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Geology beats technology: Shell shuts down oil shale pilot project


The belief that technology can always overcome natural limits just took a big hit this week when Royal Dutch Shell PLC decided to shut down its pilot oil shale project in western Colorado after 31 years of experimentation. The ostensible reason is that the company has opportunities elsewhere. Shell says it wants to shift resources away from the intransigent rock and move it to profitable opportunities.

That sounds logical. But, it might have sounded logical in any of the last 10 years as oil prices rose to historic heights while oil shale projects languished. Even today the average daily price of crude oil hovers near its historic highs set in 2011 and again in 2012.

The prize for anyone who profitably unlocks these deposits is huge, an estimated 800 billion barrels of recoverable resources. So why isn’t oil shale yielding to the mighty combination of deep pockets, sophisticated technology and high prices?

A clue comes from one sentence in coverage in The Denver Post: “Full-scale production would probably have required building a dedicated power plant.” In simple terms, it takes energy to get energy. Shell’s process requires copious amounts of electricity to heat the rock in place through boreholes in order to release the waxy hydrocarbons embedded in it. In this pilot project, the subterranean rock was heated for three years before liquids were captured and brought to the surface for further processing.

(Oil shale is a promotional term. Oil shale is neither shale, nor does it contain oil. It is better characterized as organic marlstone. It contains kerogen, a waxy, long-chain hydrocarbon that must be extensively processed to make it into a synthetic form of crude oil. Oil shale is often confused with oil taken from deep shale formations such as the Bakken in North Dakota, oil properly called “tight oil.”)

The ratio of energy outputs to inputs for oil shale is estimated to be about 2 to 1, according to a study by Cleveland Cutler who has long examined energy return on energy invested. Shell claimed a ratio of around 3 to 1 (though that claim no longer appears on the project site). That seems good until you realize that we are currently running the world on crude which has a ratio around 20 to 1.

Furthermore, the need for water to cool power plants associated with oil shale extraction and for processing the extracted liquids is considerable. And, water is increasingly difficult to secure in an area that has seen growing demand combined with more than a decade of drought.

Proponents of oil shale claimed in 1981 that it would be economical to process if oil were to reach $38 per barrel and stay there. The threshold price kept escalating along with the price of oil all the way up to $80 in a 2008 study by the U.S. Bureau of Land Management.

And, yet here we are. Brent Crude, the de facto world benchmark, hovers around $108 dollars. The average daily price for the past three years has remained above $100. In the face of these consistent record high prices, Shell is abandoning oil shale development. And, Shell isn’t the only one. Another international major, Chevron Corp., pulled out of its project last year.

There are others who soldier on in the oil shale deposits, and they may eventually find ways to produce a synthetic crude from this rock at a profit. But 30 years of failure suggests that such a development remains far off. And, in a world that is trying to wean itself from fossil fuels because of climate change and the risks of depletion, time may run out.

The path of oil shale is reminiscent of atomic fusion research. Twenty-five years ago, fusion was supposed to be just 25 years in the future. Earlier in the same decade, oil shale was touted as the future of oil. Today, fusion remains the energy source of the future (just as oil shale does), and researchers at the world’s main fusion research facility, the International Thermonuclear Experimental Reactor (ITER), say that fusion will perhaps be ready for commercial use by mid-century.

To be fair, the challenges for fusion researchers are daunting. For example, they must build and run a device that operates at interior temperatures of 150 million degrees centigrade–which is 10 times hotter than the core of the sun. And, they must do it safely and in a way that produces more energy than the device consumes.

But, because the challenges are so daunting, it may turn out that fusion will always remain the energy of the future. We already know how to fuse two atoms. And, we know how to process oil shale to produce synthetic oil.

But, we don’t know how to do either of these things at an energy or financial profit sufficient enough to make them practical for widespread deployment. There is a strong possibility that we may not learn how to succeed with either in a time frame that matters to anyone living today.

That means we must get on with other technologies, energy projects and energy policies that have a more realistic possibility of addressing our energy needs and the climate change caused by our current energy regime.

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11 Comments on "Geology beats technology: Shell shuts down oil shale pilot project"

  1. dissident on Sun, 29th Sep 2013 11:31 pm 

    So, no more prattle about trillions of barrels of shale oil (aka kerogen to syncrude) from cornies.

