28
UNOCAL'S PARACHUTE CREEK OIL SHALE PROJECT Cloyd P. Reeg, President, Unocal Science and Technology and Energy Mining Divisions 376 S. Valencia Brea, California 92621 Allen C. Randle, Vice President, Oil Shale Operations Unocal Energy Mining Division 2717 County Road 215 Parachute, Colorado 81635 John H. Duir, Vice President, Engineering and Development Unocal Science and Technology Division 376 S. Valencia Brea, California 92621 ABSTRACT Unocal began construction of the United States' only commercial scale oil shale facility north of Parachute, Colorado in 1981. The project includes a 13,500 ton (12,250 tonne) per day mine, a 10,000 Bbl (1,460 tonne) per day above-ground retort, and a 10,800 Bbl (1,400 tonne) per day shale oil upgrading plant. The heart of the project is the Unishale-B Retort, which is an indirectly-heated, counterflow design incorporating Unocal's unique upflow solids feeder. Construction of the project was completed in 1983 at a cost of about $650 million. Plant start-up, which was prolonged by problems with the retorted shale removal, cooling and pressure-letdown system, was achieved in mid- 1986 and completed in 1988. The retort has been successfully operated at 100 percent of design feed rates and has produced raw shale oil at rates up to 70 percent of design. All other components of the project have been successfully operated at or above design rates. The project has demonstrated that shale oil can be produced while protecting the environment, and meet all applicable regulatory requirements. Further, no significant impacts have been identified in extensive investigations of environmental impacts that might be associated with non- regulated substances. To date, over three million barrels (390,000 tonnes) of shale oil have been produced, upgraded into premium quality syncrude, refined by conventional refineries into a complete range of products, 68

Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

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Page 1: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

UNOCAL'S PARACHUTE CREEK OIL SHALE PROJECT

Cloyd P. Reeg, President, Unocal Science and Technologyand Energy Mining Divisions

376 S. Valencia

Brea, California 92621

Allen C. Randle, Vice President, Oil Shale Operations

Unocal Energy Mining Division

2717 County Road 215

Parachute, Colorado 81635

John H. Duir, Vice President, Engineering and Development

Unocal Science and Technology Division

376 S. Valencia

Brea, California 92621

ABSTRACT

Unocal began construction of

the UnitedStates'

only

commercial scale oil shale

facility north of Parachute,Colorado in 1981. The project

includes a 13,500 ton (12,250

tonne) per day mine, a 10,000

Bbl (1,460 tonne) per dayabove-ground retort, and a

10,800 Bbl (1,400 tonne) per

day shale oil upgrading plant.

The heart of the project is

the Unishale-B Retort, which

is an indirectly-heated,counterflow design

incorporating Unocal's unique

upflow solids feeder.

Construction of the project

was completed in 1983 at a

cost of about $650 million.

Plant start-up, which was

prolonged by problems with the

retorted shale removal,

cooling and pressure-letdown

system, was achieved in mid-

1986 and completed in 1988.

The retort has been

successfully operated at 100

percent of design feed rates

and has produced raw shale oil

at rates up to 70 percent of

design. All other components

of the project have been

successfully operated at or

above design rates. The

project has demonstrated that

shale oil can be produced

while protecting the

environment, and meet all

applicable regulatory

requirements. Further, no

significant impacts have been

identified in extensive

investigations of

environmental impacts that

might be associated withnon-

regulated substances. To

date, over three million

barrels (390,000 tonnes) of

shale oil have been produced,upgraded into premium quality

syncrude, refined byconventional refineries into a

complete range of products,

68

Page 2: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

and consumed in the ordinary

course of domestic trade,

confirming that shale oil is

the best alternative source of

transportation fuels to meet

the nation's future energy

needs.

INTRODUCTION

Unocal's long standing

interest and commitment to oil

shale originated more than 60

years ago when the company

began acquiring properties in

the Piceance Basin of the

Green River Formation of

Colorado, Wyoming and Utah.

