A Question Of Shale  

2007 Update - more on shale oil in Queensland's Shale Oil Billions In The Balance ?.

Shale Oil is one of those great white unconventional oil hopes that economists pull out of the bag of tricks when they want to tell us how vast the remaining hydrocarbon reserves are.

With Bubba pouring a bucket on the whole "shale will save us" - or help us to fry ourselves, depending on your point of view - idea (via Mobjectivist's "Belly of the Beast" post), I think the time has come to investigate the whole shale oil idea.

I worked with a major oil company for 2 years trying to develop a way to commercialize oil shale. Trust me on this, it ain’t going to happen. Most oil companies know this. The few (one??) that don’t are totally deluded.
Oil shale is not oil. Oil shale is rock that has a relatively high concentration of organic carbon compounds in it. Geologists call this a source rock. If you heat this shale to 700 degrees F you will turn this organic carbon (kerogen) into the nastiest, stinkiest, gooiest, pile of oil-like crap that you can imagine. Then if you send it through the gnarliest oil refinery on the planet you can make this shit into transportation fuel. In the mean time you have created all kinds of nasty by products, have polluted the air and groundwater of where ever you have extracted it. You have also created an enormous pile of superheated rock that will take hundreds to thousands of years to cool off.

Rigzone finished off their set of posts on tar sands this week with a look at shale oil as well, which takes a look at the latest in extraction processes (apparently electric heaters are better than fire - good to see the process making it into the 20th century anyway) but notes that myriad environmental problems remain.

U.S. officials, the petroleum industry and environmentalists are studying Alberta's tar sands development for ideas on how to exploit oil sands and oil shale resources that some say could turn Utah, Wyoming and Colorado into the nation's oil production center.

Oil shale deposits found in a 16,000 square-mile region bounded by Utah's Uinta Basin, Wyoming's Green River Basin and Colorado's Piceance Basin could hold 1 trillion to 2 trillion barrels of oil, depending on the grade of shale being produced, said James Bunger, acting energy director for the Utah governor's economic development office.

Oil shale, which would also either be mined or drilled in situ, would require processes to fracture and heat the fine-grained rock to release gases and oils out of the keragen. Keragen is the shale equivalent of bitumen in the tar sands.

Shell Exploration and Production Co. has been experimenting with electricity to heat the rock up to 700 degrees at a site west of Denver. A heating element is lowered into the well to slowly convert the keragen into oils and gases, which are pumped to the surface. The company says it intends to make a decision about commercial development efforts by about 2010 ( E&E Daily, June 24).

Enviros see trouble ahead Environmentalists are already raising red flags about oil shales. Steve Smith, assistant regional director for The Wilderness Society's Four Corners States office, told the Senate Energy and Natural Resources Committee that Alberta's experience should be a cautionary tale for the United States. For one thing, tar sands development in Alberta consumes so much natural gas that it might deprive the United States of supplies it needs, he said.

"Tar sands development in Canada could not occur without the use of large quantities of natural gas -- potentially much of the entire production to be carried by the new pipeline from the MacKenzie Delta," Smith said at an April 12 hearing. "Tar sands development in Canada is one of the principal reasons natural gas exports to the United States will not increase and may even decline over the next 10 years."

Smith also raised air quality, water use and quality, and economic considerations for oil shale development in a region. Tar sand development consumes large amounts of water, he said. Large consumption of water by the industry would post major problems in the West, where booming cities depend on the Colorado River for drinking water as well as tourism and recreation destination.

"I raise just a few of the many questions that must be asked," Smith said. "Is any water available for a new energy industry in drought years? If so, would the withdrawals for oil shale result in a reduction of flows -- or even a loss of flows -- in the critical reach just upstream of Grand Junction? If so in turn, what endangered species issues are implicated? If any water is available in drought years, how would oil shale development affect the total amount of water remaining for Colorado's use under the Law of the River?"

If we ignore all these externalities (as economists and corporate executives are prone to do), there is still the problem of the low EROEI for shale oil - estimates vary from 0.7 to 13.3 (and I'm not sure where the higher number comes from) which I suspect means that the exploitable shale reserves are likely to be far smaller than some of the grandiose estimates proferred.

In a similar vein to the Rigzone article, Grist notes that "Energy execs are begging Congress to let them dig up the West for oil shale" in "My Own Private Saudi Arabia".

