oil. Left alone underground at sufficient temperature and pressure, kerogen will turn into oil -- but it takes millions of years.

Geochemists can speed that process by heating the rock to several hundred degrees Fahrenheit until the kerogen turns into flowing crude oil.

Royal Dutch S has been working for more than 25 years on a novel technology that heats the shale in the ground. Such an "in situ" process wouldn't involve an expensive and environmentally troublesome mining operation and wouldn't create thousands of tons of waste in the form of spent shale, as the mining method does.

But S 's process is complicated. The company plans to insert electric heaters hundreds of feet into the ground to heat the oil shale to between 650 degrees and 700 degrees for more than two years. In order to prevent groundwater from flowing into its production area -- which would raise pollution concerns and dissipate the heat -- S plans to create an underground wall around its site by freezing surrounding groundwater, down to 2,000 feet deep.

S has tested the steps individually, but never all together. "We understand there are skeptics," said S Vice President Terry O'Connor. The company says it won't decide whether its project is commercially viable until the middle of the next decade.

Other companies are trying different techniques. American Shale Oil Corp., a company controlled by telephone company IDT Corp., is preparing to test heating the oil shale in Colorado by injecting steam into the ground through U-shaped pipes.

Oil-services company Schlumberger Ltd. earlier this year bought technology from Raytheon Co. In the 1970s, the defense contractor drilled into the ground in Utah and inserted radio transmitters that heated rock in the same way a microwave oven heats leftovers. The tests proved the technology could heat shale to the necessary temperature, says Schlumberger Vice President Rod Nelson. But falling oil prices led Raytheon to shelve the program before it could produce any oil. Says Mr. Nelson: "It's a little bit 'Back to the Future.'"

Daniel Elcan, managing partner of Oil Shale Exploration Co., says the older method of producing oil from shale -- mining and heating on the surface -- is being used around the world.

"A lot of people say it doesn't work. That's just not true," says Mr. Elcan. In Brazil, he adds, "I can show you a process that's been working for 30 years."

His company plans to use Brazilian technology for cooking shale above ground. At a pilot project, using an existing Utah mine, the company will produce 4,000 barrels of oil a day, Mr. Elcan says. He says he hopes to be producing 50,000 barrels a day in the state by 2013.

While several countries have oil-shale industries, large-scale production is rare. Brazil's 4,600 barrels of daily oil-shale production amounts to about 19 seconds worth of U.S. consumption.

Most oil-shale production has taken place in countries with relatively few environmental restrictions, such as Estonia and China.

Democrats in Congress have blocked the U.S. Bureau of Land Management from opening more land to oil-shale production, arguing it could disturb pristine wilderness lands, contaminate or deplete groundwater reserves and pollute the air.

The political and scientific challenges aren't easily separated. The oil companies argue that they can only justify spending millions on experimental technologies if they know they will get access to the land.

Moreover, industry advocates argue, the clock is ticking. They point to Canada, where production of oil from tar sands -- in many ways a similar process -- has taken decades but exceeds one million barrels of oil a day.

"It's something that we need to start now so it can have a significant impact down the road," Mr. Elcan says. "It's not going to happen overnight."

http://online.wsj.com/article/SB1216...s_inside_today



what do you think????

[boutons_]

how much $energy goes into heating and freezing shale ?

and where does this energy come from? burning coal?

is production of kerogen from shale carbon-neutral?

ie, what is the total cost, internal and external, of kerogen?

Coal isn't "cheap" when all the external costs are accounted for, pollution and destruction of land and water, CO2, mercury and lead air pollution.

But we can be pretty sure, and must assue, that the price of oil in 10-20 years will still be high enough to justify kemrogen calculated only on internal costs.

"50,000 barrels a day in the state by 2013"

Only 5 years to go to get 0.2% of USA's daily oil consumption. Book It!

It's MUCH cheaper, sooner, more sustainable to conserve 10% of US oil consumption by reducing transport fuel costs.

[Sec24Row7]

Why don't you help us all out by not driving and turning off your electricity to helps us get there to that 10%.

You will be missed on the forums...but think of the good you will be doing.

[Clandestino]

yeah, stay off the ing internet and conserve energy!

[boutons_]

I love the unendingly brilliant inputs from the right-wing dumb s.

[Clandestino]

would you not "being on the grid" save energy???

[RandomGuy]

Skeptics argue that new production techniques are too complex to be practical, that environmental concerns will drive costs up even further and that oil shale's history of failing to meet expectations are causes for caution.

"We can technically put a man on Jupiter," says Houston investment banker Matthew Simmons, a well-known proponent of the theory that global oil production may already have peaked. "Being technically practical and technically possible are two very different things."

I grew up in the Rockies. Shale was always "just around the corner". 25 years later, it is STILL not economically viable. It will stay that way.

Here is the law of receding horizons and why it kills shale and its cousin, tar sands:

Estimates of profitability always assume current costs. "This project will be viable if oil reaches X"--- with the assumption that costs stay stable.

If oil gets more expensive that drives EVERYTHING else up as we are finding out. So that project that would have been profitable when oil reaches X is all of a sudden facing massive cost overruns.

Oops.

Shale and tar sands are boondoggles. The ONLY people saying any different are the guys who are trying to get you to invest in their companies.

IF there really was a good chance of money to be made, investment cash would flood in. That the money spigot has been tight should say volumes about the cost/benefit as judged by people who are real experts in the field.

[Extra Stout]

Here is the law of receding horizons and why it kills shale and its cousin, tar sands:

...