The company's holdings, in the

Parachute Creek area of

Garfield County, Colorado,consist of about 50,000 acres

(20,200 hectacres), including40,000 acres (16,200

hectacres) of oil shale lands.

The potentially recoverable

shale oil on Unocal property

is estimated to total 3.3

billion barrels (430 million

tonnes). The company's

holdings provide adequate area

for depositing and vegetating

the retorted shale.

Sufficient water rights to

fully develop the resource are

also held by the company.

Unocal began construction of

its oil shale mining and

retorting project north of

Parachute, Colorado, in

January 1981. The project

includes a mine, a shale

retorting plant, a raw shale

oil upgrading facility,provisions for disposal of the

retorted shale, and the

necessary support facilities.

Construction was completed in

1983. The retort is designed

to process 12,800 tons (11,600

tonnes) of shale and produce

10,000 barrels (1,460 tonnes)

of shale oil per stream day.

To reduce the economic risks

of this pioneer project,

Unocal secured a $400 million

contract in 1981 from the U.S.

Government under the Defense

Production Act. This contract

guaranteed a product price of

$42.50 per barrel ($327.00 per

tonne), adjusted for

inflation, and has allowed the

continued operation of this

plant despite the sharp dropin world oil prices that

occurred after the completion

of the project.

PROJECT DESCRIPTION

MINE

Shale for the project is mined

from the rich Mahogany zone of

the Parachute Creek section of

the Green River geologic

formation. The shale

currently being mined has an

average yield of 38 gallons of

shale oil per ton (58 litres

per tonne) .

The entrance to the

underground mine is located

about 1,000 feet (300 meters)

above the valley floor and

opens on the south side of

Long Ridge, which forms the

north wall of the East Fork of

Parachute Creek.

The mine is an underground,

room-and-pillar operation.

The pillars are left in place

to support the roof, but allow

recovery of 60 percent of the

resource from the mine zone.

The mining sequence is a

five-step process:

69

Page 3: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

1. A drill jumbo is used

to drill the face;

2. The holes are charged

with ANFO (Ammonium

Nitrate/Fuel Oil), and

then detonated;

3 . Front-end loaders muck

the oil shale, which is

transported by truck to

the underground crushers;

4. Scalers dislodge any

shale that was loosened

by the blasting; and

5. Prototype boltingjumbos stabilize the mine

roof before the cycle is

repeated.

Run-of-the-mine shale is

crushed in four stages to an

average particle size of 0.7

inches (18 mm) and stored in

an underground surge gallery.

It is moved to the surface bybelt conveyors and screened to

remove fines.

RETORTING PLANT

The Unishale-B Retort was

constructed on a five-acre

(two hectacre) bench site just

outside the mine entrance.

Figure 1 is a retort

schematic. Crushed shale

enters the solids feeder

underneath the retort where a

10-foot (3 meter) diameter

piston forces the shale upward

into the retort. Shale oil

product acts as a liquid seal

in the feed chute to maintain

the retort pressure.

As the oil shale rises through

the retort cone it is

contacted by a counter-current

flow of hot recycle gas

entering the top of the retort

dome. The hot recycle gas

provides the heat required for

the retorting process. The

kerogen in the oil shale

decomposes into liquid and

gaseous organic products which

diffuse from the shale

particles, leaving behind a

carbonaceous deposit on the

retorted material. The oil

vapor is cooled and condensed

by the cool incoming shale.

The bulk of the liquid product

trickles down through the

shale and the balance, in the

form of mist, is carried from

the retort by the cooled

gases.

The gas and liquid are

separated from the shale in

the slotted-wall section of

the lower retort cone. Oil

and solids disengage from the

gas in the section that

surrounds the lower cone. The

liquid level in this section

is controlled by withdrawing

oil product.