Energy execs beg Congress to let them dig up the West for oil shale

"We can safely say of our future with regard to oil and gas, it has yet to see its brightest days," said Rep. James Gibbons (R-Nev.) in a House subcommittee meeting yesterday. We know what you're thinking: What the ... ? Well, apparently Colorado, Utah, and Wyoming are sitting on top of lots and lots of oil shale, a porous rock soaked through with petroleum. In fact, the Green River Basin is estimated to contain over a trillion barrels of oil, enough to eliminate trans-Atlantic oil imports by 2025.

Energy execs are chomping at the bit to start digging, but farmers and conservationists in the West aren't quite so gung-ho. The last big oil-shale boom, in the 1970s, went bust. Past oil-shale extraction methods have included underground nukes (!) and heavy mining, and though energy companies promise this time around they'll be environmentally sensitive, similar promises about coalbed methane extraction yielded contaminated land and water. Tread lightly, warned Russ George of the Colorado Department of Natural Resources, "but do tread."

The Energy Blog has also taken a balanced look at oil shale and while some companies are claiming improved extraction processes, they don't sound convincing at all when you look at them and Jim doesn't sound very positive.

Shell Exploration and Production is experimenting with a new technology that the company estimates could produce oil for $25 to $30 per barrel. The Shell process involves drilling a well 2,000 feet deep and then heating the surrounding rock to between 600 and 700 degrees for two years. The heat allows the oil and gas to flow to the surface. A thick ring of ice is formed around the well which keeps contaminants from polluting groundwater. The heating and freezing is energy-intensive, but Shell says they still produce three times as much energy as they use in the process. It will take another five years of research and testing before Shell decides whether the technology can be applied commercially.

Of course Saudi's proven reserves are money in the bank and our shale oil reserves are still pie in the sky. At least there is some optimism that we are making some progress in developing this huge reserve. The Oil Tech process has many potential environmental problems associated with the mining of the shale rock. I presume their cost of $10 a barrel does not include any of the mining costs. Shell's estimated costs are still in the acceptable range when competing with $50 crude, and I assume their cost includes all expenses.

Energy Bulletin only has a small set of shale related articles which I think indicates just how little progress has been made in this area over the past 30 years.

The only shale pilot project in Australia (the Stuart Shale oil Project) has been closed, with tar sands giant Suncor admitting the process they were using was not commercially viable. World Oil magazine had a rather bullish article on shale late last year which claimed that stage 2 of this project may yet go ahead - but I can't find any evidence of this on Google, and the owner discontinued their application to begin stage 2 in November 2004.

By far the most positive source I've been able to find on the topic of shale oil is my ragged copy of "The Control of Oil", which was extremely enthusiastic about the potential for oil shale and inferred that the oil companies had been very much against the development of these reserves and that commercially viable extraction processes had been in existance for several decades (before the 1970's). It didn't have an answer to the environmental issues though, and unless the oil companies were very adept at manufacturing the shale oil bust of the 1980's it would seem that shale isn't as commercially viable as Professor Blair believed.

I think the final word should belong to the prophet of peak oil, King Hubbert, who noted (from Mobjectivist's great "Our Petroleum Predicament" post) :

You read about "oil from shale", right? You heard about 1,000 billion barrels of oil out west? Don't get excited, it's going to stay there. Dr. Hubbert told the Senate Committee on Interior and Insular Affairs it wouldn't work, three years ago this month.

It really sounds simple. You "simply" dig up such enormous quantities of shale (1.88 million tons a day,) that it's equal to digging a Panama Canal every week. You crush it fine and heat to 1,100 degrees in a retort to boil off the oil locked in the rock. Then you get rid of the rock. Only now it's turned caustic and has increased in bulk by 20% to 33%. So you back-fill the leftovers, called tailings, into the hole you dug it out of. Since you still have a lot left over, you dump it into the empty scenic canyons of the west. To do this you need to grab off 89% of the undeveloped water of Colorado and Utah and half of Wyoming's. Oh yes, and you turn the Colorado River system into alkaline salts which means you wreck the agriculture in Colorado, Arizona and southern California. What will this get you? 1-1/2 million barrels of oil a day out of the 17 million per day that the U.S. is using!

A news item in the Milwaukee Journal of August 29, 1976,25 says that the last of the oil shale development companies, Standard Oil, Gulf, Shell and Ashland, have walked away from the projects in Colorado and Utah, asking the Department of the Interior to release them from paying any more on their leases. Standard and Gulf have already paid $126 million of the $210 million they bid, and Shell and Ashland have paid about $70 million of the $117.8 million they bid. You have to admit they tried, really tried and they spent a big buck to make it work, but it won't.