Shale down but not out!

RBC I Oil shale boosters and other enthusiasts were gathered at an annual Colorado School of Mines conference recently, when the talk turned to Shell Oil’s announcement that it was abandoning its oil shale project in western Colorado. Suddenly, the group’s comments seemed straight out of Monty Python and the Holy Grail:
“DEAD COLLECTOR: Here — he says he’s not dead!
CUSTOMER: Yes, he is.
DEAD PERSON: I’m not!
DEAD COLLECTOR: He isn’t.
CUSTOMER: Well, he will be soon, he’s very ill.
DEAD PERSON: I’m getting better!”
Combine Shell’s departure with Chevron’s exit last year, and you can pound another nail in oil shale’s coffin.
Although oil shale appears to be remarkably hard to kill, it’s like the fool’s gold of the energy world.
As longtime friend, energy writer and commentator Randy Udall and I wrote back in 2005, “If crude oil is king, oil shale is a pauper. Pound per pound, oil shale contains just one-tenth the energy of crude oil, one-sixth that of coal and one-fourth that of recycled phone books.”
It’s a badly kept secret that there is no oil in oil shale. The rock, actually called marlstone, contains a waxy hydrocarbon called kerogen that never endured the heat and pressure needed over millions of years to turn the kerogen into liquid energy.
Instead, Shell and others cooked the kerogen into petroleum by heating it in place, thousands of feet below ground. But they had to use a lot of heat — 700 degrees or more — for about three years. This is so much heat that it would take one large new power plant to produce 100,000 barrels per day of liquid energy. The “in situ” process, despite Shell’s extensive research over more than three decades, apparently never made economic sense.
The technique’s high energy demand and cost undoubtedly contributed to Shell’s exit, although the company spoke vaguely about “evolving priorities” and “other opportunities.” In Shell’s comments to journalists, the company never exactly said, “It’s over. Kaput. Finito.”
After all, that would be Shell fessing up to throwing tens of millions of dollars down a dry hole. Despite Shell’s failure, the sheer size of oil shale deposits, no matter how uneconomical, keeps proponents busy at figuring out how to tap the elusive bonanza.
Shortly after Shell’s exit, for example, Jeremy Boak of the industry-funded Center for Oil Shale Technology spun a new, experimental in-situ project as “kind of an exciting research project.”
And at last month’s conference, Boak focused on above-ground retort technology, declaring that it “is no longer in its infancy.” Boak was certainly right, as this approach has been around for decades. The big cookers that bake marlstone above ground, however, also pollute water and air. The Anvil Points oil shale project, operated by Mobil et al for decades through 1984, eventually became a federally designated Superfund site for having leached toxics into ground water.
Oil shale’s economic record also stinks. Around 1920, oil shale promoters suffered the first of many hype-driven and tax-supported economic booms followed by under-performing busts. The most infamous crash hit western Colorado hard, after the feds invested more than $7 billion back in the late 1970s. When Exxon pulled the plug on its $5 billion project on May 2, 1982, it cut 2,200 jobs and sent west-central Colorado into a decade-long depression.
Today, Shell’s decision may only impact a few dozen Coloradans, but it deals a body blow to the latest round of oil shale hyperbole.
Some of the hype came from former California Republican Rep. Richard Pombo, who intoned that if we would just get with the oil shale program, the United States could produce 10 million barrels a day of oil in only a couple of decades. Given that our actual oil production of the $3 barrel variety peaked at close to 10 million barrels per day over 40 years ago, the notion that we could ever produce that much from very expensive oil shale was delusional.
With the oil majors Shell and Chevron leaving, the largest, richest deposits found deep in the ground are unlikely to be developed anytime soon. All that’s left on the table are the European speculators, such as Enefit, Tomco Energy and Red Leaf, going after the bottom of the barrel as they focus on the less resource-rich deposits in Utah.
Still, the sheer size of the prize and the high price of petroleum products mean that some level of oil shale speculation will continue. So, as Yogi Berra might put it, it ain’t over till it’s over … though it probably should be.
 
Steve Andrews is a contributor to Writers on the Range, a service of High Country News. He is a retired energy consultant and analyst; co-writer Matthew Garrington is deputy director of the Western Energy Project. Both men live in Colorado.