Retorted shale is forced up

above the retort cone and is

scraped off the pile. It

falls down chutes through the

retort into a cooling vessel

and is cooled by sprayed

water.

Dry, cooled retorted shale

leaves the cooling vessel and

is depressured through a seal

leg. The retorted shale is

transported by conveyors and

trucks to the canyon floor.

It is then spread, compacted,

contoured, covered with soil

and vegetated with native and

introduced species.

The gases leaving the retort

from the disengaging section

70

Page 4: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

are scrubbed and cooled in a

Venturi scrubber. The

scrubbed gas is divided into a

make-gas stream and a recycle

stream. The recycle stream is

heated prior to injection into

the top of the retort. The

retort make-gas is processed

in a Unisulf plant to remove

sulfur and used as plant fuel.

After the solids suspended in

the raw shale oil are removed,

the oil is transported bypipeline to the upgrading

facility which is located

eight miles (13 km) south of

the retort.

The retort plant has completed

its startup phase and is now

operating at commercial

production levels. Our

program now is to bring the

plant up to design or greater

oil production rates.

pursuant to provisions of our

contract with the government.

Representatives from DOE and

EPA both sit on a special

Monitoring Review Committee

that reviews all aspects of

the project's environmental

performance. Not only are all

environmental impacts of the

project monitored for

compliance with applicable

standards, the plant continues

to be scrutinized to identify

any other potential

environmental and health

impacts, whether or not

subject to current regulation.

The results to date clearly

affirm that oil shale can be

developed in an

environmentally sound manner,

and further that there are no

significant health or

environmental impacts outside

of the current regulatory

sphere.

RETORTED SHALE DISPOSAL

Retorted shale disposal has

been remarkably successful,

especially in light of early

concerns regarding the

industry's ability to

establish vegetation on

retorted shale and prevent

groundwater contamination. At

Parachute, Unocal has been

able to implement a program

that results in very rapid

establishment of vegetation on

the shale pile. The retorted

shale pile has been

constructed in a manner that

minimizes the potential for

groundwater or surface water

contamination, of which there

has been no evidence.

Unocal's Parachute Creek Shale

Oil Project is one of the most

closely monitored energy

developments ever undertaken,

In most respects,shale-

derived syncrude is equivalent

to conventional petroleum. In

fact, EPA has recently

concluded that shale-derived

syncrude is exactly equivalent

to conventional crude oil and

lifted the regulatory

requirements (PMN) applicable

to new chemical substances

under the Toxic Substances

Control Act, one of the veryfirst products to be so de

listed.

UPGRADING PLANT

Figure 2 is a simplified block

flow diagram of Unocal's shale

oil upgrading process. The

raw shale oil contains

approximately 300 wppm

particulates. To protect the

hydroprocessing reactors from

plugging, the particulates are

71

Page 5: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

removed in a filter-bed guard

vessel. The essentiallyparticulate-free shale oil is

then processed in a series of

fixed-bed reactors to remove

arsenic and to saturate

diolefins. This relativelylow pressure process was

developed to prevent rapid

catalyst deactivation and

fouling in the downstream high

pressure reactors.

Arsenic-free, partly upgraded

shale oil is then processed in

the Unicracking/DW unit to

produce high quality syncrude.

The Unicracking/DW process

employs a series of catalytic

hydrotreating and

hydrocracking reactors which

operate at relatively high

pressure and moderate

temperatures. The purpose of

the hydrotreating reactors is

to convert most of the

nitrogen, sulfur and oxygen

heterocompounds to ammonia,

hydrogen sulfide and water.

The hydrocracking reactor is

filled with a special catalyst

and is operated at conditions

designed to reduce the pour

point of the shale oil and to

reduce the molecular weight

and boiling point of the

product. As a consequence of

upgrading, shale oil syncrude

expands in volume

approximately 7 to 8% from the

addition of hydrogen. Thus,

each 1000 barrels (146 tonnes)

of shale oil produced by the

retort becomes 1070 to 1080

barrels (139 to 140 tonnes) of

syncrude .

