Oil shale economics

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Main article: Oil shale

Oil shale economics is a subject which deals with the economic feasibility of oil shale extraction and processing. The economic feasibility of oil shale is highly dependent on the price of conventional oil, and the assumption that the price will remain at a certain level for some time to come. As a developing fuel source the production and processing costs for oil shale are high due to the small nature of the projects and the specialist technology involved. A full-scale project to develop oil shales would require heavy investment and could potentially leave businesses vulnerable should the oil price drop, as the cost of producing the oil would exceed the price they could obtain for the oil.

Oil shale deposits in the USA, Estonia, China, and Brazil have been important over the past hundred years.[1] Presently few deposits can be exploited economically without subsidies. However, some countries, such as Estonia, Brazil, and China, operate oil-shale industries, while others, including Australia, USA, Canada, Jordan, and Egypt, are contemplating establishing or re-establishing this industry.[2][3]

The cost of a barrel of oil extracted from the shale ranges from as high as US$95 per barrel to as low US$12 per barrel. However it would be prudent to think that costs would be inline with those of the Tar sands and so an oil price in the US$30-40 per barrel range would be considered realistic for them to be profitable. The industry is proceeding cautiously, due to the losses incurred during the last major investment into oil shale in the early 1980s, when a subsequent collapse in the oil price left the projects uneconomical.[4]

Contents

[edit] Competitive level of oil price

Medium-term prices for light-sweet petroleum, 2005-2007 (not adjusted for inflation).
Medium-term prices for light-sweet petroleum, 2005-2007 (not adjusted for inflation).

According to the survey conducted by the RAND, a surface retorting complex (mine, retorting plant, upgrading plant, supporting utilities, and spent shale reclamation) is unlikely to be profitable unless real crude oil prices are at least US$70 to US$95 per barrel. [5] Once commercial plants are in operation and experience-based learning takes place, costs are expected to decline to US$35–US$48 per barrel after 12 years. After production of 1000 million barrels, costs are estimated to decline further to US$30 – US$40 per barrel. [6] In 2005, Royal Dutch Shell announced that its in situ extraction technology deployed in Colorado could be competitive at prices over US$30 per barrel. [7] However, it is possible that the real competitive price level will be higher as the costs for building an underground wall of frozen water to contain melted shale have significantly escalated. [8]

At full-scale production, the production costs for one barrel of light crude oil of the Australia's Stuart plant were projected to be in the range of US$11.3 to $12.4 per barrel, including capital costs and operation costs over a projected 30-year lifetime. However, the project has been suspended due to environmental concerns. [6] [9] Israel's AFSK Hom Tov process, which produces oil from a mixture of oil refinery residue (in the form of bitumen) and oil shale, claims to be profitable at US$16-US$17 per barrel. This technology is still being tested.

The project of a new Alberta Taciuk Processor (ATP), planned by VKG Oil, is estimated to achieve break-even financial feasibility operating at 30% capacity, assuming a crude oil price of US$21 per barrel or higher. At 50% utilization, the project is economic at a price of US$18 per barrel, while at full capacity, it could be economic at a price of US$13 per barrel. [10]

[edit] Previous investment

Due to the low price of oil and other competitive fuels, oil shale production has ceased in Canada, Scotland, Sweden, France, Australia, Romania, and South Africa, and is stalled in the USA, Belarus, Jordan, and Morocco.[11] During the oil crisis of the 1970s, there was a widespread perception that oil supplies had peaked. Businesses expected oil prices to be around seventy dollars a barrel for some time to come, and invested considerable sums in refining oil shale — money that they lost. Because of the huge losses last time around, there is considerable reluctance to invest in shale oil production. However, in the early 21st century, USA, Canada and Jordan were planning or had started test projects, and Australia was considering restarting oil shale production. [11] [12]

[edit] Energy and water usage

A critical measure of the viability of oil shale is the ratio of energy used to produce the oil, compared to the energy returned (Energy Returned on Energy Invested - EROEI). Generally, for ex-situ processes the oil shale has to be mined, transported, and retorted, and the waste materials must be disposed of, so at least 40% of the energy value is consumed in production. A 1984 study estimated the EROEI of the different oil shale deposits to vary between 0.7-13.3. [13] Royal Dutch Shell has reported an EROEI about three to four on its in-situ development, Mahogany Research Project, which uses electric heating of the shale up to 500 °F (260 °C). [14] [7] [15] This compares to a figure of typically 5:1 for conventional oil extraction. EROEI will be less important to the extent that lower-cost energy sources are used to fuel the extraction process.

