Oil shale bonanza on hold in West Slope
MEEKER, Colo. What better evidence of the daunting challenge that oil shale presents: Shell Frontier Oil & Gas, seen as the leader in the quest to free millions of barrels of oil in massive rock formations in a three-state area, doesnt expect to start commercial production any time soon.The company has been researching ways to tap the vast resource for more than a quarter century, and has been running tests since 1996 on private land amid the sagebrush-covered hills and pinon pine and juniper forests of northwestern Colorado.And yet in July, Shell withdrew a state mining permit to start work on a federal research and development lease granted by the federal Bureau of Land Management.There were a myriad of factors, Shell spokesman Tracy Boyd said.One was ongoing research and testing. The results could change what Shell will ask for in its permits for work on three 160-acre parcels of federal land approved by the land bureau for demonstration projects.What isnt changing, Boyd said during a recent tour of Shells research site, is the companys belief that the oil shale formations under western Colorado, eastern Utah and southwest Wyoming could help meet the nations growing demand for energy.We (the industry) have this huge resource sitting here in the United States of unconventional oil in oil shale that is awaiting for someone to crack the technical nut, Boyd said.Shell may apply for permits again in a year or so, he added. The company hopes to make a decision about commercial production within the next decade.
Federal and industry estimates peg the amount of oil trapped in the rocks from about 1 trillion to 1.8 trillion barrels, or three times the proven reserves of Saudi Arabia. Of that, roughly 800 million barrels are considered recoverable.The catch is extracting the oil from the rock, something thats been tried on and off for nearly a century. The shale, or kerogen, is a precursor that wasnt buried deeply enough or naturally processed long enough to complete the transformation to oil.Turning the shale to oil requires heating it: above ground after mining or, as Shell has done, in the ground, a process called in situ in place.Theres talk about being the Saudi Arabia of oil, said Jeremy Boak, project manager at the Colorado Energy Research Institute based at the Colorado School of Mines in Golden. Its probably never going to be the Saudi Arabia of oil shale production rates.Significant commercial production could be 10 to 20 years away, Boak said. But if the economic, technical and environmental issues can be resolved, he said, oil shale could help bridge the gap until renewable or alternative energy becomes more common.Oil prices hovering above $90 a barrel could make the attempt all the more enticing.About half the oil shale underlying the region is in the Piceance Basin of northwest Colorado. Thats where its the deepest, thickest, richest, Boyd said: 2,000 feet down to the base of the oil shale formation.Besides Shell, Chevron USA and Midland, Texas-based EGL Resources Inc. received 10-year federal research and development leases in the basin last year.
Early this year, the Interior Department approved a 10-year lease for Alabama-based Oil Shale Exploration Co. for the only oil-shale experiment on federal land in Utah.The sheer magnitude of the resource is just world-class, said Robert Lestz, oil shale technology manager for Chevron USA.The research leases could lead to larger ones for commercial production. By years end, the land bureau is expected to release a draft environmental review of commercial oil shale development. The analysis is meant to provide a framework; more detailed reviews would be done as specific projects are proposed.ExxonMobil Corp., which is increasing its natural gas production in Colorado, failed to land one of the research leases.It was Exxons shutdown of its $5 billion project near Parachute on May 2, 1982, that marked the end of the last oil shale boom and sent the western Colorado economy reeling for years. About 2,200 people lost their jobs on whats still referred to in the area as Black Sunday.On the 25th anniversary of the bust, companies on the vanguard of the latest efforts to tap oil shale say theyre moving carefully and are mindful of the potential economic, social and environmental impacts.Some politicians are urging caution. A measure by Rep. Mark Udall, Eagle Countys Democratic congressman, in the House version of the 2008 Interior Departments appropriations bill would prohibit using federal funds to prepare final regulations for a commercial oil shale leasing program or conduct commercial lease sales.Udall has said he wants to make sure oil shale is developed responsibly to avoid another economic bust.The 2005 federal energy bill required the land bureau to prepare an environmental impact statement and commercial regulations.Environmentalists worry that an oil shale boom could strain area water supplies and increase air pollution if more coal-fired power plants are built to power operations.
Lestz of Chevron said he believes the technology wasnt adequate to mine oil shale in the 1970s and 1980s and doesnt know if it is yet. Theres no certainty that we will be successful, he said.Chevron is working with the University of Utah and the Los Alamos National Laboratory in New Mexico on its in situ process. Lestz said Chevron has spent a lot of time in the lab on the fundamentals and plans to drill on its research parcel by the end of the year to get material for further study.At the Shell Mahogany research site, a web of gleaming silver pipes roughly the size of a football field attests to the years the company has spent on research. A coolant circulates through the pipes to freeze groundwater to form a wall designed to prevent water from flowing into the production area.Underground heaters eventually will be inserted inside the freeze wall to slowly cook the rock to at least 650 degrees to free the oil. Building the wall will take another year.Boyd said tests at a smaller site recovered 62 percent of the hydrocarbons, better than the 25 percent to 30 percent recovery rate for conventional oil and gas. He said the oil produced is high-quality transportation fuel.Shell intends to move carefully to make sure it can produce the oil in economically and environmentally sound ways, Boyd said.Were committed to making sure that we dont hurry up and get to the point of production without fully assessing and making sure that were in balance, he said.