PROJECT PERFORMANCE

RETORTING

All pioneer plants experience

unexpected problems that

inhibit early performance, and

Unocal's retort is no

exception.

Construction of the plant was

completed in the fall of 1983,

however, start-up was not

achieved until mid-1986. The

plant start-up phase was

completed in 1988 when

commercial production rates

were reached.

For all of 1987, production of

shale oil was 17% of design.

In 1988, production nearly

doubled to about 32% of

design, almost one million

barrels (130,000 tonnes). For

1989, the plant consistently

performed between 50-60% of

design on a short-term basis,but merely matched the

previous year's total

production. Technological

improvements completed duringan extended mid-year shutdown

have so far resulted in a 25

percent increase in the

project's daily production

rates. Over three million

barrels (390,000 tonnes) of

raw shale oil have been

produced to date.

During start-up, significant

progress was made in solving

problems that initiallyprevented sustained, high rate

operation. The major problem

area was in the system for

removing the processed shale

from the retort vessel and

cooling it for disposal.

Retorted Shale Removal

and CoolingAs retorted shale reaches the

72

Page 6: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

top of the retort, it forms a

natural angle-of-repose pile.

In the original design, an

Archimedes spiral truncated

the center of the pile. The

solids were pushed to the

sloped sides of the pile where

they fell by gravity to the

cooling system. The retorted

shale in the commercial plant

decrepitates to a much finer

consist than expected. This

finer particle size, combined

with the force of the

counter-current flowingrecycle gas, resulted in an

increased angle-of-repose that

made the Archimedes spiral

ineffective. The scraper was

redesigned after an extensive

research program in early

1984. The scraper now

successfully removes the

retorted shale from the pile

and meters it into the shaft

coolers.

The finer than expected

retorted shale also caused

problems in the cooling

system. In the original shale

cooling design, the hot

retorted shale was cooled with

a water spray. The generated

steam flowed concurrently with

the retorted shale and was

withdrawn prior to

depressuring. The finer

consist has a low permeability

that inhibits water

penetration into the material

and steam flow out. This made

it extremely difficult to

efficiently contact the hot

retorted shale with water. As

a result, steam was trapped

within the partially cooled

solids. The subsurface steam

caused solids flow

instabilities and pressure

control problems.

To solve this problem,

extensive modifications were

made to the shaft cooler that

were completed in July of

1986. Further modifications

were made during routine

turnarounds to optimize the

seal leg design to depressure

the low permeability, fine

consist, retorted shale. Fine

solids nave to be depressured

in a very controlled manner to

maintain controlled solids

flow.

Typical First Generation

Problems

Laboratory data and vendor

testing were ineffective in

predicting the wear

characteristics of raw and

retorted shale. Throughout

the plant, metallurgical and

design improvements have been

developed to cope with the

abrasive properties of the oil

shale.

UPGRADING and MINING

The mine has produced crushed

shale at the current operating

rate with no major problems.

As the retort moves toward

full design rate and higher,the mining capacity can be

increased to meet demand.

In the upgrading plant, there

have been no major operatingor design problems. Syncrude

produced at the upgrade

facility has continuously met

all specifications. As the

production rate increases, the

upgrade facility will continue

to perform as designed.

Operations at the 10,000

barrels (1,460 tonnes) per

stream day design rate have

already confirmed satisfactoryperformance.

73

Page 7: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

Syncrude transportation has

proved to be exactlyequivalent to the

transportation of conventional

crude oil.

ULTIMATE TECHNOLOGY CAPABILITY

The Parachute Oil Shale

project is continuing to

increase oil production

through improved on-stream

efficiency and technologyevolution. The performance

improvement trend is

proceeding at a reasonable

rate.

