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Oil Shale:

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Oil Shale: A viable step towards energy independence? Author: Benjamin Reichard; Contact: bedoxr_at_gmail.com Overview What? Where? Why? How? Economic Appeal ... – PowerPoint PPT presentation

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Title: Oil Shale:


1
Oil Shale
  • A viable step towards energy independence?
  • Author Benjamin Reichard Contact
    bedoxr_at_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"

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What is oil shale?
  • 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

6
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 worlds oil shale is located
    in that region

7
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

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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

12
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

13
What are we waiting for?
  • Oil shocks of the 1970s and 1980s 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

14
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

15
The Cost of Oil
  • Price as of 4.25.2007
  • 67.25/barrel
  • 1 year projected forecast
  • 87.42/barrel

16
The Recurrent Themes
  • Accessibility
  • Technological limitations
  • Socio-economic factors
  • Environmental impacts
  • Legal barriers

17
How do we get it?
  • Mining
  • Open-pit
  • Underground
  • In situ conversion

18
Typical Deposit
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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

21
Surface Retort
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23
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

24
The Freeze Wall
25
The Freeze Wall
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28
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

29
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

30
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

31
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)?

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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

34
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

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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

37
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

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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

43
Albertas Tar Sands A Model for U.S. Oil Shale
Production
  • Commercial success of ventures in Albertas tar
    sands development has added 174 billion barrels
    to Canadas 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

44
Tar Sands Oil Shale
  • Albertas 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

45
Tar Sands Oil Shale
  • A further advantage of oil shale is its areal
    density
  • While Albertas 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

46
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)

47
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?

48
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

49
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

50
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."

51
Could it be profitable?
  • We are at least 10 years away from oil shale
    development reaching the production growth phase
  • More than 20 years away from 1 million barrels
    per day production levels
  • And more than 30 years away from the target
    production of 3 million barrels per day
  • But rising oil prices suggest it could be worth
    the initial outlay

52
Legal Issues
  • Water rights
  • Land use
  • Permitting
  • Leasing

53
What about water?
  • A perpetual problem in the western U.S.
  • Water is needed for
  • Plant operations
  • Reclamation procedures
  • Support infrastructure
  • Population growth
  • State legal regimes of prior appropriation
    conflict with federal mineral rights regimes

54
Water Rights
  • Recently, California has returned 0.8 million
    acre-ft./year to the upper basin states
  • This is anticipated to be enough to support a 2.5
    million barrels/day oil shale industry
  • But that figure is at least a decade away
  • Plus, population growth will require water
  • And no one knows how climate change might affect
    water flows in the near and long term
  • Short supply of water means greater cost for
    appropriative rights

55
Infrastructure?
  • Extensive oil and gas development in the region
    has created plenty of roads
  • Do enough power generation facilities already
    exist to meet external energy needs?
  • Population growth to support industry will
    require even more infrastructure upgrades and
    poses more environmental risks

56
Mining Law
  • 1872 Mining Act opened public lands to free
    mineral development and patenting
  • 1920 Minerals Leasing Act removed oil shale from
    coverage of the 1872 Act
  • A federal leasing regime such as that for oil and
    gas has never grown up around oil shale
  • FLPMAs recording requirement cleared public
    lands of many stale mining claims

57
Mining Law
  • Energy Policy Act of 1992 required holders of
    unpatented claims to pay a fee of 550/year
  • After 1992, patent applicants are limited only to
    ownership of the oil shale estate, while the
    federal government retains surface and other
    minerals
  • Nevertheless, some legal disputes are still
    kicking around as to pre-1920 claims that have
    not been perfected