Water is also needed to add hydrogen to the oil-shale oil before it can be shipped to a conventional oil refinery. The largest deposit of oil shale in the United States is in western Colorado, a dry region with no surplus water. It has been proposed that the Green River oil shale could be ground into a slurry and transported via pipeline to a more suitable pre-refining location with fewer constraints on water use.[citation needed]

[edit] Co-pyrolysis

Several co-pyrolysis processes to increase efficiency of oil shale retorting have been proposed or tested. In Estonia, the co-pyrolysis of kukersite with renewable fuel (wood waste), as well as with plastic and rubber wastes (tyres), has been tested. [16] Co-pyrolysis of oil shale with high-density polyethylene (HDPE) has been tested also in Morocco and Turkey. [17] [18] Israel's AFSK Hom Tov co-pyrolyses oil shale with oil refinery residue (bitumen). Some tests involve co-pyrolysis of oil shale with lignite and cellulose wastes. Depending on reaction conditions, the co-pyrolysis may lead to higher conversion ratios and thus lower production costs, and in some cases solves the problem of utilization of certain wastes.[16]

[edit] Current projects

Shell's experimental in-situ oil shale facility, Piceance Basin, Colorado.
Shell's experimental in-situ oil shale facility, Piceance Basin, Colorado.
Companies having oil shale resources (with oil shale operations or development projects)[19]
Company Location Method Status
Chevron Shale Oil Company Colorado, USA Modified in-situ process (CRUSH process) Testing
Eesti Energia Narva, Estonia Hot recycled solids (Galoter process) Operational
EGL Resources Colorado, USA True in-situ process (The EGL Oil Shale Process) Testing
ExxonMobil Colorado, USA Modified in-situ process; reactive fluids (ExxonMobil Electrofrac) Testing
Fushun Mining Group Fushun, China Internal combustion (Fushun process) Operational
Hom Tov Mishor Rotem, Israel Conduction through a wall (Hom Tov co-pyrolysis process) Testing
Independent Energy Partners Colorado, USA True in-situ process (fuel cell process) Testing
Kiviõli Keemiatööstus Kiviõli, Estonia Internal combustion (Kiviter process) Operational
Millennium Synfuels Utah, USA Conduction through a wall (Staged electrically heated retort process (Oil-Tech process)) Pilot project
Mountain West Energy Utah, USA True in-situ process (IGE process) Testing
Oil Shale Exploration Company Utah, USA Hot recycled solids (ATP) Pilot project
Petrobras São Mateus do Sul, Paraná, Brazil Externally generated hot gas (Petrosix process) Operational
Queensland Energy Resources Stuart Deposit, Queensland, Australia Hot recycled solids (ATP) Pilot project, temporary suspended
Red Leaf Utah, USA Externally generated hot gas (EcoShale In-Capsule Process) Testing
Shale Technologies LLC Rifle, Colorado, USA Internal combustion (Paraho Direct process) Pilot project
Shell Frontier Oil and Gas Colorado, USA True in-situ process (ICP) Pilot project
VKG Oil Kohtla-Järve, Estonia Internal combustion (Kiviter process) Operational

