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Oil shale: Real, or just a mirage? Various signs hint that shale oil’s ‘time’ may be closer than ever; companies jumping on bandwagon in U.S. and overseas F. Jay Schempf Petroleum News Contributing Writer
After decades of unsuccessful attempts to produce oil commercially from more than a trillion barrels entrained in U.S. oil shales, producers — and powerful U.S. lawmakers — are today reviving the prospects of developing this vast resource. The majority of the oil shales lie in Colorado, Utah and Wyoming.
Shell Exploration and Production Co. apparently has come a long way in developing its in situ conversion process, known as ICP, for extracting kerogen, a synthetic light crude oil, as well as gas liquids and other byproducts from the U.S. oil shale deposits (part one of this series in the June 12 issue of Petroleum News described ICP).
Meanwhile, other companies are ready to jump on the oil shale bandwagon, not only in this country but also overseas. Major companies reportedly are perfecting existing and untried underground shale oil retrieval methods, but they’re keeping information about these techniques close to their vests. Fire flooding During the short-lived Colorado oil shale boom in the 1970s and 1980s, several companies championed in situ extraction based on a rarely used secondary oil recovery technique called oxygen injection or fire flooding.
In fire flooding, compressed air is forced into a depleted oil reservoir via injection wells. Some of the underground oil is then ignited, and the resultant fire radiates heat into the surrounding formation, thinning and pressurizing the passed-over oil and driving it toward producing wells. Company researchers think that, with some tweaks, this technique will work in oil shale but there’s no evidence that this approach has ever been tried.
The closest analogy to fire flooding oil shale may be Project Rulison, a 1969 underground nuclear blast near Rifle in western Colorado. Detonated far underground in tight sandstones, the bomb experiment yielded highly radioactive — and thus useless — natural gas. This experiment was followed in 1973 with a massive, three-bomb attempt in the same general area. That test, too, failed.
But the concept of heating the subsurface to produce oil from shale apparently encouraged Shell to dedicate the research and development resources, and lots of time, that have resulted in the company’s ICP process. Surface retorting But despite the obvious benefits of and progress made in heating the shale in situ, nobody’s dismissing surface retorting technologies. A number of retorting techniques exist, one or two of them even being used in pilot projects around the world. In Brazil, for example, a pilot surface retort called the Petrosix process produced the equivalent of 1.4 million barrels of shale oil and other products during 1999.
Other surface-oriented retort/pyrolysis systems have been demonstrated, both in the United States and abroad; however, none has beaten the mirage of viability that oil price fluctuations bring to commercial shale oil production.
But several American and Canadian companies say updated variations on known mining/retorting techniques allow them to produce the shale oil today at a lower cost than in the past. Utah process yields $10 oil, says inventor One of the companies, Oil-Tech Inc. based in Vernal Utah, says its demonstration surface retort in Uintah County, near Bonanza, produces kerogen at a cost of $20 per barrel when fed with shale purchased from outside sources. If the company had its own mine as a source of feedstock Oil-Tech says the cost would fall to $10 per barrel or less.
Oil-Tech’s prototype retort — an 80-foot vertical stack of five hollow modules capable of processing up to 1,000 barrels per day — uses electricity to heat incoming shale to 1,000 degrees Fahrenheit. Gravity flow, cooling and filtering of the condensed vapor ultimately yields shale oil ready for refining. The retort is designed for zero toxic output, say company officials — the pressure inside the sealed modules is lower than that of the atmosphere, thus eliminating vapor emissions.
According to Oil-Tech, an independent engineering firm tested the process’s validity during a March 2004 demonstration run, using about 1,000 tons of crushed shale.
The company says production costs can be lowered even more by reusing processed shale to heat incoming new feedstock, a feature that other retorting systems incorporate into their processes. In Oil-Tech’s case, the spent rock can be infused with oxygen to raise its temperature to as much as 2,500 degrees. Then, instead of using electricity, the super-hot residue can be re-employed to heat incoming shale.
Once the oil is removed, the residue — a light, ash-like substance — can be mixed with topsoil for projects such as re-vegetation, the company says.
Noting that larger companies have spent up to $400 million on retorts, Oil-Tech says it can produce multiples of its 1,000-barrel per day unit for around $2 million apiece. Meantime the prototype retort operates from time to time, as the owners try to interest government and private industry in commercial operation.
This summer, the Bureau of Land Management plans to sell as much as 60,000 tons of mined shale that was abandoned years ago. Oil-Tech hopes to buy a portion of this shale to demonstrate that at today’s high oil prices the system can vault over the cost barriers to achieve commercial shale oil production. ATP, the multi-tasking separator In the mid-1970s, at about the same time as companies were trying to make western U.S. shale oil profitable, Bill Taciuk, a scientist with the Alberta Energy Research Institute, invented a surface-based horizontal, multi-chambered thermal desorption and hydrocarbon cracking system for separating and extracting organics from host solids. The institute called the invention the Alberta Taciuk Process, or ATP for short.
