Recent Developments and Future Paths for Production of Shale Oil

Jeremy Boak, DirectorCenter for Oil Shale Technology & Research

Colorado School of Mines

Introduction COSTAR and the Oil Shale Symposium Oil shale and global resources Developments in the U. S. World-wide developments Future paths

COSTAR Center for Oil Shale Technology and Research Membership - Total, Shell, ExxonMobil Research Team

– Colorado School of Mines– University of Wisconsin– Binghamton University (SUNY)– National Center for Atmospheric Research

Initial tasks:– rock mechanics, – geology and stratigraphy, – geochemistry– GIS database development

Oil Shale Symposium

• Colorado School of Mines, Golden CO, – October 19-23, 2008

• >300 attendees each year from >20 countries• Strong representation by countries already

producing shale oil at the surface• Full spectrum of viewpoints, lively discussion

Global Oil Shale Resources

Changing Resource Estimates

Where is the Green River Formation?

The world’s largest known oil shale resources occur in:

– Eocene lake sediments of Green River Formation

– Western Colorado and adjacent Utah and Wyoming

Piceance Basin largest fraction of reserves

Major basins connected at times during history

Each basin has a unique history

Even different evaporite mineralogy

Oil Shale - Tremendous Potential

• The U.S. Geological Survey estimates: • Total U.S. oil shale resource is 2.1 trillion barrels• 1.5 trillion barrels in the Green River Formation of Colorado,

Utah, and Wyoming• 800 billion barrels of oil

• Strategic Unconventional Fuels Task Force estimate of recoverable resource from Green River Formation

• Enough to replace the oil we import for more than 180 years• Almost three times the proven reserves of Saudi Arabia

Recent activity - RD&D leases Shell

– permit submitted & withdrawn; tests continue on private land Chevron

– 1 core hole, 15 monitoring wells drilled and logged– Research partnerships - Los Alamos National Laboratory, University of

Utah, and others– Key issues - kerogen chemistry; rock fracturing; environmental protection

AMSO – hydrologic test well drilled

OSEC – lease for surface processing in Utah– Plan in preparation

Recent activity - other Other western U. S. activity

– ExxonMobil Colony site– OSEC partnership with Petrobras & Mitsui– Total partnership with IEP– Ecoshale retort pilot field test complete; next step

commercial scale– ConocoPhillips holds private land

Regulatory activity– Leasing regulations– New RD&D leases– Shell water request

Ecoshale pilot scale test results 10 barrels product per

BOE energy input 5 barrels product per

barrel water input API gravity 34 with no

fines; 70% diesel + jet fuel

fraction CO2 2/3 of traditional

retort No hazardous emissions 1 year construction to

reclamation <$25/barrel cost

• Mined• Rubblized• Impounded• Handled Only Once at Mine Face• Stationary Extraction

Source: Laura Nelson, Ecoshale

Oil Shale Regulations Proposed Leasing Process

1. Call for expression of interest2. Comments from Governors, local governments, and Native

American tribes3. Set geographic area4. Call for lease applications5. NEPA for lease area6. Hold competitive lease sale (high bidder wins)7. Plan of Development8. Site-specific NEPA 9. Obtain Permits10. Construction11. Production begins

Oil Shale Regulations Diligence Milestones

Submit proposed Plan of Development (POD) within 2 years of lease issuance

Submit final POD within 3 years of lease issuance Apply for all permits within 2 years of POD approval Begin installation of needed infrastructure before

end 7th lease year Begin production by end 10th lease year

Oil Shale Regulations Proposed Royalty Options

Flat 5 % 5 % royalty on initial production, 12.5

% thereafter Sliding Scale Royalty

– (Based on market price of oil)

Comments Over 75,000 comments received ~74,800 from letter writing campaigns Some comments on royalty rate:

– Shale oil costs more than oil and gas to produce and a lower rate will promote oil shale production.

– The 5% flat rate is too high; a 1% to 3% royalty would offset start-up cost and promote oil shale production.

– The government should impose a royalty rate higher than 5%.

Competitive Leasing Route

•If regulations finalized, what is ACTUAL impact?

•Is this a “rush to develop?”• No environmental or socioeconomic risks – merely

set “rules of the road”• No on-the-ground activities are authorized • Projects must still clear 47 Federal, State and County

permitting agencies• Water rights’ issues reside with the States, not BLM

Global Developments Total partnering with Petrobras in

Morocco and Jordan China contracting with UMATAC for ATP

Retort; expanding production in several areas; completed survey of oil shale resources

Jordan working with multiple partners Estonia continues to increase production

Current shale oil production

0

5,000

10,000

15,000

20,000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Prod

uctio

n (B

OPD)

ChinaBrazilEstonia

Future shale oil production (?)

1,000

10,000

100,000

1,000,000

10,000,000

1990 2000 2010 2020 2030 2040 2050

Produ

ction

(BOP

D)

ProductionGrowth '90-'08Growth '99-'0815% GrowthUS 1860-1920

Potential influences on oil shale production

Local environmental issues Socioeconomic issues Global environmental issues – carbon Peaking of global oil production

Environmental issues for oil shale Development

Issues– Water quantity and quality – Air quality– Surface and ecosystem impact

Environmental process needs– Process, baseline, management,

dissemination– Model development– Impact assessment & policy– Mitigation technology development

Social and economic impacts– Multiple developments (tight gas)– Revenue sharing – time and share– Concerns about boom-bust cycle– Public outreach– Workforce development

Greenhouse gases

How to keep this

From accelerating this

0100200300400500600700800

0 10 20 30 40Fischer Assay

Annu

al C

O2 (

mill

ion

tons

)

World Oil Production – Peaking?

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1950 1970 1990 2010 2030 2050 2070 2090

Annu

al Pro

ducti

on (M

MBO)

ActualHubbertExponentiala*e-bx̂ 2

Oil Shale Conclusions Oil shale resources are widely distributed A great deal of excitement in the revived oil

shale industry Countries & companies that have sustained

effort will benefit by their leadership Both surface and subsurface processes are

being employed New advances offer promise for the future Environmental challenges are significant

Backup Information

Oil Shale and Tar Sands PEISProposed Land Use Plan Amendment

Colorado – 359,798 acres

Utah – 630,971 acres

Wyoming – 1,000,453 acres

What is oil shale?Organic rich sedimentary

rock formed in lake or marine environments– Commonly carbonate rich; most

not true shale– Kerogen-rich, primarily algal

and bacterial– Immature precursor to oil & gas

Produces oil upon heating