Tag Archives: oil exploration

Economics and Environmental Impact of Oil Shale Production

oil shale combustion. Image from wikipedia

[A] second shale revolution is in prospect, in which cleaner and more efficient ways are being found to squeeze the oil and gas out of the stone. The Jordanian government said on June 12th that it had reached agreement with Enefit, an Estonian company, and its partners on a $2.1 billion contract to build a 540MW shale-fuelled power station. Frustratingly for Jordan, as it eyes its rich, oil-drenched Gulf neighbours, the country sits on the world’s fifth-largest oil-shale reserves but has to import 97% of its energy needs.

In Australia, Queensland Energy Resources, another oil-shale company, has just applied for permission to upgrade its demonstration plant to a commercial scale. Production is expected to start in 2018. Questerre Energy, a Canadian company, also said recently that it would start work on a commercial demonstration project, in Utah in the United States.

In all these projects, the shale is “cooked” cheaply, cleanly and productively in oxygen-free retorts to separate much of the oil and gas. In Enefit’s process the remaining solid is burned to raise steam, which drives a generator. So the process produces electricity, natural gas (a big plus in Estonia, a country otherwise dependent on Russian supplies) and synthetic crude, which can be used to make diesel and aviation fuel. The leftover ash can be used to make cement. Enefit’s chief executive, Sandor Liive, says his plants, the first of which started production in December 2012, should be profitable so long as oil prices stay above $75 a barrel (North Sea Brent oil was around $113 this week).

Although the new methods of exploiting the rock are cleaner than old ones, environmentalists still have plenty to worry about. Oil shale varies hugely in quality. Estonia’s is clean, Jordan’s has a high sulphur content, Utah’s is laden with arsenic. Like opencast coal mining, digging up oil shale scars the landscape. Enefit has solved that in green-minded Estonia, by landscaping and replacing the topsoil. Other countries may be less choosy.

Some of the world’s biggest energy firms have also experimented with mining and processing oil shale, only to give up, after finding that it took so much energy that the sums did not add up. However, Shell says it is making progress with a new method it is trying, also in Jordan, in which the shale is heated underground with an electric current to extract the oil.

These rival technologies have yet to prove their reliability at large scale—and they are far from cheap. Mr Liive reckons it will cost $100m to get a pilot project going in Utah (where his firm has bought a disused oil-shale mine), and another $300m to reach a commercial scale. A fall in the oil price could doom the industry, as happened in the 1980s when a lot of shale mines went out of business…America this week loosened its ban on crude exports. If the second shale revolution succeeds, it will have a lot more oil to sell.

Oil shale: Flaming rocks, Economist, June  28, 2014, at 58

Shell in Alaska, the jobs vs. environment game

Royal Dutch Shell  won a final U.S. air-pollution permit to operate an oil-exploration rig in Alaska’s Beaufort Sea beginning in 2012.  Shell is authorized to use its Kulluk rig and supporting icebreakers and oil-spill response vessels for 120 days each year in the Arctic waters, the Environmental Protection Agency said today in an e-mailed statement.  “This air permit is one of several federal authorizations Shell needs to explore for oil and gas” off Alaska “starting in July 2012,” the agency said. “EPA’s final permit significantly reduces the potential air pollution from Shell’s drilling operations.”

Shell, which has invested about $4 billion in the Arctic leases since 2005, hasn’t drilled any wells in the region while opponents won delays with appeals and lawsuits. Environmental organizations and Alaskan native groups said it would take too long for equipment to reach the remote and icy region during an oil spill.  The company, based in The Hague, received approval from the EPA in September for the Discoverer ship to drill and station icebreakers and spill-response vessels in the Beaufort waters and the neighboring Chukchi Sea. Discoverer is owned by Noble Corp., based in Baar, Switzerland.

Pete Slaiby, vice president of Shell Alaska, said in a May 2 interview that having two rigs in the Arctic would enable faster drilling of relief wells.  “We will continue to advance our drilling plans and evaluate investment decisions that would allow us to commence with a 2012 drilling season,” Curtis Smith, a Shell spokesman, said today in an e-mailed statement.  Shell, Europe’s largest oil company, still needs Interior Department approval of its Chukchi Sea exploration plan and a permit from U.S. offshore-oil regulators for each of 10 planned wells. The company won the Interior Department’s approval for an exploration plan for the Beaufort Sea, near the North Slope towns of Deadhorse and Kaktovik, in August.

The Beaufort and Chukchi seas hold about 25 billion barrels of oil, Shell says, citing government estimates. A study commissioned by the company said developing these resources would lead to 54,700 new jobs across the U.S.

Katarzyna Klimasinska, Shell Wins U.S. Air Permit for Oil Exploration Off Alaska, Bloomberg, Oct. 21, 2011

Not Only the Amazon: the preservation of boreal forests

Canada’s vast boreal zone contains the world’s largest intact old-growth forest and has more fresh water than the Amazon. Its flora help to slow climate change and it is a breeding ground for 3 billion migratory songbirds. Only 12% of the region is now formally protected, well below the 50% scientists say is necessary to save its ecosystem. On May 9th Quebec unveiled the Plan Nord, a C$2.1 billion ($2.2 billion) proposal that seeks both to develop its northern region and to safeguard its environment. But whether those two objectives are actually compatible remains open for debate…

Yet provincial governments are also pushing to tap the region’s rich resources. Ontario has registered 30,000 mining claims in an area west of James Bay nicknamed the “Ring of Fire”, where chromite (used for stainless steel) was found in 2006. And Quebec’s Plan Nord will open an area twice as big as France to mining, energy development and forestry. Meanwhile Alberta has few limits on boreal oil exploration. In April its government released the details of a plan to protect 20% of the region’s land and faced a backlash from energy firms. The federal government has little power to make the provinces become greener.

Aboriginal groups, who hold treaty rights in the north, have also tussled with environmentalists, whom they blame for disrupting their fur trade and seal hunt. They hope that miners will provide much-needed jobs. Ontario’s Nishnawbe Aski Nation and the Quebec and Labrador arm of the Assembly of First Nations say they were not adequately consulted before their provinces’ conservation laws were drafted, and now oppose the legislation. Indigenous peoples may not be as anti-green as oil companies, but they are no tree-huggers either.

Canada’s environment: Boreal blues, Economist, May 14, 2011,at 46