The retort has regularly

produced 7,000 barrels (1,025

tonnes) per day of raw shale

oil. Feed with a higher

Fisher assay than design, up

to 41 gallons per ton (gpt)(171 litres per tonne), has

also been routinely processed.

The plant was designed for 34

gpt (142 litres per tonne)feed.

Oil recovery in the retort was

increased significantly in

1988 and again in 1989 by

installing new crushers that

enabled a decrease in the rock

size fed to the retort. The

design feed consist was +1/8

inch (+3 mm) by -2 inch (-50

mm) . The raw shale is now

crushed and screened to a

consist of +1/4 inch (+6 mm)

by -1 inch (-25 mm). This

decreased feed size has

resulted in an oil production

increase of more than 25%.

The recycle gas temperature

was increased in 1989 from1040

F(560

C) to1090

F(588

C) . This change has

further increased oil

recovery .

The full benefit of these

latest technological

improvements is still being

explored. Their potential is

expected to be fully realized

by mid-year.

Pioneer Plants (Rand

Corporation Study)

To put Unocal's experience in

perspective, it might be

useful to compare the retort's

performance with that of other

new technologies. A good

frame of reference is the Rand

Corporation work on the

performance of new solids

processing plants.

The Rand studies predicted

start-up would have been 33

months+/- 3 . 6 months ;

Unocal's actual experience was

34 months in other words,

typical . Plant performance

since start-up has followed a

similar path, i.e., growth of

shale oil production has been

better than Rand's worst case,

but not as good as the best

case prediction. If

performance continues to

follow the Rand analysis, the

plant can be expected to

continue to improve for the

next few years.

Improvements in operating

efficiency should increase

production at least until

maximum current stream dayrates are sustainable on an

annual basis. In other words,

even if there is no further

improvement in technological

performance, the ability to

keep the plant running will

substantially raise average

calendar day production rates.

74

Page 8: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

If the limits of Unocal's

technology have not been

reached,and nothing indicates

it has . the Rand work would

suggest that design operations

can be achieved at current on

stream expectations (90%).

Rand also looked at the

economic performance of

pioneer plants. The three

separate facilities that

comprise Unocal's Parachute

Creek Shale Oil Project

required a total investment of

$650 million (as spent), as

compared to an original

estimate of $464 million (with

inflation) , representing a

cost increase of 39.9 percent.

This compares quite favorablyto an expected cost growth of

66 percent, based on the Rand

work. Operating expenses are

running approximately 10%

below design estimates,

primarily as a result of lower

than expected natural gas

prices.

PRODUCTS FROM SHALE OIL

SYNCRUDE

The syncrude is a superior

refinery feed. This is

especially evident in the

level of contaminants and in

resid content. Typical

inspections of the

commercially produced syncrude

are shown in Table 1. This

table also includes

inspections of Arabian Light

crude, the world standard for

light crudes.

As shown in Figure 3, some 65

to 70 percent of the syncrude

yields high quality

transportation fuels on

distillation, and the

remainder is an excellent

hydrocracker or FCC feed.

Syncrude can be completely

converted into high quality

transportation fuels. By

choosing the processing route

for the gas oil, production of

gasoline, jet fuels or diesel

can be maximized.

Unocal's syncrude is and has

been co-processed with

conventional crude oils at

several refineries in the

Midwest and Rocky Mountains.

Over 3 million barrels

(390,000 tonnes) of syncrude

have been refined into the

complete spectrum of

conventional petroleum

products and entered the

ordinary course of commerce in

the United States.

Gasoline

Shale oil syncrude contains

approximately 25 vol% of

gasoline boiling range

material. Five vol% (butanes

and pentanes) can be blended

directly to gasoline; the

remaining 20 percent is a good

naphtha reformer feedstock.

As shown in Table 2,the

naphthenes and aromatics

content of the syncrude is

significantly higher than that

of naphtha derived from

Arabian Light crude. This

makes the syncrude naphtha a

much better reformer feed.

The low sulfur content may

allow it to be reformed

without a hydrotreating step.

