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  1. Oil Shale: A viable step towards energy independence? Author: Benjamin Reichard; Contact: bedoxr@gmail.com

  2. Overview • What? Where? Why? How? • Economic Appeal • Environmental Concerns • Legal Barriers

  3. What is oil shale? • Formed over millions of years ago by deposition of debris on lake beds and sea bottoms • Heat and pressure transformed the materials into oil shale • Known commonly as "the rock that burns"

  4. Oil shale is rock that contains bituminous materials released as a petroleum-like liquid when heated To obtain oil, shale must be heated to a high temperature (a process called retorting) The resultant liquid must then be separated and collected Traditional and current mining methods have been used to extract the shale before retorting 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 What is oil shale?

  5. Where is oil shale? • A significant portion is found here in the United States, which is why it may be so important to energy independence • Much of the American oil shale is found in the Western states: Colorado, Utah, and Wyoming • Indeed, much of the world’s oil shale is located in that region

  6. Where is oil shale? • It is estimated that the Green River Formation in the western U.S. contains nearly 2 Trillion barrels of oil • Recoverable estimates range from 500 billion to 1.1 trillion • Even a middle-of-the-road estimate of 800 billion barrels is 3 times the proven reserves of Saudi Arabia

  7. Why do we care? • 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 years

  8. What are we waiting for? • Cost of production has historically been prohibitive • Cost of pumping oil has always been less • Consequently, there has been little economic incentive to develop oil shale technologies

  9. What are we waiting for? • Oil shocks of the 1970’s and 1980’s stimulated some interest previously, but crude prices leveled off • Also, during the oil crises, major oil companies spent several billion dollars in various unsuccessful attempts to commercially extract shale oil • Recently, rising oil prices have renewed interest in oil shale as an economically viable alternative to “traditional” oil

  10. The rising price of oil • Currently, oil prices are hovering below $70 per barrel • Some forecasts predict a rise to $85 per barrel over the next year

  11. The Cost of Oil • Price as of 4.25.2007: • $67.25/barrel • 1 year projected forecast: • $87.42/barrel

  12. The Recurrent Themes • Accessibility • Technological limitations • Socio-economic factors • Environmental impacts • Legal barriers

  13. How do we get it? • Mining • Open-pit • Underground • In situ conversion

  14. Typical Deposit

  15. Extraction Issues • 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 • After retorting, the oil must be upgraded by further processing before it can be sent to a refinery • The spent shale must be disposed of, often by putting it back into the mine • Eventually, the mined land is reclaimed

  16. Surface Retort

  17. In situ retorting: a new frontier? • Shell Oil is currently developing an in-situ retorting process known as thermally conductive in-situ conversion (ICP) • The process involves heating underground oil shale • The volume of oil shale is heated over a period of 2-4 years • The released product is pumped in conventional ways

  18. The Freeze Wall

  19. The Freeze Wall

  20. Advantages of ICP • No open-pit or subsurface mining • No leftover piles of tailings • Avoid combustion-related groundwater contamination • Minimize unwanted byproducts • Minimize water use • Reach deeper resources previously deemed inaccessible

  21. Development • Shell, Chevron, and E.G.L. Resources have all submitted in situ conversion plans for the Green River fomation to the BLM • BLM has done Environmental Assessments with findings of no significant impact (!), thus paving the way for these larger scale test projects

  22. The Latest Advance: Thermal Solution Processing • Unproven outside the laboratory setting, thermal solution processing would be quite a coup • It would enhance oil yields • Produce an oil more stable for shipping and storage • Improve recovery of by-products • Produce less spent shale and lessen environmental impacts

  23. Economic Factors • U.S. demand for oil is increasing • By 2025, imports are expected to account for 70% of demand • Demand worldwide is growing • OPEC is the primary supplier • When will production peak (or has it already)?

  24. Economic Factors • Production of oil shale could offset impact of rising import prices • Decreased demand on foreign sources on the part of the U.S. could also stabilize prices on the world market • Previous oil shocks have taught important lessons about the far-reaching effects of price spikes

  25. Price Spikes • A threat not to be ignored as demand grows and known reserve amounts remain static • Inflation • High interest rates • High unemployment rates • A stagnant economy

  26. Economic Appeal • High quality and environmentally desirable feedstock for jet fuel, and other military and civilian fuels • Nitrogen compounds important to chemical manufacturing industry • SOMAT (shale oil modified asphalt) has proven value because it extends pavement life

  27. Primary Benefits • Reduced price in crude • Increase in employment • Assured supply • Increased state and local revenues • Increased federal revenues • Technology export • Strategic benefits • Supply diversity • Favored fuel quality

  28. Mitigating Economic Factors • Large capital investments required • Long lead times precede flow of revenue streams • Price volatility of conventional petroleum • Uncertainty of costs required for commercial viability • Costs of regulatory compliance

  29. Alberta’s Tar Sands: A Model for U.S. Oil Shale Production • Commercial success of ventures in Alberta’s tar sands development has added 174 billion barrels to Canada’s proven reserves • U.S. oil shale resources are just as rich, accessible, and high quality as the Alberta tar sands. . . • But commercial investment is required

  30. Tar Sands & Oil Shale • Alberta’s sands are producing about 22 gal/ton • The richest reserves of oil shale in the U.S. are conservatively estimated to produce 30 gal/ton, with some test studies yielding 38 gal/ton of shale

  31. Tar Sands & Oil Shale • A further advantage of oil shale is its areal density • While Alberta’s tar sands yield about 100,000 barrels of oil per acre, the Green River Formation oil shale has a density of over 1 million barrels per acre • This density translates into economic and technological benefits for companies • It also means a smaller environmental footprint

  32. Advantages of oil shale • Tar sands produce “bitumen” whereas oil shale produces “kerogen,” a product richer in hydrogen and nitrogen, and therefore more valuable • Oil shale production does not require removal of as much overburden • Oil shale production requires less external energy (estimated 300,000 btu/bbl of oil shale syncrude vs. 350,000 btu/bbl of tar sand syncryde)

  33. Tar Sands & Oil Shale: Getting over the hump • Technological issues • Will new methods of extraction and processing develop? • Will those methods be able to comply with environmental regulations? • Economic issues • Will a market develop? • Will capital be attracted? • What will the returns look like?

  34. Could it be profitable? • Mining techniques are not the problem • The issue is in creating a commercial-scale retorting process • Mine • Retorting plant • Upgrading plant • Supporting utilities • Spent shale reclamation • Models predict that such a complex is unlikely to be profitable unless oil prices reach $70-$95/barrel

  35. Could it be profitable? • In situ conversion may provide an answer • Less surface area required • No spent shale reclamation • Successful field test, but commercial-scale development is in its infancy • Nonetheless, Shell predicts that in situ conversion processes could be profitable with an oil market between $25-$30 per barrel

  36. Could It Be Profitable? • Playing it close to the vest: • Shell has submitted the largest patent application in U.S. history for its ICP technique • Shell representative, Terry O'Cannon states, "We try to keep them from speculating too much and keep expectations low because we don't know if this technology will be successful and viable in the long term."