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Oil shale (part III)

September 7, 2008

Part I (geology and reserves)

Part II (direct combustion)

Perhaps the most economic use of the oil shale is to use retorting extraction technologies to remove the organic kerogen from the rock.  This can be potentially done in two ways.  The first is to extract and crush the rock before retorting in special kilns.  The second is to extract the oil by heating the rock in place, the so-called in-situ extraction method.

I mentioned in the previous post (and in the subsequent reply to a comment), that economic potential for direct burning of shale is limited due to the greater value of liquid hydrocarbons and due to the competition with Egyptian natural gas, which makes electricity generation from shale too expensive.

Clearly, the technology exists to extract oil from the oil shale, and in the mean time extract substantial amounts of sulfur contained in it.  So, why are we not doing it?

Jaber and co-workers have an interesting economic analysis in a recent (2008) paper. The manuscript seems to have been accepted somewhat earlier, because the analysis is based on a price of USD 63 per barrel, which is substantially lower than the current price of USD 107 per barrel.  This increase, plus the long-term prospect of diminishing global petroleum reserves will increase the attractiveness of oil shale retorting in the long-run.

Even now, investors are interested.  The government has begun talks with various energy companies, although it has placed a moratorium on proposals in order to explore for uranium first.  Some reports suggest that the government is more interested in in situ extraction.

Aside from the economics, certain environmental issues need to be resolved.  Large scale surface mining and mineral processing will potentially need a lot of fresh water, which is not readily available.  Moreover, landscape disruption is an obvious by-product of strip mining.  The Jordan Phosphate Mines company has not yet done anything to rehabilitate the Russeifa mines between Amman and Zerqa, despite these abandoned mines being in a high population area.  One can only imagine that mines in the south will be left as is after the ore is removed.  I would hesitate to endorse any deal that does not ensure reasonable management of the mining sites after the mines close.

In situ extraction is an attractive method that will keep the landscape in tact.  The technology to do this is still unproven, as are it’s economics.  Moreover, potential groundwater contamination due to mobilization of hydrocarbons and heavy metals is also a concern.

In the final analysis, I believe that there is no rush for this.  The oil shale is not going anywhere, energy costs will increase the value of shale as time goes by, increasing the economic viability of any projects and the bargaining power of the government to ensure the best environmental management of these endeavors.  Who says we need to use all of the country’s resources in one generation?  Don’t our children deserve that we leave them something?

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