Baltimore, MD-Oil shale is about to make another break for the energy spotlight. The U.S. has just given the green light for development, but utilizing Colorado's massive reserves has always been a risky venture.

Close . . . but No Oil

Geological fate dealt a cruel blow to Colorado. If the oil-rich sedimentary rock was a little deeper, then it would have been naturally heated under pressure. The resulting oil would have been easy to extract, and Colorado would be laughing at Saudi Arabia.

Oil shales are rocks with enough organic material to provide petroleum after distillation. The organic material is called kerogen. In a process called "retorting," the shale is heated to 445-500° C so oil can be extracted.

And there's enough oil shale to last long time.

The U.S. Energy Information Agency reports that there are 2.6 trillion barrels of recoverable oil. Nestled below Colorado lie 800 billion barrels-almost three times the oil reserves in Saudi Arabia! Yet no oil is currently being produced.

Technology has never developed a cheap and efficient method for production.

Traditionally, the rock is mined like coal and transported to a processing plant. The shale is heated up to 950° F so the oil can be separated.

Another process, called in-situ, involves fracturing the shale and heating it in order to release the oil and gas.

These techniques are extremely expensive and require too much energy to extract a relatively small amount of oil. There are also environmental concerns like air and groundwater pollution and waste disposal.

Oil shale received attention back in the 1970's when oil prices reached $40 per barrel. Yet the ten billion dollars invested only produced five million barrels of oil . . . over 13 years! That's under 400,000 barrels per year. Failure caused a halt in oil shale development. Future endeavors led to further failure-it simply wasn't economically viable.

Oil prices over $40 per barrel are needed for oil shale to compete against conventional oil drilling. The prospect of tapping into the rich U.S. oil shales is a possibility now that prices have stabilized over $50 per barrel.

A Glimmer of Hope

Recently, the government awarded three companies the opportunity to develop the oil shale resources in Colorado. Shell, Chevron, and EGL resources have received leases on 160 acres to develop oil shales.

Each company is eschewing the traditional method of mining. Instead, they are exploring the in-situ plan of heating the shale while in the ground, allowing the oil and gas to be pumped up to the surface. This on-site process alleviates some of the environmental concerns like carbon dioxide emissions.

The Shell Oil Company has been testing this method with some success. Their process involves creating a freeze wall around the targeted area to seal off groundwater. After removing the water, the company inserts electrical rods to heat the shale underneath to 700 ^oF. But the heating process takes years to produce oil. Once the oil is produced, it is extracted using conventional drilling means.

This technique has some major obstacles.

A program producing 100,000 bbl/day of oil requires a lot of power. A plant is needed to consistently generate the 1.2 gigawatts necessary to heat the shale. The fact remains that the technology must improve before commercial production is possible.

Peak Indicator

Peak oil is going to become more important than global warming over the next few years. This year oil prices are expected to average $65 per barrel-but that's a very low estimate. Don't be surprised if they top $100.

One telltale sign of peak oil is when countries begin developing unconventional sources to meet future demands. In 2007, these unconventional sources are taking much more of the spotlight. Canadian oil sands are producing over one million barrels per day. Deep offshore drilling is receiving major attention from the big oil companies.

And now shale oil is starting to be developed. These new sources will soon become a necessity to meet the world's 85 million bbl/day thirst for oil.

Until next time,

Keith Kohl