Sunday, September 4, 2005

Oil for the Masses

Shell Oil Company believes it has come up with an economically viable (at $30/barrel) way to extract petroleum products from oil shale. If true, this has very large potential consequences, mostly good.

For those of you old enough to remember Jimmy Carter's "Synfuel" disaster, you probably know that the oil shale deposits inside the U.S. were widely seen at the time as the shortest path to energy independence for America. Unfortunately, we let government do it instead of private industry, and the predictable result was billions of dollars spent with utterly no tangible result.

The Shell endeavour, by contrast, was entirely privately funded (with their own money), and very focused on practical results. Rocky Mountain News has a good story about the process, excerpted below (many more details in the linked story):

While we were trying to do the math, O'Connor told us the answers. Upwards of a million barrels an acre, a billion barrels a square mile. And the oil shale formation in the Green River Basin, most of which is in Colorado, covers more than a thousand square miles - the largest fossil fuel deposits in the world.


They don't need subsidies; the process should be commercially feasible with world oil prices at $30 a barrel. The energy balance is favorable; under a conservative life-cycle analysis, it should yield 3.5 units of energy for every 1 unit used in production. The process recovers about 10 times as much oil as mining the rock and crushing and cooking it at the surface, and it's a more desirable grade. Reclamation is easier because the only thing that comes to the surface is the oil you want.

Perhaps the key point in this discussion is that America's oil shale fields in the Green River Basin (the blue areas on the map above) form the single largest proven oil deposits in the world. Bigger than Alaska. Bigger than Saudi Arabia. Bigger than Qatar. With Shell's new process, should it prove feasible at large scale (and there's every reason to believe that it will), America could be energy-independent for many decades — long enough to come up with a viable alternative to a hydrocarbon-based energy infrastructure.

Wikipedia has a good introductory article on oil shales. Estonia (a country I know well through my business travels) has the world's largest oil shale production facilities, just west of the city of Narva. These date from the early 1900s, and process the shale in the most intrusive process imaginable: the oil shale is dug up, crushed, cooked (to release the hydrocarbons through vaporization), and dumped in huge ugly piles. This region of Estonia looks like some giant's kid was playing in the sandbox — several-hundred-foot-high piles of gravel dot the landscape, great pits nearby. Left alone, the region is as flat as a billiard table, so the predations of man are all the more obvious. I certainly wouldn't want to see this kind of process applied in the beautiful sections of Utah and Colorado where the richest oil shales in the U.S. are found (see the map above).

But Shell's in situ process has great promise, not only economically, but also in terms of minimizing environmental damage. China has already entered into a major partnership with Shell to exploit its much smaller and much less rich oil shale fields. Estonia has held discussions with Shell, but ironically the miner's unions in Estonia are doing everything they can to derail the talks. In the U.S. there are formidable political obstacles to overcome — the Democrats will surely reflexively oppose this, and the wacko fringe of the environmentalist movement will mobilize.

I suspect that the American public's reaction to higher pump prices (say, $5/gallon) will be more than enough to overcome such opposition. I'd be willing to place a bet that (assuming the processe scales) we'll be seeing American Shale Oil at our pumps within a few years...

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