Shale and tar sands are boondoggles. The ONLY people saying any different are the guys who are trying to get you to invest in their companies.

IF there really was a good chance of money to be made, investment cash would flood in. That the money spigot has been tight should say volumes about the cost/benefit as judged by people who are real experts in the field.

Go ahead and google "Fort MacMurray" and then wipe the egg off your face.

[boutons_]

Some of you shale oil advocates tell us, to produce a barrel of shale oil:

1. how much water ? Is the water re-usable? How mich $$ to clean up the water?

2. how much energy? (heating rock, sounds extremely efficient)

3. how much CO2 and methane released?

4. how many tons of shale rock for barrel of oil, and where does this used shale rock go?

5. what is the "well head" price per barrel?

some answers:

"According to the Interior Department shale oil costs between about $38-65 per barrel to produce, whereas onshore conventional oil costs about $19.50 per barrel. The Department also points out that, due to the higher energy requirements of extracting the oil, shale oil produces less energy than conventional oil, coal or wood."

"Currently companies pay 12.5-18.8% to the feds for on and offshore oil development, while the lowest Interior Department proposal fixes the royalty rate for oil shale at 5%."

http://www.treehugger.com/files/2008...ation-plan.php

=============

So shale oil is so expensive to produce, it needs a subsidy as reduced royalty. I wonder if the oilcos will give us a break on gas prices for selling us OUR SHALE OIL?

===============

The plant is anticipated to demonstrate a scale feasibility of producing oil from oil shale at a target cost of below $30 USD per barrel...EnShale [the subsidiary company] has a patent pending extraction process that uses coal gasification, a clean coal technology, as a heat source and horizontal kilns. The oil shale is heated to approximately 1,000 degrees Fahrenheit, which releases the oil from the shale in a gaseous form and then is cooled to become liquid oil. The pilot plant is expected to be completed by late 2008.

http://www.treehugger.com/files/2008...rado-river.php

We all know the shale oil men will treat the Colorado River and its basin with utmost respect.

[Nbadan]

Yep, shale oil production requires a lot of water which is another rare commodity in the Western U.S.

[RandomGuy]

Go ahead and google "Fort MacMurray" and then wipe the egg off your face.

Yes, I know there is money flowing into tar sands, and even that one or two large oil companies are cautiously feeling around for the possibility.

Money is flowing into the development, but if you want to make a bet as to the ultimate amount and profit to be made on oil sands, step up.

When I say "flood" I mean comparative to the billions that the oil companies are spending on exploration and drilling of other sources of energy.

I stand by my statement: oil sands and oil shale are boondoggles. The fact that people are pumping money into these ponzi schemes doesn't change the underlying physics.

If you want to invest your retirement money in the companies that stand to profit from them, go right ahead.

[Aggie Hoopsfan]

I love the unendingly brilliant inputs from the right-wing dumb s.

Someone's got to keep up with your unendingly brilliant liberal pussy ass thoughts.

[RandomGuy]

Well, what about it Stout, gonna go out and put some money in it?

[Sec24Row7]

Well, what about it Stout, gonna go out and put some money in it?

It's not worth it to do with the threat of windfall profits taxes...

[Extra Stout]

Well, what about it Stout, gonna go out and put some money in it?

I already own stock in Petrobank.

[Aggie Hoopsfan]

It's not worth it to do with the threat of windfall profits taxes...

Obama would eat it on windfall profits taxes.

The day Congress passes a law like that Exxon and every other major oil producer picks up and moves their headquarters overseas, and takes the 1/3 of all corporate income taxes paid in this country with them.

Obama's a ing idiot.

[RandomGuy]

I already own stock in Petrobank.

I see. Good luck, and at least you are confident enough to do so. Props, man.

[RandomGuy]

I already own stock in Petrobank.

Read through their 2007 annual statement. Interesting.

They will likely make a good chunk of money this year.

They raised a LOT of capital in the last year or two, and are investing heavily in production.

For a common shareholder:

They issued a LOT of convertable debt and a lot of common shares. This will tend to dilute any future earnings for the common stock. This also means that management sees a lot of opportunity, but be careful and mind their expense growth rate, especially the costs associated with developing the reserves they purchased.

Your first clue as to if/whether to bail from this should be that their development costs were higher than management thought. I would bet a good chunk of money that they have significantly underestimated a few of their costs, as building up the development and doing what they want to do there will create a huge demand e in labor and other construction materials.

I would also keep a close eye on what the provincial governments and Canadian federal government does/says about royalties and tax breaks.

That bit of caution said, management sees a lot of profit potential and has aggressively invested in capacity. The potential payoff is big. Also, their Columbian investments look to have some good prospects with the current government momentum against the FARQ, as that will take a lot of risk out of the Columbian environmental (business environment) risk.

Some of their technology involves methods of extraction that don't involve vast open pits, so that will be a good thing when it comes time to pay the butcher's bill for cleanup after their operations.

Seems to be a good investment from what I read in their annual statement.

[Ignignokt]

Take it from me, its better to collect gubmint paychecks.

[Nbadan]

So you support polluting our rivers, devastating our natural resources so oil companies can export even more oil to the highest bidder....

[Extra Stout]

So you support polluting our rivers, devastating our natural resources so oil companies can export even more oil to the highest bidder....

What attracted me to Petrobank was the THAI process, which involves injecting small Asian people into the ground to dig the oil out.

This is distinct from the HITA process, in which we abandon oil and Steve Smith carries you around with a rickshaw.