The Florida Times-Union: Alternative oil projects on tap

Originally created 11/26/07
By Special to the Times-Union

Close your eyes for a moment and imagine how things would be if the U.S. was a major oil exporter rather than a major importer. Better balance of trade; stabilized oil prices for domestic consumption; debt reduction; stronger world influence.

Far-fetched? Not really if we commit our nation to it. The Manhattan Project produced an atomic bomb in three years. The man on the moon project took eight years.

Most of the world’s unconventional oil reserves are in North America, 1.7 trillion barrels in Canadian tar sands and 2 trillion barrels in U.S. oil shale. That’s 3.7 trillion barrels total. Seventy percent of the best oil shale is already under federally controlled and managed U.S. land.

World conventional oil production will peak within about a decade. Price pressure will be unrelenting.

The U.S. started developing its oil shale industry in the early 1980s. When OPEC found out, it cut oil prices below $30 per barrel and that killed the oil shale project. It also killed Brazil’s fledgling ethanol initiative.

About 10 years ago, Brazil decided to force the transition to ethanol. Included in the incentives were temporary price controls on petroleum to keep its fledgling ethanol industry competitive.

Canada has moved smartly on tar sands. It has solved most of the production problems and has shown that oil from tar sands can be produced profitably. Its production was 1 million barrels per day in 2004 and is expected to be 2.5 million barrels per day by 2025. Canada’s investors will now reap the benefit of their perseverance.

Market forces alone are working too slowly in the U.S.

Today, using conventional extraction technology for mining the oil shale; extracting the oil and gas and then disposing of the waste wouldn’t be profitable unless the price of crude oil stays in at least the $70 to $90 per barrel range. It also brings several environmental problems. Most investors aren’t willing to take on those risks, especially after what OPEC did in the 1980s.

Shell Oil Co. is developing the most promising solution, in-situ retorting. Here, the shale isn’t extracted. The shale is heated in place and only the oil and gas are extracted from the ground. It does far less permanent damage to the environment and is expected to be competitive as low as mid-$20s per barrel. Shell has demonstrated the technical feasibility, but hasn’t yet demonstrated its commercial scalability.

Shell is working to demonstrate a method to prevent ground water contamination during in-situ retorting. Shell’s approach is to create an impenetrable frozen ground barrier around each in-situ site to keep ground water out. The technological challenge will be to maintain the barrier during retort, where temperatures can reach 700 degrees Fahrenheit.

Once successful, Shell will need at least three years to a go decision, another three to design and permit a facility, and another six to eight years to construct it. That means 12 to 14 years to commercial production of oil from shale.

We need a Manhattan-style national project for energy independence, including conservation, drilling, and renewable and unconventional fuels. One significant piece must be to accelerate our oil shale production capability dramatically. We can learn from the Brazilians and Canadians.

“We seek to do this and the other things not because they’re easy, but because they’re hard,” President Kennedy said in setting the man on the moon goal.

Committing our nation to energy independence and the other “hard” things, like bringing fiscal responsibility and medical cost containment back to the federal government, will likely fall on the shoulders of the next U.S. president.

This person will need great vision, business, leadership and communication skills such as Presidents Kennedy and Reagan had. And a fiscal discipline even stronger than President Clinton’s.

Think carefully about which candidates have these traits as you decide who is best qualified to be our next president.

Jeff Hohlstein is an Orange Park author.

Email: [email protected]

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