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Seeking Alpha: Can Royal Dutch Shell’s Shale Extraction Technique End ‘Peak Oil’ Paranoia?

Posted on Apr 10th, 2007 with stocks: RDS.A

By Jack Brynaur

Over the past few years, more and more apocalyptic stories have been popping up about a supposed phenomenon known as “peak oil.” The theory is that we’re running out of oil, the big powers are keeping it quiet, and as supplies dwindle, world-wide economic chaos will ensue.

This is hardly a new theory. According to the Chicken Littles of the world, we’ve been “about to run out of oil” for over thirty years. Obviously it hasn’t happened yet. With the recent upswing in strife in the Middle East, however, the notion has gained in popularity.

The thing is, this theory is utterly false, and can be laid to rest with a single well-established fact: there is more oil in the Colorado shale fields than the entire Middle East had at its peak. The only reason we’re still importing oil is that, at present, it is cheaper to do so than to extract it from shale. Until recently, getting oil out of shale has been a nasty and expensive business.

That’s about to change, though, as engineers at Royal Dutch Shell (RDS.A) have applied for a patent on a new method of extracting shale oil cheaply and cleanly. (As an interesting side note, it is the largest patent application in U.S. history.)

 Amazingly, this method:

  • Is cleaner than conventional drilling
  • Generates the highest grade of light-sweet crude oil, which burns cleaner than other varieties
  • Becomes profitable with oil just north of $30 a barrel (which we’ve already blown past)

In other words, with Shell’s new technique, it actually benefits the environment to switch to shale oil. I found this hard to believe at first, but seeing as I am a patent lawyer, I decided to pull the patent application to see for myself. When I saw the invention laid out on paper, I was convinced that it would work.

As with most great ideas, the basic concept is simple. In brief, engineers dig holes around the extraction area, into which they insert giant cooling rods. The water in the soil freezes, and forms an “ice-bowl,” which traps the oil and prevents seepage. The center of the formation is then heated, causing the oil to bubble up through the rocks, from which it may then be extracted with ease. The ice-bowl prevents all the nasty chemicals released by this process from getting into the water table.

Shell has been granted rights to a small patch of shale field in Colorado to make an experimental run with its new method, and all present signs suggest it will be a success. Make no mistake, however. Even if Shell’s idea is a disastrous failure, existing technologies can get oil out of the shale — it’s just expensive. Other new extraction methods are also being tried by a number of companies.

Here’s a partial list:

Petrobras (PZE)
Shell Frontier Oil and Gas
Exxon Mobil (XOM)
Chevron Shale Oil Company (COP)
EGL Resources
Milennium Synfuels
Oil Shale Exploration, Inc.

The absolute worst case scenario I can fathom is that oil prices could get high enough to make existing shale extraction techniques economically feasible (some estimates put the break-even point at about $75 a barrel). At that point, we could tap our shale reserves and continue on, whether any of the new methods work or not, without any significant changes in infrastructure. Sure, gas would be more expensive, but probably no more-so than Europeans pay now. The economy may go through a rough patch during the transition, but the theory of a global economic meltdown over peak oil just isn’t credible.

In fact, once shale production takes off, we could easily become the world’s biggest exporter of oil, with China as our biggest customer. Strange as it may sound, it is quite possible that, within our lifetimes, Chinese government officials may take to fretting about their dependence on “Middle-Western” oil.

In short, don’t buy into the peak oil paranoia. It is nothing more than a fairy tale, and is dangerous in that it distracts attention from the real impending crisis within our energy policy: global warming. It makes no sense to waste our time fretting about running out of oil when we in truth should be concentrating on figuring out how to curb our usage of it. After all, even if we were running out, wouldn’t the best solution be the same? and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

10 Comments on “Seeking Alpha: Can Royal Dutch Shell’s Shale Extraction Technique End ‘Peak Oil’ Paranoia?”

  1. #1 Makere
    on Mar 3rd, 2008 at 20:56

    so… where IS the link to the patent?

