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Denver Business Journal: Shell pursuing oil shale idea for money-maker here

Cathy Proctor
Shell Exploration & Production Co. said it's pulled high-quality crude oil from Colorado's vast oil shale reserves but is still a few years away from determining whether oil shale is commercially viable in the long run.
The giant oil company, perhaps the furthest ahead in research on freeing oil locked in layers of rock deep underground, is moving into the next phase of its research — methods to stop potential groundwater pollution around shale sites.

“We are in this to make money. It's not a science fair project,” Mike Long, Shell's manager of regulatory affairs, said during his presentation on the company's research at the National Western Mining Conference in early February.
Other companies and the federal government are getting involved in oil shale, too.
In mid-January, the Bureau of Land Management said it will do environmental analysis on eight proposals for oil shale research filed by six companies: Chevron Shale Oil Co., EGL Resources Inc., Exxon Mobil Corp., Oil-Tech Inc., Shell Frontier Oil & Gas and Oil Shale Exploration, LLC. Projects that pass the environmental test will get 160-acre leases for oil shale research and development, and the right to reserve another 4,960 acres for commercial development.
The BLM hopes to make decisions on the projects and the leases next fall.
The goal is nothing less than bringing billions of barrels of domestically produced oil to the U.S. market.
The oil is locked in underground rock formations that sprawl across 16,000 square miles in Colorado, Utah and Wyoming. It's the largest known concentration of oil shale in the world and holds an estimated 800 billion barrels of recoverable oil, enough to meet U.S. demand for oil — at current levels — for 110 years, according to the BLM.
Six of the projects the BLM is considering are in Rio Blanco County on Colorado's Western Slope. The other two are in Utah.
But local officials, burned by the boom and bust of oil shale efforts in the early 1980s, are cautious about the latest development efforts.
“They're all R&Ds,” said Garfield County Commissioner Larry McCown, who worked in the oil shale industry in the 1980s and 1990s, and who remembers the day in May 1982 that Exxon announced it was pulling out of its research efforts — a day still known as “Black Sunday” among locals.
“Until we get further along on what the companies' plans are, I think it's premature to yell 'wolf' — that we're in another boom cycle,” McCown said.
“I think it's a tremendous resource. I don't think it can be overlooked,” McCown said of the oil shale reserves. “I'm not a naysayer, I'm optimistic about all types of alternative energy. This one's here. Whether it can be developed economically or not, I would hope that it's up to free enterprise.”
Shell has been working on oil shale since laboratory research started in 1981. It's had field tests in the Piceance Basin in Colorado since 2000.
“Colorado oil shale is the most concentrated energy source in the world,” Long said. “Basically, we hope to create a new domestic oil industry.”
The first tests revolved around “in situ” efforts — inserting electronic heaters into holes drilled into underground rock formations. The heaters slowly heated the rock to between 650 and 700 degrees over three or four years. Once hot enough, the oil shale melts into liquid, and both oil and natural gas began flowing into conventional wells, according to Shell.
The company said it got 1,500 barrels of light oil plus natural gas from a small plot.
The product was one-third natural gas and two-thirds light oil, easily refined into high-dollar products such as diesel and jet fuel and gasoline, Long said.
One acre can produce oil and natural gas equivalent to about 1 million barrels of oil, he said.
The underground heating process offers advantages, Long said.
Traditionally, oil shale was mined using open pits. The rocks were hauled to an above-ground heater, or retort, to melt the oil out of the rock.
The “in situ” or underground method doesn't require open-pit mining, there are no tailings to dispose of, it's more efficient — with a smaller footprint offering more oil and natural gas — and the product is a higher quality that needs less refining, Long said.
Shell believes the process is economical when the market price of oil ranges between $25 and $30 per barrel, said Jill Davis, spokeswoman for the Shell's “Mahogany Research Project” that's focusing on oil shale.
Oil has traded above $60 per barrel for much of this year.
Shell's next round of research, isolating a chunk of ground the size of a football field by freezing the groundwater around it in a “freeze wall,” kicked off late last year, Long said.
The test is to see if groundwater, heat and oil and natural gas can be contained in an area by a wall of frozen groundwater, and not be allowed to flow and mix outside that area, he said.
The test questions are: “Can we make it? Can we break it? How can we break it and can we fix it?” Long said.
If the company gets a 160-acre lease from the BLM, the third research phase will kick in — integrating the heating to get the product, and the freezing to contain the product, he said.
The process is still energy-intensive and will require Shell to build a power plant to support the heating and freezing equipment, Long said. But the company said its process produces 3.5 units of energy for every unit used.
And while decisions to move ahead on a large scale are far off, the company's research effort still is creating activity in the area, Davis said.
For instance, Shell is planning a 16,000-square-foot office-conference building to house employees now working out of trailers, she said.
Shell has about 35 employees and 30 contractors working at the site, plus 100 others in Houston and Denver supporting the research project.
The company also plans studies on roads and housing in the area — what's there and what's needed, Davis said.
“Economically viable, environmentally responsible and socially sustainable,” Davis said. “Those are the three things that will determine commercial viability. In the meantime, we'll start scoping and studying things. You don't build a large commercial project without that kind of scoping.”

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