Oil-shale companies tout research projects

May 16, 2012
dsp shaleplayohiovalley.com

SALT LAKE CITY (AP) - A small company that holds a federal lease to extract petroleum from oil shale reserves in western Colorado is taking a new approach to withdrawing crude oil from solid rock - one that it hopes will avoid groundwater contamination.

The process is "basically the same as steaming vegetables," said Alan Burnham, chief technology officer for Rifle, Colo.-based American Shale Oil LLC.

Within weeks, the company will send a pool of oil down a well and blast it with hot fuel gas. The boiling oil will heat up an underground zone about 50 feet wide and 50 feet deep to more than 600 degrees.

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Burnham described his company's process Tuesday at an unconventional fuels conference at the University of Utah. It's the latest in nearly a century of efforts by companies to unlock oil shale - a rock that contains fossilized algae, an immature form of oil that never received enough heat or pressure to produce liquid crude.

The University of Utah conference has been a showcase of varied efforts for the past six years to develop vast reserves of oil shale and tar sands across parts of Colorado, Utah and Wyoming. This year's conference follows a decision by the federal government to limit research and development projects after an initial round of leasing in 2007.

The Bureau of Land Management has tentatively decided to lease about 460,000 acres of oil shale deposits, down from 2 million acres that the Bush administration planned to offer across the Rocky Mountains.

The agency said it would open another 91,000 acres for development of gooey tar sands, down from 431,000 acres previously.

American Shale Oil is working a piece of land near another oil-shale research project by Shell Oil Co., but taking a different approach. Shell is targeting a rich zone of oil shale that has the potential for groundwater contamination.

American Shale Oil plans to drill deeper into a less concentrated layer of oil shale that it says is isolated from groundwater.

"We are avoiding the water aquifer contamination problem," Burnham said. "They have spent a lot of money on that. We're a small company that wants to avoid it."

The company has no doubt it can extract high-quality crude oil from solid rock on its 160-acre lease in the Piceance Basin of Colorado. Its test is more about how well it can heat a zone of rock 2,000 feet underground.

The company expects to generate enough oil initially to purge startup fluids, then capture more oil in tanks for refinery tests. The company believes the oil will yield sweet or light crude with little polluting sulfur.

American Shale Oil, with just three employees and half a dozen consultants, is a joint venture of French oil company Total S.A. and Newark, N.J.-based Genie Energy Corp. It plans to spend more than $100 million on the research effort. Burnham said it's just as expensive to pump liquid crude from deep and remote parts of the world, and that oil shale could eventually prove profitable.

"If it's not profitable, it won't happen," he said.

A government and industry watchdog group called the Checks and Balances Project has chronicled failed oil-shale efforts since the 1920s. It expects American Shale Oil to do no better.

"We've been here before. We've seen small companies make big claims before going bust," said Matthew Garrington of the group based in Denver and Washington, D.C. "We've seen pilot projects before. There's nothing new about that. This is the same empty promise."

Extracting shale oil is a tough nut to crack, but companies with new technology seem closer to reaching that goal, said Philip Smith, a University of Utah chemical engineering professor.

"I definitely think it has potential. The energy resource is there, and there's so much of it," said Smith, director of the university's Institute for Clean and Secure Energy.

The West's oil shale deposits are believed to contain more than 1 trillion barrels of oil - four times the holdings of Saudi Arabia, according to government and industry estimates. The U.S. Energy Department has said it will take a "massive capital investment" to unlock Western oil shale.

Even then, the payback is uncertain. But if it takes another century to commercialize oil shale, Smith believes the effort is worth pursuing.

"This isn't like creating a chip in your garage. It takes time," said Smith, who compared the effort to recent advances with hydraulic fracturing, which is unlocking vast reserves of natural gas in the U.S.

It was small players that led the way in drilling technology, he said, and small companies will lead the way in oil shale.

"Humankind has got to have energy," he said.

 
 

 

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