  2. #2 Chunjie
    on Jun 9th, 2007 at 06:58

    Thomas, if you care so much about this wonderful earth, perhaps you should stop using any technology of the world. Even simply using electricity (based on the famous theory of global warming) will cause global warming!!! Throw away your fridge at home and don’t heater when you are cold!!! don’t use your car because they will create demand for oils which will cause suffering to your poor polar bear. Go live in the jungle where you can live without destroying earth. While preaching about what’s happening to your poor polar bear, have you thought of the meet you ate??? what happened to the poor cow??? if you say you are a vegetarian, well, you know what?? you shouldn’t eat them because they help produces the O2 that helps reduces global warming!!! so just sit there quitely and die already…

  3. #3 Feo Amante
    on Apr 13th, 2007 at 13:33

    We’re all a bunch of idiots? What is happening to the poor polar bear, Thomas? Links to your statement please. Validate your charge.

  4. #4 thomas
    on Apr 12th, 2007 at 15:30

    you all sound like a bunch of idiots…know what is happening to the poor polar bear and then you’ll know we are destroying this wonderful earth.

  5. #5 Not Sleeping
    on Apr 12th, 2007 at 14:52

    From the description of Shell’s process on Wikipedia’s article on “Oil Shale”:
    “An electrical heating element is lowered into each well and allowed to heat the kerogen to 650 to 700oF over a period of approximately four years, slowly converting it into oils and gases, which are then pumped to the surface. An operation producing 100,000 barrels a day would require a dedicated electrical generating capacity of 1.2 gigawatts. To maximize the functionality of the freeze walls, working zones will be developed, in succession, adjacent to each other. This in-situ method requires 100% surface disturbance, greatly increasing the footprint of extraction operations in comparison to conventional oil and gas drilling.”

    4 years? Just more pie in the sky. Also how is all this oil going to get to China? Gonna fly it out of Colorado in the bellies of winged pigs. How much for the pipeline? How much for the electricity? Daily demand WILL outstrip daily supply. That’s Peak Oil. Doesn’t matter how much there is in the ground. The industry mouthpieces cant discuss the subject on the level, they discuss an assumption of what Peak Oil sounds like, not the actual situation. They know that if Saudi Arabia’s daily output goes into irreversible decline, there is no other producer able to pick up the slack in time. Not Nigeria, not Iraq, and of course not Venezuela. Something has to slow down demand. So lets all fight “Global Warming” huh. All the indicators show we are a day late and a dollar short on any real progress there. Once Siberia’s permafrost starts to thaw out, ridiculous amounts of methane will be let loose into the atmosphere, and thats much worse then the little CO2 weve been belching out.

  6. #6 Jeff
    on Apr 12th, 2007 at 14:24

    Read Tertzakian’s book (“A Thousand Barrels a Second”) for a balanced non-scare treatment of the concept of peak oil. The infrastructure we have is highly dependent on light sweet crude, and it’s not a chicken-little statement to anticipate a peak in the availability of light sweet crude. In addition, some economies are very sensitive to price changes, so that a long-term price of (e.g.) $75, while not a catastrophy, might have a significant and painful economic impact on some nations (PRC being a leading example). I completely agree with the posting that the sky is not falling and I recognize that a disruptive technological change like the one being discussed could completely reorganize the global economy – but a patent is a long way from a large scale production process.

  7. #7 agitator
    on Apr 12th, 2007 at 14:16

    Man-made global warming is a fraud. A Marxist inspired power grab by a bunch of parasites that couldn’t get a real job if they wanted to, which they don’t. It has also spawned a wholly unnecessary and fabricated commodities market that directly benefits certain large financiers and companies at the expense of the public. I certainly hope Mr. Brynaur is right and that Shell is able to do what is discussed. On the other hand, Mr. Brynaur’s credibility goes down the drain when he puppets Marxist man-made global warming propaganda.

  8. #8 kasikstan
    on Apr 11th, 2007 at 20:11

    where is the link to the patent

  9. #9 jessica
    on Apr 11th, 2007 at 14:56

    because people are chronically stupid. Did they forget to mention how much deep frying is required for this or many coal powered plants are going to be required?

  10. #10 Nick Nolan
    on Apr 11th, 2007 at 14:36

    How it is possible that people still dont understand the concept of peak oil? It is not the oil in the ground that is running out. It is the volume of oil that is produced.

    Saudi Arabia produces 9.1 million barrels per _day_ (with net energy gain 10-15%). In one day! That is 6.5 Exxon Valdez tankers every day! If we eventually get 10-100 million barrels per _year_ from shale, it will be good high margin business to Shell, but hardly noticed in the grand scale of things. Yes, there will be enormous quantities oil inside US soil, and they will never run out because it is physically and economically impossible to drag it out fast enough to suck those reserves empty.

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