The Oil Drum

It isn't hard to see why I am an oil shale skeptic. I outlined my reasons in two essays on oil shale: “Oil Shale Development Imminent” and Oil Shale = Cellulosic Ethanol.

In those essays, I provided some history of oil shale, discussed Shell's unique process, as well as the reasons those "trillions of barrels" remain elusive. But one of Shell's recent moves has raised some eyebrows, as they are in the process of buying up water rights in Colorado to process the shale.

Green River Formation: Trillions of Barrels of Oil?

Click on the image to the right to download the .pdf of a full page "advert" which appeared in both Time and Fortune magazines over Easter. It was written by Jeremy Leggett, the prominent peak oil and climate change commentator and proponent of renewable energy (also Chairman of Solarcentury). On peak oil Jeremy doesn't pull any punches: The bad news is that no combination of technologies can plug the energy gap if the peakists are correct. There will be a third, and last, global energy crisis. It will dwarf previous crises. Profound economic dislocation will result. The challenge for human civilization will be how we rebuild post-peak. The interesting point here is that that Shell sponsored the thing. So, what's in it for Shell?

Click to enlarge. .pdf

Below the fold is the full text of an email sent by Jeroen van der Veer, the CEO of Shell, to all Shell employees, and explicitly meant for wider distribution. (Update: an almost identical version is now available on Shell's website)

It is a clear acknowledgement of the reality of peak oil, climate change and of the need for comprehensive policy changes, and is worth reading in full.

Cross-posted from Peak Energy

The Australian Financial Review today has a report on a plan by the Ziff brothers to revive Queensland's defunct shale oil industry (subscription required) - "a mining project worth as much as $14 billion near the Great Barrier Reef Marine Park". The report predicts the development would bring 16,000 new residents to the Whitsundays region and is already facing opposition from local groups like "Save Our Foreshore" concerned about damage to the environment and the tourism industry.

Bloomberg has a much smaller version of the story - "Ziff Seeks to Develop Australian Oil-Shale Project, Review Says".

Queensland Energy Resources Ltd., a closely held company backed by Ziff Brothers Investments, is seeking to develop an Australian oil-shale project valued at A$14 billion ($12 billion), the Australian Financial Review reported.

Consultants from New-York based Ziff recently met the Queensland government to discuss development of the project, which would require the relocation of a nearby airport, the paper said, citing government documents. The project, located in Queensland state near the Great Barrier Reef Marine Park, may contain as much as 9.7 billion barrels of oil resources, the Review said, citing a document lodged with the state's government.

Queensland Energy is scheduled to complete an initial study into possible development of the project within six months, the Review said, citing Simon Eldridge, the company's director of corporate affairs. The company acquired the project from Southern Pacific Minerals NL in 2004, the report said.

The original Stuart shale oil development in the area was done by Southern Pacific Petroleum.

Lord Ron Oxburgh, former non-executive chairman, Shell UK; chairman, House of Lords select committee on science and technology; honorary professor, Cambridge University

The morning began with a Keynote address by Lord Oxburgh former non-executive chairman of Shell, who spoke on “Out of Oil, into Hot Water.” He began by noting the economic difficulties that are coming as demand continues to exceed supply. We are not, after all, making oil any more. (Ed comment – well let’s not forget biofuels – and it turned out he did not). Because these problems will arise around the time of peaking they will likely be precursors to it, and these economic consequences will come sooner than expected.

The problems, however, are not that we are running out of oil, rather it is that we are running out of cheap oil. When oil fields are abandoned there may be 60% of the original oil (OOIP) that is left in the rock. At present this is just too expensive to extract, but it leaves us with a problem since most transportation requires a liquid fuel. To work effectively the vehicle must have a small, relatively light engine, together with a storage reservoir full of fuel, that must in turn, be as light, yet energy dense, as possible. The Internal Combustion Engine (ICE) has filled that need for the past century or so. The fuels that power it are among the most energy dense of those commonly available. That alone, however, is not the problem.

[editor's note, by Dave Cohen] Fellow TOD contributor Bubba is co-author of this report. He is an industry insider. It seemed important for those of us concerned about peak oil to respond to the Jack-2 test well result and all the publicity it has spawned. I also had conversations about this piece with Byron King at Whiskey And Gunpowder. Byron writes frequently about peak oil issues. I take full responsibility for this post's contents since I did the final editing.

With the successful test drilling of Jack-2 in the ultra deepwater Gulf of Mexico, there has been a media blitz proclaiming the good news. The "peak oil" theory is under attack. From Business Week's September 7, 2006 article Plenty of Oil--Just Drill Deeper The discovery of reserves in the Gulf of Mexico means supply isn't topping out, we learn

You can tune out all the scare talk about Peak Oil for a while--probably a long while. Peak Oil is the theory, on the verge of becoming conventional wisdom, that the world's petroleum supply is topping out and will not be able to meet global demand soaring along with the economies of China and India. But a successful test in a mammoth field deep beneath the Gulf of Mexico, announced on Sept. 5 by Chevron (CVX), Devon Energy (DVN), and Norway's Statoil (STO), should help put that scary scenario on hold for decades....

