Shale Oil Bust

With fossil fuel supplies on the decline, the world is turning to the vast energy potential of shale oil, but a less energy-intensive extracting process has yet to be developed.
Published: Wed 01 May 2013

Shale oil isfound in many places across the worldbut the US boasts the largest supply-the country accounts for 62% of the world’s oil shale resources. The USA, Russia and Brazil together account for 86%. The estimated US shale oil reserves total an astonishing 1.5 trillion barrels of oil – or more than five times the reserves of Saudi Arabia. If the US taps in to these reserves, they would have the largest oil reserve in the world. However, no one is producing commercial quantities of oil from these vast depositsas extracting oil from shale is difficult. This is despite the many attempts in the past to extract shale oil and the billions that the US government has invested to develop the industry.

The problem with shale oil…

For many years, a process called “retorting” has been used to extract this very valuable resource. Unfortunately, it is very environmentally unfriendly. Basically, the shale is put through a processing facility which crushes the rock into small chunks. This is done to extract a petroleum substance called kerogen which is upgraded using a process called hydrogenation (which requires lots of water). This is then refined into gasoline or jet fuel. The problem is that after retorting, you get kerogen (not oil). The heating process has desiccated the shale which leaves dried, dusty, shale residue which has low levels of heavy metal residue and other toxic, chemically-activated substances. Most of this must be disposed of which could create ecological problems. When it rains, the toxic substances will contaminate all of the water supplies that can be reached. Studies show soil and water contamination to various degrees by chemicals or pollutants from oil shale tailings. This obviously has a negative effect on many land and water species.

Other disadvantages of shale oil include:

  • Fuel production costs from oil shale have yet to be fully evaluated
  • Extraction has large land and infrastructure requirements
  • Large quantities of energy are required during extraction. A 100,000 barrel per day oil shale operation needs about 1,200MW of power-this requires its own power plant which will consume millions of tons of coal each year, contributing to increasing pollution levels.
  • The complete technology for cost-effective mining and oil extraction from oil shale has yet to be developed

If you add up the capital investment to build the retorting mechanisms and the costs of energy, water, transportation, environmental compliance and refining, you land up with a very expensive end-product.

Possible solution?

An emerging new technology promises to unlock the potential of shale oil. According to experts, the technical groundwork may well be in place for a fundamental shift in oil shale economics. The new technology may begin to tap the oil shale’s potential. Royal Dutch Shell has recently completed a demonstration project (the Mahogany Ridge project) in which it produced 1,400 barrels of oil from shale in the ground, without mining the shale at all. Shell used a process called “in situ” mining. This process involves the extreme heating of shale while it’s still in the ground, causing the oil to leach from the rock. In-situ Conversion Process (ICP) accelerates this natural process of oil and gas maturation by literally tens of millions of years. This is done by slow sub-surface heating of petroleum source rock containing kerogen, the precursor to oil and gas. This acceleration of natural processes is achieved by drilling holes into the resource, inserting electric resistance heaters into those heater holes and heating the subsurface to around 650-700F, over a 3 to 4 year period. During this time, very dense oil and gas is released from the kerogen and goes through a number of changes. The changes include the shearing of lighter components from the dense carbon compounds, concentration of available hydrogen into these lighter compounds, and changing of phase of those lighter, more hydrogen rich compounds from liquid to gas. In the gaseous phase, these lighter fractions are now far more mobile and can move in the subsurface through existing or induced fractures to conventional producing wells from which they are brought to the surface. The process results in the production of about 65 to 70% of the original “carbon” in place in the subsurface. ICP is clearly very energy-intensive, as its driving force is the injection of heat into the subsurface. However, for each unit of energy used to generate power to provide heat for ICP, when calculated on a life cycle basis, about 3.5 units of energy are produced and treated for sales to the consumer market. This energy efficiency compares favorably with many conventional heavy oil fields that for decades have used steam injection to help coax more oil out of the reservoir. The produced hydrocarbon mix is very different from traditional crude oils. It is much lighter and contains almost no heavy ends. 

However, because ICP occurs below ground, care must be taken to prevent the products of the process from escaping into groundwater flows. Shell has developed an ice wall technology to isolate the active ICP area which also safeguards the environment from the heating process. For years, freezing of groundwater to form a subsurface ice barrier has been used to isolate areas being tunneled and to reduce natural water flows into mines. Shell has successfully tested the freezing technology and has shown that the freeze wall prevents the loss of contaminants from the heated zone. 

Although the freeze wall and ICP is energy-intensive and does work in the field, it has not been proven to work on a commercial scale. However, the technology does work. Shell’s most recent test was carried out over the past several months and produced in excess of 1,400 barrels of light oil plus associated gas from a very small test plot using ICP technology. 

According to O’Connor, these processes may eventually make shale-derived oil more competitive than crude oil at prices below $40 per barrel. He says that if this happens, shale oil development may soon occupy a very prominent position in the national energy agenda.

According to experts, there is a dispute within the industry over how long, if ever, demonstration extraction technologies can become commercially viable. However, Shell’s in-situ process looks the most promising. It also makes the most sense from a financial perspective. There may be a better, less energy-intensive way to heat up the ground than what Shell has discovered but the large companies like Shell, Chevron, and Exxon Mobil will provide their resources to any private or small firm that is able to make a breakthrough.

Engerati Analysis

With dwindling energy supplies across the globe, the vast quantities of shale oil can no longer be ignored. With the right processes and technologies in place, the potential of shale oil can be realized. Unfortunately, most of these are still in the experimental stage.

Sources

Altprofits-Oil Shale

Daily Reckoning-Oil Shale Reserves

OilPrice-How Shale Oil will Change the World