  2. rollin on Mon, 30th Sep 2013 12:45 am 

    Just because Shell closed it’s pilot experiment does not mean they are not interested. They may be back if the price is right.

    Of course, kerogen makes no sense energetically, but that does not stop the myth from going on.

  3. dissident on Mon, 30th Sep 2013 1:31 am 

    There is no evidence that the experiments over the last 40 years ever succeeded to produce a commercially viable extraction process. As for price, well, it will never be high enough to justify any burn 1+ barrel to get 1 barrel commercial venture. The global oil price has a ceiling imposed by the collapse of global economies when it is much higher than $100 per barrel.

  4. BillT on Mon, 30th Sep 2013 2:15 am 

    “… it takes energy to get energy …”

    This simple rule seems to elude techies of all kinds. See any article on nuclear fusion energy for an example.

    That is why you will not see an honest evaluation of any of the so-called ‘renewables’. Because, when it comes down to it, none are actual NET producers, just alternate ways to use hydrocarbons.

    For instance: A typical wind tower takes 3,000 to 5,000 cubic yards of concrete and a minimum of 300 tons of steel rods just for the foundation.

    That is 430 to 750 truck loads of concrete, and at least 15 truckloads of rebar steel. Welding, placement, boring of the hole, etc. Each tower is between $4 million and $7 million in cost, not counting continuous maintenance and replacement eventually.

  5. simon on Mon, 30th Sep 2013 1:06 pm 

    It could be possible that companies would be willing to use more energy to create ‘crude oil’ if the versatility of crude was in high demand (ie. if the cost of energy was less than the cost of crude oil)

  6. shortonoil on Mon, 30th Sep 2013 2:32 pm 

    They are shutting this down because some Shell engineer was fumbling around, and stumbled on to a copy of the Second Law in one his old college textbooks. In reality petroleum must have a minimum ERoEI of 6.9:1 at the well head for petroleum to act as an energy source. The other alternative is to sell it as a really crappy salad dressing, or make a zillion plastic cups for MikiDe. Petroleum without energy delivery capabilities is almost worthless.

  7. simon on Mon, 30th Sep 2013 3:30 pm 

    Shortonoil -> Uneconomic oil (financially and EROEI) can still deliver energy.

    You are assuming that all forms of energy cost the same.

    I would imagine this form of oil is not economic. When we slide to > 150USD per barrel, this project may re-commence

  8. rockman on Mon, 30th Sep 2013 4:37 pm 

    Fractured unconventional shale reservoirs aren’t working very well for Shell either. As I posted elsewhere they are selling out their position in the Eagle Ford Shale. Between leases and drilling I estimated they’ve sunk upwards of $2 billion and drilled about 185 – 200 wells. The average initial production rates of those wells were 73 bopd and 960 mcfpd.

  9. shortonoil on Mon, 30th Sep 2013 7:44 pm 

    “Shortonoil -> Uneconomic oil (financially and EROEI) can still deliver energy.”

    ERoEI is not economic, it is thermodynamic. Physics trumps economics. The Second Law is inviolable! The same can not be said for the “Laws of Economics”.

  10. BillT on Tue, 1st Oct 2013 2:05 am 

    shortonoil, some cannot disconnect energy from money. Even if oil went to a million dollars per barrel, it still comes down to NET energy and the wells would close. You and I understand this. I’m not sure techies or economists do. Their world depends on BAU and they cannot accept that it is coming to an end.

  11. simon on Tue, 1st Oct 2013 8:11 am 

    Hi Bill and Short.

    My point seems to be getting lost here.

    That is, the decision to pursue a goal in industry is economic, not based on physics, so if people will pay enough for a commodity it will be extracted.

    I believe the same is true for ‘tight oil’ as if you remove the subsidies it would not be economical, but with enough jiggery pokery, it can be done.

    if the cost of oil was sufficient, it would be economical to build a (nuclear/gas/hydro/wind/solar) power station simply to extract the oil.
    I grant you this would depend on the cost of the raw materials and the cost of oil.

    Point being, that these projects are not viable now, but with the inevitable rise in the cost of oil, one day, some bright spark may determine they are viable, and the slide down the other side of the peak will plateau for a few years, at the most it will gain a few years, at a large cost.

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