Cambridge Energy Research Associates predicts world oil and natural gas liquids capacity could increase as much as 25% by 2015. Says Robert W. Esser, a director of CERA: "Peak Oil theory is garbage as far as we're concerned."

Let's take a closer look at the prospectivity, geology, economics, technology, reservoirs, hydrocarbons and logistics of the Lower Tertiary play in the Gulf of Mexico (henceforth the LTGOM).

The weather is still pleasantly warm, and winter seems, as yet, to be just an unpleasant thought that can be put off until, at least, Thanksgiving. But unfortunately for those who have to look towards energy supplies for the winter, particularly in Europe, it may already be coming too quickly. To simply describe what is likely going to turn into yet another mess this winter, let me try a quick summary of what seems to be in the offing.

Gazprom you may recall has been buying into, or acquiring more control of, pipelines that carry their gas from Russia to the West. In the process, last year, it had a bit of a row with Ukraine, over the price that should be paid for the gas Ukraine was using. By offsetting the cheaper price that was to be paid for gas from Turkmenistan, the deal that was cut gave Ukraine the promise of gas at a price that would allow it to continue to function. Well, unfortunately for that agreement, Gazprom has just agreed to pay more for Turkmen gas. At a price of $100 per thousand cubic meters this is already $5 above the price that Ukraine was going to pay for a blend that also contained $230 Gazprom gas.

I mentioned in an earlier post that there have been over 2,000 patents filed on different ways to best extract oil from oil shale. Before going on to close this series with a discussion of the Rand report, and the Shell process, I thought I would draw a little attention to a new method being proposed in Israel. According to the report

Older technologies squeezed oil out of shale by putting the crushed rock under enormous pressure at high temperatures. But the process developed by Gvirtz costs far less. The shale is mixed and coated with bitumen, a remnant of normal oil refining, then put through a catalytic converter under relatively low pressure. The output is synthetic oil that can be refined into gasoline and other products. . . . . . That will entail construction of a pipeline from the Ashdod refinery located 80 kilometers (48 miles) to the north that would be used for transferring the necessary bitumen needed for the production process. A parallel pipeline would transport the synthetic oil back to Ashdod for refining. . . . . . . "The cost of producing a barrel of oil using the process would be around $17 a barrel," estimates Amit Mor, managing director of Eco-Energy. At that price, the proposed plant would be a veritable gold mine, with annual profits between $188 million to $317 million. Mor notes that the projections are based on the U.S. Energy Dept.'s forecasts of an average oil price of $45 to $50 a barrel in the coming 25 years.

The process is anticipated to produce 3 million tons of oil from 2 million tons of bitumen and 6 million tons of oil shale. While the idea apparently has some merit, perhaps in that it recovers otherwise unattainable oil from the shale, I think that I would need to know a fair bit more about this before I could make sense of it. Perhaps someone with more of a bent to EROI than I can comment.

[editor's note, by Prof. Goose] Hey folks, see these buttons to the left? Note that they include reddit and digg. If you recommend TOD articles at these sites (account required, but they take seconds to set up, and once setup and logged in, all you have to do is click!), we can get more traffic driven over here! Do it for every article you think is worthy.

Update [2006-6-18 10:34:44 by Super G]: A large portion of this article was cut off when it was originally posted. I have just added in the rest.

I have recently noticed an increase in oil shale coverage in the media, so this seems like a good time to take a look at the potential for oil shale to meet a portion of our energy wants (as opposed to “needs”).

First, what is oil shale? Wikipedia has a nice overview on oil shale here. Briefly, oil shale started off just like the plant material that was ultimately converted into oil, but the material was not subjected to high enough temperatures and pressures to convert it completely to oil. But it is feasible to complete the process that nature started and convert oil shale into oil and natural gas by heating it. Given that the U.S. has an estimated oil shale reserve of a trillion barrels or so, it is not surprising that billions of dollars have gone into figuring out how to economically extract the oil from oil shale.

Shell and Chevron-Texaco are two companies that, I would argue, are precipitously close to acknowledging the peak oil problem.  Between Chevron-Texaco's "Will you join us" ad campaign which states:

"Energy will be one of the defining issues of this century.  One thing is clear: the era of easy oil is over. What we all do next will determine how well we me the energy needs of the entire world in this century and beyond.  Demand is soaring like never before.  As populations grow and economies take off, millions in the developing world are enjoying the benefits of a lifestyle that requires increasing amounts of energy. In fact, some say that in 20 years the world will consume 40% more oil than it does today. At the same time many of the world's oil and gas fields are maturing. And new energy discoveries are mainly occurring in places where resources are difficult to extract, physically, economically and even politically. When growing demand meets tight supplies, the result is more competition for the same resources.  We can wait until a crisis forces us to do something.  Or we can commit to working together, and start by asking the tough questions: How do we meet the energy needs of the developing world and those of industrialized nations? What role will renewables and alternative energies play?  What is the best way to protect ourenvironment? How do we accelerate our conservation efforts?   Whatever action we take, we must look not just to next year, but to the next 50 years."

...to Shell Director Malcom Brinded's recent comments that:

The challenges of supplying the expanding energy needs on which rising living standards for billions of people depend - while still preserving our environment - are increasingly apparent.  I believe they are among the greatest challenges ever  faced by mankind.