Oil shale: rock that burns begins to glow (slowly)
For nearly 80 years, Colorado oil shale has been the pot of black gold at the end of the rainbow.Skip to next paragraph
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There's certainly lots of it.
Current estimates place the equivalent of 1.2 trillion barrels of oil in the rocks beneath the 1,500 square miles of the picturesque Piceance (pronounced Pee'-ahnce) Creek Basin in northwestern Colorado. And there are thought to be 620 billion more barrels in nearby areas of Utah and Wyoming.
But the cost effectiveness of oil shale, which depends on oil being relatively expensive, has always seemed just out of reach.
The National Geographic magazine once waxed lyrical on the potential of Colorado's oil shale, calling it ''almost beyond comprehension. Enough oil is held in these natural reservoirs to fill many times over every tank, cask, barrel, can, and other container of every kind in the world.''
The date? 1918.
Only now, 64 years later, does oil shale finally seem ready to be produced commercially.
Yet this boom will not develop at the tempo expected even six months ago, oil-shale developers agree. Instead of the 400,000 barrels per day (BPD) by 1992 the US government aimed for after the fall of the Shah of Iran, a more modest 100,000 BPD by the end of the decade is foreseen.
The scaling-down is ascribed to less interest on the part of the Reagan administration and a softening of oil prices.
William H. Love, president of Occidental Oil Shale, calls oil shale ''a very marginal business.'' He adds, ''I know people won't believe this, but the companies are not in it because of short-term profits. They are in it because, down the road, the country will need it and it will be economic,'' he maintains.
The technology involved in extracting oil from shale is relatively simple. The experts agree it can be done. The $64,000 question is, ''At what price?''
The biggest problem with conventional oil and gas is finding the stuff. Extraction is relatively simple.
With oil shale it's the other way around. The location of kerogen, the rubbery hydrocarbon in oil shale, has been well known since 1918. The big cost is extraction.
It is ''low-grade ore,'' so a great deal of rock must be processed for each gallon of oil. Also, the only way found thus far to extract the kerogen is to heat it to 900 degrees F., in a process called retorting, so the industry is extremely energy-intensive as well.
Since the days of $3-a-barrel petroleum, oil-shale advocates have been saying that if the price of petroleum goes up by only a little bit, oil shale will be competitive.
This history makes financial experts skeptical about current pronouncements of oil shale's competitiveness.
But the Tosco Corporation, a middle-sized oil company, for many years has been involved in, and is bullish about, oil shale. It is a joint owner with Exxon of the Colony Project, which, along with a Union Oil undertaking is one of two Colorado operations that appear committed to producing oil from shale on a commercial scale in the 1980s.
Tosco's conviction that oil shale could be competitive with oil goes back to 1960, explains John Lyon, head of its Oil Shale Division. During the 1960s, however, Tosco could not raise the money to go commercial, in part because financiers feared that such a development would depress world oil prices.
Tosco tried again in 1974 with Atlantic Richfield but was hit by extreme inflation in the construction industry and uncertainties in federal energy and environmental policies. Now, with a federal loan guarantee and Exxon as a partner, Tosco is trying again.
''Our economics are based on world oil prices staying level, in real terms,'' Lyon explained. Recent oil price declines have been primarily in heavy crude rather than in the light crude with which shale oil will compete, he noted.
Also, Tosco estimates that shale oil has a $1 to $1.50 advantage over the Wyoming oil most similar to it because it yields a higher fraction of gasoline and diesel fuel. Wyoming ''sweet'' has been selling for $36 to $37 a barrel lately. ''Our economics are premised on a lower price than that,'' he said.