58
Extracting oil shale
  • 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

59
Green River Formation Land Ownership
60
Energy Policy Act of 2005
  • 369. OIL SHALE, TAR SANDS, AND OTHER STRATEGIC
    UNCONVENTIONAL FUELS
  • Act recognizes that oil shale, tar sands, and
    other unconventional fuels are strategically
    important domestic resources
  • Emphasizes research for commercial viability in
    an environmentally sustainable and sound manner
  • Directs the Dept. of Interior to develop a
    research and development leasing program for the
    Green River Basin
  • Directs the Dept. of Interior to complete a
    prgrammatic environmental impact statement (PEIS)
    for a commercial leasing program
  • The Act requires the Dept. of Interior to
    promulgate regulations for a commercial oil shale
    and tar sands leasing program and authorizes the
    Secretary to conduct lease sales

61
Research and Development
62
RDD Leasing Timeline
63
Proposed Test Site
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65
PEIS Timeline
  • Currently, a draft PEIS is scheduled for Summer
    2007

66
Environmental Concerns
  • 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
  • Both conventional approaches to oil shale
    processing use considerable water
  • The total energy and water requirements together
    with environmental and monetary costs have made
    production uneconomic

67
Environmental Concerns
  • Conventional mining operations bring obvious
    changes to the topography
  • Air quality impacts have not been thoroughly
    studied
  • Mass. v. EPA could have a significant impact here
    because processing petroleum products from oil
    shale involves significantly higher CO2 emissions
    than crude oil processing

68
Environmental Concerns
  • Water quality and quantity in Upper Colorado
    River Basin
  • Leaching of salts and toxins from spent shale
    piles
  • 3 barrels of water needed for every barrel of oil
    produced under conventional processes
  • Groundwater impacts of in situ processes

69
Environmental concerns
  • Shells current plan involves use of
    ground-freezing technology to establish an
    underground barrier created by pumping
    refrigerated fluid through a series of wells
    drilled around the extraction zone.
  • The freeze wall is supposed to keep groundwater
    out and hydrocarbons in

70
Environmental Concerns
  • But. . .
  • The process is unproven on a commercially
    feasible scale as Shell is only just beginning a
    large-scale operation
  • Confirmation of the technical feasibility of the
    concept hinges on the resolution of two major
    technical issues controlling groundwater during
    production and preventing subsurface
    environmental problems, including groundwater
    impacts
  • Shell purports to have the answer, yes or no, by
    2009

71
Environmental/Energy Overlap
  • An operation producing 100,000 barrels of oil per
    day is estimated to require 1.2 gigawatts of
    dedicated generating capacity!
  • This is equivalent to a facility needed for a
    city of 500,000
  • Shell asserts it will produce 3.5 units of energy
    for every 1 consumed
  • This is predicated on use of combined cycle
    natural gas power plants. . . Rising price of
    natural gas? Use of gas produced on site?
  • What about coal-fired plants?
  • Less efficient, even more air pollution concerns
  • Even more mining of coal would be required to
    support an oil shale industry using coal-fired
    external power sources

72
Connection to Natural Gas
  • Oil shale can be used as a feedstock substitute
    in chemical processes using natural gas, thus
    freeing gas for other uses
  • Can in situ conversion processing produce a
    significant amount of natural gas itself?

73
Issues to be considered
  • The major issues that will be addressed in this
    planning effort include
  • Resource management
  • Surface and groundwater protections
  • Air quality protection
  • Protection of wilderness, riparian, and scenic
    values
  • Transportation corridors
  • Multiple mineral development
  • Socioeconomic impacts on local economies.

74
Who is involved?
75
Commercial Viability
  • The Department of Energy has created a National
    Strategic Unconventional Resource Module (NSURM)
  • This module is meant to serve as a guide for
    assessing issues of technical and economic
    feasibility

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Commercial Leasing Timeline
78
The BLM/DOI is looking at Utahs royalty rate
structure as a model
79
Other Factors
  • Housing, schools, health care, transportation,
    utilities, and waste management all will need to
    be planned and funded
  • Past experience indicates that community
    infrastructure development must be heavily
    supported by developers and governmental entities

80
Conclusion
  • We are taking another stab at oil shale right now
  • Will it be profitable?
  • Will industry be patient enough?
  • Will government help or hinder (or both)?
  • Can the local environment bear the costs?
  • Like most other questions in Energy, only time
    will tell
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