Taciuk targeted ATP primarily at separating bitumen from oil sands, but noted that the process could also be applied to shale oil production. In 1975 the institute licensed the technology to UMA Engineering, a Canadian industrial process developer. But before the company could market the process for possible use in the United States the shale boom lost a zero. Today, UMA markets the process for oil sands, toxic waste remediation and other thermal processes.
However, when applied to oil shale ATP is said to increase kerogen oil and combustible gas yields from the shale; improve thermal efficiency; and reduce process water requirements. Apparently the process also minimizes residual coke remaining on spent shale, thus rendering the residue better for environmentally safe disposal. The process also uses some of the hot processed shale to re-circulate into the retort section for heat transfer. Aussie project gets first ATP shale application In recent years, an Australian group led by Southern Pacific Petroleum has used a demonstration-scale, 4,500-barrels per day ATP retort for shale oil extraction, planning to eventually build larger models that can produce as much as 200,000 barrels per day of shale oil.
The group began mining shale from its Stuart deposit near Gladstone on Queensland’s central coast. The deposit reportedly contains some 2.6 billion barrels of recoverable shale oil. In 2000 Canadian oil sands company Suncor Energy bought into the project and financed construction of the demonstration plant in Gladstone. In April 2001, however, Suncor bowed out of the project, citing total commitment to its oil sands business.
A month later, despite a spate of mechanical problems and merciless harrying by Greenpeace, the group sold more than 40,000 barrels of medium shale oil to Southeast Asian refiners. Thereafter, operations limped along until December 2003, when Southern Pacific Petroleum ran into financial difficulties.
The plant remains closed today but the project could restart with new financing and management led by the owners of the New York-based Ziff-Davis publishing empire and a mysterious Texas oilman, Jeff Sandefer. But until new arrangements are made, the jury is still out on the Stuart shale deal, although different companies are mulling possible projects in other shale-rich areas in Australia. ‘Sniffing’ Canadian shale for aromatics In Canada, major oil sands developer CanWest Petroleum Corp., based in Vancouver, B.C., is dedicated to processing the country’s not insignificant western oil shale resources. The company currently is evaluating several retorting processes, including ATP. But the company’s emphasis would be on the Canadian shale’s extremely high aromatics content, rather than its light oil.
The company operates the Pasquia Hills Oil Shale Prospect, comprising 1 million acres under permit in central Saskatchewan. A 50,000-acre mine site overlies what the company says are 4.3 billion barrels of shale hydrocarbons, more than half of which are aromatics. The company believes it could extract the aromatics for petrochemical feedstock.
As part of a joint venture with Nova Chemicals Corp., CanWest recently announced that it will conduct further analysis, including liquid characterization tests, on the Pasquia Hills shale oil. In addition, the company is building a laboratory scale, steam-assisted retort that will produce basic data needed for possible development of an “advanced steam-assisted retort.” The upcoming shale picture Worldwide, oil shale development continues in various stages of maturity. Perceptions of the technology are changing and industry watchers expect announcements of commercial-scale oil shale extraction technologies sooner rather than later.
Meanwhile, related petroleum industry phenomena can’t be overlooked. The rapidly expanding and highly profitable development of Canada’s Athabasca oil sands, for instance, could serve as a model for initiation and growth of a U.S. oil shale industry. The oil sands industry was considered “a loser” as recently as 1990. But as this industry has matured through the learning process, production efficiency has improved significantly and costs have declined. Certainly, say industry experts, such on-the-job learning also would occur in a fully functioning North American oil shale industry.
And while commercial shale oil production in the United States and Canada is in the offing, countries like Brazil, Estonia and a few others continue to actually produce oil from shale. Russia is puttering around with its massive shale resource as well. Oil shale-rich nations — and DOE says some 27 of them have exploitable resources — are keeping a peeper on possible future activity.
The Peoples’ Republic of China has produced shale oil in small quantities since the 1920s and continues to do so with 30-year-old retort technology. Now, thanks to the burgeoning domestic demand for petroleum products, the Chinese are looking for larger-scale retorts and advanced technologies to increase shale oil production while also minimizing environmental effects. Shell last year signed an agreement to help study ways to develop some 17 billion metric tons of recoverable oil from shale deposits in China’s northeastern Jilin Province. And while no Shell entity has yet raised the prospect, Shell’s ICP technology, among others, might prove applicable in China.
So once again, the spotlight is trained on the awesome potential of shale oil production around the world. Nothing’s for sure, but maybe this time the spotlight’s beam will focus brightly on the likelihood of commercial shale oil production, rather than on a dim scattering of interesting possibilities.
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