What's new in production

	Vol. 225 No. 8
ROBERT E. SNYDER, EXECUTIVE ENGINEERING EDITOR

Oil shale back in the picture. With oil prices at $40 and declining crude oil production in most areas, some non-oil-company investors are taking another look at the huge volume of potentially recoverable hydrocarbons in vast oil shale deposits. These occur in several world locations, the US in particular. Looking back some 30 years, shale oil that could be produced at $4 to $5 per barrel was considered attractive at $10 to $11 per barrel oil prices. Prompting this renewed shale oil interest was the fact that the US had become a net oil importer, together with the oil crises of 1973 and 1979.

Although there are Devonian-Mississippian black shales in the eastern US, the main targets were vast deposits in four western US basins: Uinta, Green River, Washakie and Piceance in the Utah, Wyoming and Colorado area; and further concentrated in the Eocene Green River formation. During the 1970s, the government started leasing six 5,100-acre publicly owned tracts in the three states.

Many oil companies joined the party, including The Oil Shale Corp. (TOSCO), Union Oil Co. of California and USBM, who tested new retorting processes for removing the kerogen (an oil precursor) from crushed rock and processing it into usable hydrocarbon liquid. A 16-company consortium sponsored by Sohio participated in a 30-month evaluation of an extraction process. Amoco said its commercial production should get underway by 1980, with full scale production of 50,000 to 100,000 bopd by 1982. Some projections indicated possibly 900,000 bopd by the mid-1980s.

In early 1974, three new oil shale mining and processing methods were being discussed: 1) the TOSCO II process involving room and pillar mining, ore crushing and surface retorting; 2) Occidental's in situ process combining mining and explosive rubblizing to create an underground retort; and 3) nuclear in situ recovery through 1,700-ft chimneys created by 100-kiloton detonations. The first process was commercially available; the second achieved pilot project status; and, not surprising, no tests were scheduled for the nuclear proposal.

However, military demand for fuel changed, and the strategic value of shale oil reserves began to diminish. And, after spending several billion dollars, oil companies gave up their oil shale interests. Unocal was the last to do so in 1991. At present, shale oil is not being produced in the US, and large-scale commercial production is not expected for 20 to 30 years under present economic conditions. But it's not for a lack of reserves. According to published World Energy Council (WEC) estimates, nearly 62% of the world's potentially recoverable oil shale resources are concentrated in the US. At year-end 1999, WEC says the US had a possible shale oil reserve approaching 1.0 trillion barrels.

Outside the US, oil shale has been burned directly as a low grade, high ash-content fuel in a few countries such as Estonia. Jordan also possesses a significant quantity of oil shale resources, but no formal development. Oil shales also occur throughout Canada, particularly in Nova Scotia and New Brunswick, where some early mining occurred. Investigations into power plant use have also been made.

Australia is generating the most publicity, with claims from the Australian Geological Survey organization of recoverable and additional shale oil reserves of 37 billion tonnes, or about 260 billion barrels. During the 1970s and ‘80s, an exploration program was undertaken by two Australian companies, Southern Pacific Petroleum and Central Pacific Minerals (SPP/CPM). The aim was to find high-quality oil shale suitable for open-pit mining in areas near infrastructure and deepwater ports. The program was successful in finding commercial deposits along the coast of Queensland.

In 1995, SPP/CPM signed with the Canadian company, Suncor Energy, to commence development of one of the oil shale deposits, the Stuart deposit, located near Gladstone. Suncor operated the Stuart project but, in 2001, SPP/CPM purchased Suncor's interest. The Stuart project incorporates the Alberta-Taciuk Processor (ATP) retort technology and had three planned stages. The Stage 1 demonstration plant attained full production during 2001. After technical and economic feasibility were proved, it was planned that the ATP in Stage 2 was to be scaled up to 14,800 bpd of oil products. A Stage 3 commercial plant was conceived as processing 65,000 of bpd of oil products to bring total production to 85,000 bpd by 2009.

Greenpeace has steadfastly opposed the Stuart project, and continues to be an obstacle. The SPP/CPM joint venture ran into financial and environmental compliance problems and sold its Stuart oil shale project asset in late 2003. Queensland Energy Resources (QER), a new Australian Company, is the new owner. QER recently closed Stage 1 production. The company was in a hiring spree in June of this year and is preparing a detailed environmental impact statement for Stage II of the Stuart project. Thus, Australia's main oil shale project is apparently still active, but moving ahead slowly.

Meanwhile, in the US, one company continues to doggedly pursue the possibilities. What follows is from a July press release, which World Oil has not verified in any way. A Utah-based, privately held corporation called Oil Tech, Inc., says it has developed and installed an improved surface retorting process that can produce shale oil for less than $10 a barrel. Located in eastern Utah, the company says that Unified Engineering witnessed a demonstration of the new technology, reportedly saying, “The retort installation was well planned and well built, and oil was produced on all occasions when we were on-site to observe the retort in operation.”

The facility's components included about 1,000 tons of shale, plus a drier, crusher, retort, crushed shale bin and storage tank. Basically, when the shale rock is heated in a retort, it forms a smoke or vapor, which when cooled, forms a liquid called syncrude or shale oil. Syncrude contains 10% naphtha, 40% kerosene, 40% diesel fuel and a 10% nitrogen rich residual. The first three components are all refinery grade blend stock; the last is a “natural asphalt additive.”

The bottom line appears to be that development of 1 to 2 trillion barrels of world shale oil is under development by a few entrepreneurial companies, but at a cost of $10 a barrel? Well, let's hope they surprise everyone.