[edit] See also

[edit] Footnotes

  1. ^ Altun, N. E. (2006). "Oil Shales in the world and Turkey; reserves, current situation and future prospects: a review" (PDF). Oil Shale. A Scientific-Technical Journal 23 (3): 211–227. Estonian Academy Publishers. ISSN 0208-189X. 
  2. ^ 2007 Survey of Energy Resources. Oil Shale. Country Notes (PDF accessdate = 2007-11-08). World Energy Council (2007).
  3. ^ Bsieco, M. S. (2003). "Jordan's Experience in Oil Shale Studies Employing Different Technologies" (PDF). Oil Shale. A Scientific-Technical Journal 20 (3 Special): 360–370. Estonian Academy Publishers. ISSN 0208-189X. 
  4. ^ Clifford Krauss (December 21, 2006). The Cautious U.S. Boom in Oil Shale. New York Times. Retrieved on 2007-11-09.
  5. ^ Bartis, James T. (2005). "Oil Shale Development in the United States. Prospects and Policy Issues. Prepared for the National Energy Technology Laboratory of the U.S. Department of Energy". . The RAND Corporation. ISBN 978-0-8330-3848-7 Retrieved on 2007-06-29.
  6. ^ a b "A study on the EU oil shale industry viewed in the light of the Estonian experience. A report by EASAC to the Committee on Industry, Research and Energy of the European Parliament" (PDF) (May 2007). European Academies Science Advisory Council. 
  7. ^ a b Linda Seebach (2005-09-02). Shell's ingenious approach to oil shale is pretty slick. Rocky Mountain News. Retrieved on 2007-06-02.
  8. ^ Nancy Lofholm (2007-06-16). Shell shelves oil-shale application to refine its research. The Denver Post. Retrieved on 2007-06-24.
  9. ^ Schmidt, S. J. (2003). "New directions for shale oil:path to a secure new oil supply well into this century: on the example of Australia" (PDF). Oil Shale. A Scientific-Technical Journal 20 (3): 333–346. Estonian Academy Publishers. ISSN 0208-189X. 
  10. ^ (2004). "Strategic Significance of America’s Oil Shale Resource. Volume II Oil Shale Resources, Technology and Economics" (PDF). . Office of Deputy Assistant Secretary for Petroleum Reserves; Office of Naval Petroleum and Oil Shale Reserves; U.S. Department of Energy Retrieved on 2007-06-23.
  11. ^ a b Brendow, K. (2003). "Global oil shale issues and perspectives. Synthesis of the Symposium on Oil Shale. 18-19 November, Tallinn" (PDF). Oil Shale. A Scientific-Technical Journal 20 (1): 81–92. Estonian Academy Publishers. ISSN 0208-189X. 
  12. ^ Shale oil. AIMR Report 2006. Geoscience Australia. Retrieved on 2007-05-30.
  13. ^ Cleveland, Cutler J. (1984-08-31). "Energy and the U.S. Economy: A Biophysical Perspective" (PDF). Science 225 (4665): 890–897. American Association for the Advancement of Science. doi:10.1126/science.225.4665.890. ISSN: 00368075. 
  14. ^ (2006-02-15). "Oil Shale Test Project. Oil Shale Research and Development Project" (PDF). . Shell Frontier Oil and Gas Inc. Retrieved on 2007-06-30.
  15. ^ Spencer Reiss (2005-12-13). Tapping the Rock Field. WIRED Magazine. Retrieved on 2007-08-27.
  16. ^ a b Veski, R. (2006). "Co-liquefaction of kukersite oil shale and pine wood in supercritical water" (PDF). Oil Shale. A Scientific-Technical Journal 23 (3): 236–248. Estonian Academy Publishers. ISSN 0208-189X. 
  17. ^ Aboulkas, A. (2007). "Kinetics of co-pyrolysis of Tarfaya (Morocco) oil shale with high-density polyethylene" (PDF). Oil Shale. A Scientific-Technical Journal 24 (1): 15–33. Estonian Academy Publishers. ISSN 0208-189X. 
  18. ^ Ozdemir, M. (2006-11-07). "Copyrolysis of Goynuk oil shale andthermoplastics" (PDF). Retrieved on 2007-06-29.
  19. ^ (2007). "Secure Fuels from Domestic Resources: The Continuing Evolution of America’s Oil Shale and Tar Sands Industries" (PDF). . United States Department of Energy Retrieved on 2007-07-11.

[edit] References