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Oil shale remains in the crosshairs


Photograph of Shell Exploration and Production Mahogany Research Project in Rio Blanco County.

Photograph of Shell Exploration and Production Mahogany Research Project in Rio Blanco County.

Glenwood Springs, CO Colorado
Sunday, December 14, 2008

GLENWOOD SPRINGS — The Bureau of Land Management’s oil shale royalty structure hasn’t altered three companies’ plans to continue with oil shale research in the Piceance Basin.

When the royalty rates were announced in November, Shell Exploration and Production had said it was hoping for a lower royalty figure “that would be more conducive to get a startup industry off the ground.”

Under the BLM’s regulations, the royalty rate would be set at 5 percent for the first five years of commercial oil shale production from federal leases. After that, the royalty rate will rise 1 percent each year until it reaches 12.5 percent. 

Tracy Boyd, a spokesman for Shell, said nothing has specifically changed with the status or timeline on its oil shale research project in the wake of the Bureau of Land Management’s oil shale regulations and the royalty rates. The regulations were released the same day the U.S. Department of the Interior finalized a plan to open 2 million acres in Colorado, Wyoming and Utah to potential oil shale development.

“The one thing it did do for us, that we were looking for all along, was to give us another point of clarity,” Boyd said of the royalty rate. “It is not it is all of a sudden that this data point is going to be a make or break kind of thing. It just gives us one more thing to plug into (our economic) model and know that we are going to have to deal with as time goes on.”

Boyd added that the company does not “speed up and slow down” its oil shale research development based on the short-term fluctuations on the price of oil, which has been plunging to lows not seen for years.

Shell currently holds three 160-acre oil shale research and development leases in the Piceance Basin. American Shale Oil and Chevron both hold one. 

Those leases, which are located on some of the most prime shale deposits in Colorado, can be expanded to 5,120 acres “once commercial production levels have been achieved,” according to the BLM.

It is currently estimated that there might be close to 1 trillion barrels of oil located in oil shale deposits in the Piceance Basin, which stretches across Mesa, Garfield and Rio Blanco counties. 

What are other companies thinking?

Kristi Pollard, a spokeswoman for Chevron, said the royalty rates hasn’t changed its plans for its experimental lease in the Piceance Basin.  

“At this point, the 5 percent (royalty rate), we agree with,” said Pollard, adding the company is currently evaluating the royalty rate increase after five years of commercial development. “There are plenty of issues that play with these leases and that is certainly not changing our direction whatsoever,” she said. 

Pollard said that Chevron has been very outspoken that if the company goes forward commercially with oil shale development, it wants to do so only if it’s environmentally friendly, and if it is economically sustainable. 

“If we can’t do both of those things, then that is what makes us change our mind on its development,” she said.

Claude Pupkin, president of American Shale Oil (AMSO), said the BLM’s recently released oil shale royalty rates will not have any short-term affects on its current oil shale research program.

Pupkin said he felt the rates outlined by the BLM are too high and that it should be capped at 5 percent, instead of eventually sliding up to 12.5 percent. That’s because the cost of developing and extracting oil shale is higher than developing conventional oil, he said. 

Last November, AMSO, a subsidiary of IDT Corp., reached an agreement with Schlumberger Technology Corp. to supply drilled core samples from its research and development lease. Schlumberger will analyze the samples to develop improved methods to estimate rock properties in AMSO’s lease, according to IDT.

This month, AMSO also reached an agreement with the Lawrence Livermore National Laboratory to study how to permanently store carbon dioxide created by the oil shale extraction process.

The Associated Press contributed to this report

Contact Phillip Yates: 384-9117
[email protected]

Post Independent, Glenwood Springs, Colorado CO

Shell’s Exploration and Production’s current oil shale research project is ongoing on the company’s private lands in Rio Blanco County. The company’s proposal to begin work on its three research and development leases may be submitted to the BLM in another year, said Tracy Boyd, a spokesman for the company. Shell’s current project is looking to pull kerogen — the hydrocarbon material in oil shale — out of the rock by heating the formation between 650 and 700 degrees for three to four years. 
The company is also developing a “freeze-wall” technology that is intended to build a frozen wall that protects the surrounding water formations from hydrocarbons during the oil shale conversion process.
Source: Shell
Chevron is currently looking at using supercritical carbon dioxide (CO2) to pull the kerogen out of the shale. Under the company’s plan, it would be blasted into the formation at a high pressure underground. 
It would pull the kerogen from the shale and allow it to come to the surface from conventional drilling, according to a report from the Grand Junction Daily Sentinel.
“It’s something being used in the food industry and is used to remove caffeine from coffee beans,” said Kristi Pollard, a spokeswoman for Chevron. “It is a technology that is currently out there and the goal is to try and apply it to oil shale.”
Source: Chevron 

The company’s plan is to heat the oil shale formation through an horizontal well, according to its Web site. The heat causes the organic material in the rock to slowly heat up to a boiling point. The resulting oil vapors serve as a medium to transfer the heat through the rock, which would break and turn to rubble, according to the company.
The hot oil vapor would be collected through a production well.
Source: American Shale Oil


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