Jet Fuel

Shale oil syncrude is an

excellent source of JP-4, JP-8

and Jet A fuels. These fuels

can be produced directly bydistillation. Table 3 shows

75

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the distribution of products

when the goal is to maximize

the production of JP-4. The

product slate shows yields of

40 vol% JP-4, and 30 vol% each

of diesel fuel and gas oil.

Table 4 compares the important

properties of the JP-4 derived

from syncrude with JP-4

specifications. It is evident

that this is an excellent JP-4

fuel.

Approximately 36 vol% of jet A

can be distilled from the

syncrude. As shown in Table

5, this fuel meets all the

ASTM specifications.

Diesel Fuel

As shown in Table 6, 70 vol%

of the syncrude can be

distilled to diesel fuel when

the goal is to maximize

production of this fuel. The

properties of the diesel are

compared to the important

specifications of military

diesel fuel in Table 7. The

diesel fuel distilled from the

syncrude easily meets all

specifications .

Syncrude as Middle

Distillate Fuels Source

Table 8 summarizes the yields

of JP-4, Jet A and diesel fuel

that can be produced from

shale oil syncrude bydistillation. Additional

middle distillate fuels can be

produced from the shale oil

syncrude gas oil in

conventional gas oil

conversion units.

Syncrude Gas Oil as

Hydrocracker and FCC Feed

The portion of the shale oil

syncrude boiling above 650 F(343

C) is an excellent feed

to an FCC or hydrocracker

unit. Table 9 compares

properties of this syncrude

fraction with properties of

gas oil from Arabian Light

crude. The gas oil from

syncrude is superior to that

from Arabian Light crude in

every respect. The syncrude

is essentially free of metals

(Ni, V, Fe), carbon residue,

vacuum resid

(1,000

F-plus(538

C)) and has very low

nitrogen and sulfur contents.

As a result, the entire

syncrude

650

F-plus(343

C)can be fed to a conventional

hydrocracker or FCC unit. The

Arabian Light residue has to

be distilled to remove1,050

F-plus(566

C) material,which contains contaminants

deleterious to hydrocrackingand fluid catalytic cracking

catalysts.

Syncrude Gas Oil as

Hydrocracker Feed

Unocal has conducted numerous

hydrocracking pilot plant

programs to study the

conversion of the heavyportion of the syncrude to

transportation fuels and other

valuable products. Typical

yields obtained in the

experiments simulating maximum

production of JP-4 and lighter

products in a conventional

single-stage Unicracker are

shown in Table 10.

With 1,050 SCF/B (288

m3/tonne ) hydrogen

consumption, the butanes plus

liquid yield was 117 vol%. Of

this, 92 vol% was JP-4, 21

vol% butanes and pentanes and

4 vol% gas oil. Table 11

76

Page 10: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

lists the important properties

of the principal product,JP-

4 , along with the

specifications. It is evident

that the JP-4 produced by

hydrocracking the650

F-plus(343

C) syncrude is a high

quality fuel.

Syncrude Gas Oil as FCC

Feed

The entire650

F-plus(343

C) portion of syncrude was

processed in a laboratory unit

with conventional FCC

catalysts at various

severities. Typical results

are given in Table 12. At

standard conditions, and with

commercially available

catalyst, 85 percent of the

syncrude gas oil was converted

to gasoline and lighter

products. The high

selectivity to gasoline, low

coke and decant oil production

make the heavy component of

the syncrude a premium FCC

feedstock. The propenes and

butenes and the cycle oil are

excellent alkylation and

diesel blending stocks,

respectively .

Syncrude as Source of

Lube Stocks

Shale oil syncrude is

potentially an excellent lube

stock. As shown in Table 13,36 vol% of the syncrude can be

extracted to lube stocks.

This compares favorably to

Alaskan Cook Inlet crude, the

primary source of lube stocks

in one of Unocal's refineries.

