Sometimes things just don't go the way you planned.
Getting to my office in the pre-dawn hours this morning was easier than usual. I already had my whole schedule laid out, researching specific energy investments. All I needed was a cup of coffee to smooth out any leftover hangover woes. I had a good feeling about this morning.
Unfortunately for me, my whole plan disintegrated within the first hour after getting to my desk.
Tuesday's article on World Oil Production apparently struck a chord in some of you, and I saw one prominent theme while sifting through your questions: Why on earth wouldn't I mention the massive oil shale reserves in the U.S. as the answer to our future energy security?
In fact, so many of you had asked me about U.S. oil shale reserves within the last few days that it wouldn't be right if I didn't immediately address the topic.
Who am I to ignore what is clearly on the minds of my readers?
Now that I've officially ditched my original plans (perhaps I'll have my chance next week), we can delve deeper into the trillions of barrels of oil shale reserves lying underneath U.S. soil.
And I do mean trillions of barrels, dear reader. Yet like every good thing that comes our way in life, developing our rich reserves of oil shales also comes with a huge catch.
So, without further ado, I'll give you my honest opinion concerning the future of oil shales . . .
U.S. Investing in Oil Shales
The first thing I want to point out is that I do have my concerns about the development of oil shales.
But before I go further into those reservations--I'm willing to bet that my average reader isn't a trained geologist living in Colorado. The odds are against it. So let's first get past some of the common misconceptions about oil shales.
What are they?
Well, oil shales aren't exactly shales, nor are they really oil. They are finely grained sedimentary rocks with a good amount of kerogen. Kerogen is not exactly oil as we think of it. But using a process called pyrolysis, the kerogen in the oil shale can be heated up and turned into a type of synthetic crude oil.
The largest deposit of oil shales lies in the Green River formation, which stretches throughout Colorado, Utah and Wyoming. And while the world's oil shale reserves are estimated at 2.6 trillion barrels, the Green River formation is reported to contain up to 1.8 trillion barrels. If we take the lower estimates, that's still over 800 billion barrels of recoverable oil.
To put that in perspective, we're talking about three times the amount of oil reserves in Saudi Arabia!
Even though you may never have heard of oil shales, they've been on our government's mind for nearly a century, ever since the U.S. government created the U.S. Naval Oil Shale Reserve.
I know what you're thinking: "If people have been looking to develop oil shales for that long, why haven't we heard more about them?"
Like I mentioned earlier, oil shales come with a catch . . .
The Harsh Reality of Oil Shales
In order to make oil shales commercially viable, the price of crude oil has to remain high. Considering that a barrel of oil is more than four times more expensive now than in 2000, I'm not surprised to see a few heads turning towards oil shales.
One of the problems is that oil shale doesn't contain as much energy as many believe. It contains only about 10% of the energy that crude oil offers.
But this isn't the only obstacle . . .
Extracting the oil shales is turning out to be difficult. Shell Oil Company is one of a few companies working on the problem. The company is hoping the in-situ method they're currently working on, which involves heating up the shales underground, will be able to extract between 65% and 70% of the resource.
I'm a little hesitant to pin a gold star on oil shales, because there's still a lot of work that needs to be done. Instead, I put more faith in the oil sands up in Alberta. Next week, I'm going to show you exactly why I feel they'll play a bigger role in our future energy security.
Until next time,
Keith Kohl
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Biodiesel from Algae and Ethanol from switchgrass are real long term solutions.
Nice article. K. Kelley
When I invest my money, I try to consider the long term both in terms of returns on actual money and real cost to my kids and other people in the future.
Wishing you all the best,
Kevin Geery
Not to say that the long tail of the oil industry is unimportant, or that we can escape it rapidly. Thanks for your straight talk in "World Oil Production" about the limits ahead: "Why am I so worried about the giant fields? It's because we're no longer finding them." People really need to understand this.
So how about straight talk on the spread in estimates of peak date and future reserves (e.g. Yergin/CERA's 2025 vs Deffeyes 2005) and the actual factual reserves of Iraq (e.g. DOE/EIA 225Gboe vs OGJ 115G, http://en.wikipedia.org/wiki/Oil_reserves#Iraq) and why it became so urgent to topple Saddam?
Good response to the oil shale issue. I would like to add that the process of mining shale oil is destructive to the land. Many of the shale areas are in national forests, next to ski areas, and national parks and the liberal tree huggers of Colorado are persnickety about their beautiful mountains being raped and exploited for oil. And, shale mining could interfere with the production of mountain stream beer and disrupt the hunting industry. This is why both liberals and conservatives have voted against it year after year. It has been a political nightmare.
However, at maybe $35 barrel to produce, according to Shell estimates, and more emissions intensive and water intensive than Alberta's oil sands crude, I can't see anyone rushing in to extract it until global energy security reaches such a critical state to make kerogen-based synthetic crude from the Green River formation both politically (i.e. environmentally acceptable)and financially viable.
I admire what Shell is trying to do but what about that witch of a judge in San Fransisco that says that no roeds can be built to get to the oil because of of presidential decision by Clinton that roads could not be built on public lands. I am confident that Shell or some other oil giant will figure out how to get the oil out of the ground but with the NIMBY groops, the judge, and the enviromentalist, how can it be exgtrected? I'll bet you 5 to 4 that Shell et el will find a way.
PS: the skiing in Colorado is great today.
Your remarks?
I am looking forward to your next article.
Regards, Foreman
retired foreign service
Now to the Oil Shales.
If this proves to be as good as claimed, then yes, BILLIONS of barrels of oil will be pouring out of the West, providing the little old lady type environmentalists don't start screaming again.... What a pain in the butt those creatures are with their cries of, "Save the Dinosaur!".... Ooops! Too late!
The first significant shale oil recovery project (and associated refinery) was located outside of Rifle, Co. At this location some of the highest kerogen content (Mahogany Zone)shale was found at a relatively modest depth and could be accessed at an outcropping along a canyon wall -- thereby reducing mine development costs.
Room and pillar mining was selected
and found to be both safe and stable.
The facility was owned by Socal, at an announced cost of $640 million (including a refinery with a rated capacity of 50,000 barrels per stream day (bpsd)
Retorting was accomplished by a proprietary SoCal process known as a rockpump.
Project engineering was by Fluor Corporation/Socal R&D. Construction was by Daniel Construction Co. (Merit/Open Shop)and involved a man camp with a construction complement of over 3500.
Unfortunately, the international oil price made the project uneconomical.
Every day I am looking forward to read the articles from you - thank you.
I am a danixh ziticen living in Denmark north og the Capital, Copenhagen. Our country is a littel cold, so we admire your beautiful country, espicially California, wher we sometimes spend our holidays.
Yours
John E. Lassen
This country has not decided on a global warming policy yet. I don't expect this type of investment until the developers can get the guarantees (pollution permits) so they can run their extract and process long enough to cover their capital investments.
In Colorado, only in-situ development will be feasible. There is not a lot of water available for processes that dig out the rock and there would be problems trying to find a place to dispose of the tailings from mining on the huge scale required.
I would expect that other sources such as coal and oil sands will be developed before significant oil shale development occurs.
after reading your comments on the prospects of Shale Oil.
We, here in Australia had a very promising company called Southern Pacific who had actually build a plant and told their shareholders that they had sold a million barrels! Well they went bankrupt
18 months later when noboddy believed them any more.The multi- million dollar plant is slowly rusting away.Yes stupid me learned the hard way that a lot of technological advances have to take place before this dream becomes envoirementally
realizable. Ps. I read the other day that the town near the plant has an Cancer rate 4x the nation average.