Tag Archives: United States shale gas

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

Oil Sands Rush and the New Pipelines: Canada

Oil production from the tar sands is set to rise from 2m barrels a day (b/d) to 3.3m by 2020, or from 58% to 72% of Canada’s total oil output. Getting this oil to market is a mounting worry for Canada’s energy industry and for Stephen Harper’s Conservative government. That is because the necessary infrastructure is opposed both by local communities and by greens, who want to halt development of the tar sands. Per barrel, the extraction of oil from bitumen emits between three and four times as much carbon and other greenhouse gases as conventional oil does, according to the Pembina Institute, an environmental think-tank in Calgary. But other estimates are much lower….

The Obama administration has withheld approval of the Keystone XL pipeline, which would take oil to Gulf coast refiners. (TransCanada, Keystone’s promoter, still hopes for approval.) Mr Harper has courted China as an alternative market for the oil, but that depends on approval of Enbridge’s Northern Gateway project, a C$5.5 billion ($5.4 billion) 1,177km twin pipeline from Edmonton to Kitimat in British Columbia. The route crosses the land of 50 or so First Nations bands (indigenous tribes). More than 4,000 people have registered to speak at the environmental hearings, which began in January.

Last month another energy firm, Kinder Morgan, said it would spend $4.1 billion to double the capacity of the Trans-Mountain to Vancouver, the only existing line to Canada’s west coast. It hopes to start work in 2016. Vancouver’s mayor opposes the idea, worrying that tourism will be wrecked by tanker traffic and spills.

The government is pulling out all the stops to get these projects approved. The budget bill includes sweeping changes to the cumbersome procedures that govern environmental approval of energy projects. These now involve up to 40 federal departments and agencies. Under the bill, only those directly involved would be able to intervene in hearings; fishery habitat will no longer automatically be considered; and most assessments will have to be completed within 18 months. The federal government would have the power to overrule the energy board, but also to cede the assessment process to the provinces. These changes could quicken the prospects of big hydropower schemes in Manitoba, Labrador, British Columbia and Quebec, aimed at exporting electricity to the United States.

But pipelines are the government’s priority. That is because natural-gas exports, long the mainstay of the energy industry, are threatened by shale gas in the United States (they have fallen by 5% over the past year). While there are legitimate environmental worries, replacing gas exports with tar-sands oil is vital for economic growth, argues Matthew Akman, an analyst at Scotiabank. Investment is pouring into the tar sands, but potential oil exports will outstrip pipeline capacity by 2015.  Unless, that is, existing pipelines are rejigged—and not just Line 9. TransCanada’s 3,000km main line has carried Alberta’s gas to Ontario and Montreal for more than 50 years, but now runs at less than half of capacity. Converting the line to oil, and adding a spur to a refinery at Quebec City, would cost more than C$5 billion and take several years. But it could still beat the Northern Gateway, and be politically more attractive. Refiners in eastern Canada currently use imported crude costing $20-30 a barrel more than western Canadian oil.

The budget bill also includes money to investigate whether green charties are engaging in political activities incompatible with their status. But there are risks—not least to Canada’s international image—in demonising environmentalists. The arguments for developing the tar sands are strong, but the opponents cannot be simply shrugged aside.

Energy in Canada, The great pipeline battle, Economist, May 26, 2012