The properties of the finished

crankcase lubes from these

crudes are comparable.

Syncrude Converts

Entirely to

Transportation Fuels

As this experience shows,

shale oil is a superior source

of feed-stock for

transportation fuels our

single largest domestic energy

requirement. Utilizing the

gas oil conversion flexibilityfound in most modern

refineries, 100% of the

syncrude can be converted to

transportation fuels; there

are no heavy bottoms left as

with conventional crude oil.

Jet fuels, diesel and gasoline

can all be produced from

syncrude, and by choosing

among processing options, any

product can be maximized.

ENERGY POLICY

CONSIDERATIONS

The United States is now using

80 quads of energy per year

roughly one-quarter of all

the commercial energy consumed

in the world. By far the

biggest share, 43 percent, is

crude oil, which is mostlyconsumed by our transportation

system.

The western United States

contains at least 600 billion

barrels (78 billion tonnes) of

recoverable shale oil 20

times domestic petroleum

reserves of about 25 billion

barrels (3.25 billion tonnes),and about equal to all of

OPEC's crude oil reserves.

Eighty percent of this

resource is under federal

ownership.

The United States may need

this resource much sooner than

some people think. While the

United States is the world's

77

Page 11: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

largest consumer of petroleum,about one-third of the total,we have less than 3 percent of

known reserves. To make upthe difference between what we

produce and what we consume,

we continue to import more and

more oil. In 1985, we

imported 32 percent of our

petroleum needs. In 1987, it

was 39 percent. Last year, it

ran as high as 50 percent.

Some authorities now believe

that our import level will

reach 65 percent during the

1990s.

The foreign trade bill for

these purchases is staggering.

By some estimates, imported

crude oil purchases accounted

for nearly one-half of the

nation's substantial trade

deficit in recent months!

Given these trends, it's very

possible that a repeat of the

1970s could be experienced

this decade. As OPEC regains

control of the world oil

market, this country could

face a new round of economic

shocks and supply disruptions.

Former Energy SecretarySchlesinger recently predicted

this could occur as early as

1992, with oil prices rising

above $30 per barrel ($231 per

tonne) thereafter.

Alternative sources of energy,

especially alternative

transportation fuels, will be

needed to augment or supplant

conventional petroleum

supplies in the future.

Shale-derived fuel is one of

the alternatives, and perhaps

should be viewed as the most

attractive of the fossil fuel

alternatives for several

reasons.

First, as Unocal's

experience at Parachute

Creek shows, shaleoil is

a superior source of

feed-stock for

transportation fuels

our single largest

domestic energy

requirement.

Second, Unocal has

demonstrated that the

environmental challenges

posed by oil shale

development are

manageable .

Third, Unocal is closing

in on defining the

technological and

economic parameters for

the extraction of shale

oil in commercial

quantities.

EFFORTS SHOULD CONTINUE IN THE

NATIONAL INTEREST

If Unocal can continue to

operate the project, the

company will be able to

establish the technical,environmental and economic

viability of commercial oil

shale development. That is

important information for

Unocal,the undisputed

technological leader in oil

shale. But the technical,environmental and economic

parameters of oil shale are

also important knowledge for

the United States which will

ultimately have to deal with

its increasing dependence on

foreign oil.

Unfortunately, Unocal may not

be able to perfect the full

potential of its retorting

technology under current

78

Page 12: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

economic conditions. Unocal's

shale technology is, however,

years ahead of other shale

technologies or coal

liquefaction. It is in the

national interest to continue

this effort; it is the

fastest, easiest, and least

costly manner to define the

competitive price of this

important alternative energy

source .

79

Page 13: Cloyd Reeg,President, Technology Energy Mining Brea,UNOCAL'SPARACHUTECREEKOILSHALEPROJECT CloydP.Reeg,President,UnocalScienceandTechnology andEnergyMiningDivisions 376S.Valencia Brea,California92621

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