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The Arizona Daily Star: Advances may ease extraction of shale oil in Western states

By Joe Carroll
Bloomberg news
Tucson, Arizona | Published: 05.30.2007

Colorado and Utah have as much oil as Saudi Arabia, Iran, Iraq, Venezuela, Nigeria, Kuwait, Libya, Angola, Algeria, Indonesia, Qatar and the United Arab Emirates combined.

That’s not science fiction. Trapped in limestone up to 200 feet thick in the two Rocky Mountain states is enough so-called shale oil to rival OPEC and supply the U.S. for a century.

Exxon Mobil Corp. and Chevron Corp., the two biggest U.S. oil companies, and Royal Dutch Shell Plc are spending $100 million a year testing methods to separate the oil from the stone for as little as $30 a barrel.

And some companies, including Raytheon Co., are working on new technologies to make oil-shale extraction more efficient and less environmentally hazardous.

A growing number of industry executives and analysts say new technology and persistently high prices make the idea feasible.

“The breakthrough is that now the oil companies have a way of getting this oil out of the ground without the massive energy and manpower costs that killed these projects in the 1970s,” said Pete Stark, an analyst at IHS Inc., an Englewood, Colo., research firm.

The U.S. imports two-thirds of its oil, spending $300 billion a year, or 40 percent of the record trade deficit. Oil prices have risen 63 percent since 2004, and higher fuel costs have slowed growth in the world’s largest economy to the lowest in four years.

Reserves’ scale “significant”

“The potential for shale is large,” said Joseph Stanislaw, senior energy adviser for Deloitte & Touche LLP who co-authored a book on the world oil economy.

“Assuming the technology proves out, the size and scale of the reserves are significant.”

In the high desert near Rifle, Colo., Shell engineers are burying hundreds of steel rods 2,000 feet underground that will heat the shale to 700 degrees Fahrenheit, a temperature at which Teflon melts.

The heat will be applied for the next four years to convert the hydrocarbons from dead plants and plankton, once part of a prehistoric lake, into high-quality crude that is equal parts jet fuel, diesel and naphtha, the main ingredient in gasoline.

Chevron, which helped build the Saudi Arabian energy industry when it struck oil in the kingdom in 1938, plans to shatter 200-foot thick layers of shale deep underground, said Robert Lestz, the company’s oil-shale technology manager.

Rather than using heat to transform the shale into crude, Chevron plans to saturate the rubble with chemicals to convert it. The method will reduce power needs and production costs, Lestz said in a May 24 interview.

Chevron scientists are working with researchers at the Los Alamos National Laboratory in New Mexico to determine which chemicals work best for converting shale to crude oil.

Shell’s heating technique amounts to “a brute-force approach,” said Lestz, who is based in Houston.

1.5 trillion barrels likely

Raytheon, which pioneered the microwave oven in the 1940s, is developing a process that includes using radio waves to heat up the oil shale.

Irving, Texas-based ExxonMobil plans to shoot particles of petroleum coke, a waste byproduct of oil refining, into cracks in the shale. The coke will be electrically charged to create a subterranean hot plate that will cook the shale until it turns into crude. The company declined to discuss the progress of its oil-shale tests.

“These are quite remarkable technological approaches,” said Jeremy Boak, a geologist at the Colorado School of Mines in Golden. “We know the oil is here. It’s just a matter of getting it out.”

U.S. oil-shale deposits likely hold 1.5 trillion barrels of oil, according to Jack Dyni, a geologist emeritus at the U.S. Geological Survey. All 12 OPEC countries combined have proved crude oil reserves of about 911 billion barrels, led by Saudi Arabia, with 264.2 billion barrels, according to statistics compiled by BP Plc.

Skeptics of the potential for shale oil include Cathy Kay, an organizer for the environmental group Western Colorado Congress, who said the techniques will drain water supplies, scar the landscape and require so much power the skies will be choked with smoke from coal-fed generators.
 
“They are going to do absolutely massive environmental damage,” said Kay, who has spearheaded the Grand Junction, Colo., group’s anti-shale campaign since September.

Shell to use walls of ice

Shell, based in the Hague, estimates it can extract oil from Colorado shale for $30 a barrel, less than half today’s price for benchmark New York futures.
Shell’s process includes surrounding each shale field with an underground wall of ice.

The so-called freeze walls are to prevent groundwater from swamping the heating rods and to protect the local water supply from contamination as the organic material in the rocks turns to oil, according to Terry O’Connor, the Shell vice president in charge of the company’s Colorado shale project.

In the 1970s, oil-shale efforts involved mile-wide strip mines and factory-sized cookers to boil giant limestone boulders.

This time, no company expects to bring in front-loaders, heavy-duty dump trucks or thousands of miners to haul shale from open pits.

“The old technique required them to dig the equivalent of a new Panama Canal every month,” said former Colorado Gov. Richard Lamm, whose tenure from 1975 to 1987 included the last attempt to extract oil from shale.

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