Oil Shale: Finally a Bride?

The past few years has seen an explosion in the production of shale gas. The recently released World Energy Outlook 2012 predicts that the US will replace Saudi Arabia as the world's largest producer of oil by 2020 as a result of a dramatic increase in production from an unconventional source: shale oil.

How plausible is this? Lets begin with the facts. First, there is a tremendous amount of oil locked up in US shale, particularly in Colorado. With 'known' reserves of approximately 600 billion barrels of oil equivalent and estimated potential of 1.8 trillion bbl, this resource is the American version of Canada's oil sands -- an unconventional source of petroleum that has a long history of being a bridesmaid, but never a bride. A popular saying in the Colorado industry captures this nicely: “Oil shale is the fuel of the future, and always will be.” But, as the tar sands have shown, changes in the economics of the industry coupled with technological developments can foster large scale production from previously inaccessible sources.

Second, the projection is based on expectations about both price and technology. Significantly, a recent survey of petroleum economists showed little consensus about future prices. The survey revealed two distinct camps -- those who think prices will remain high or increase and those who think they will fall substantially. Their take on prices is largely tied to their expectations about the impact of shale oil on the global market. One camp argues that the upside from shale oil supplies will be more than enough to meet demand growth. The other disputes that, saying the likely impact from shale is being exaggerated.

The role of technology is equally contentious. Some geologists point to the role of two technologies that have been central to the development of shale gas: hydraulic fracturing and horizontal drilling. Others emphasize the technologies present at Shell's Mahogany Ridge Project; a new, working, but small scale, oil shale demonstration technology that produced 1400 barrels of oil without mining. The traditional approach to oil shale -- which led to the bridesmaid label -- involved 'retorting,' a process that required mining the shale, hauling it to a processing facility that crushed the rock into small chunks, then extracted a petroleum substance called kerogen, then upgraded the kerogen through a process of hydrogenation (which requires lots of water) and refined it into gasoline or jet fuel. Here is a description of the Mahogany Ridge process from Shell's Terry O'Connor:

“Most of the petroleum products we consume today are derived from conventional oil fields that produce oil and gas that have been naturally matured in the subsurface by being subjected to heat and pressure over very long periods of time. In general terms, the In-situ Conversion Process (ICP) accelerates this natural process of oil and gas maturation by literally tens of millions of years. This is accomplished by slow sub-surface heating of petroleum source rock containing kerogen, the precursor to oil and gas. This acceleration of natural processes is achieved by drilling holes into the resource, inserting electric resistance heaters into those heater holes and heating the subsurface to around 650-700F, over a 3 to 4 year period.

“During this time, very dense oil and gas is expelled from the kerogen and undergoes a series of changes. These changes include the shearing of lighter components from the dense carbon compounds, concentration of available hydrogen into these lighter compounds, and changing of phase of those lighter, more hydrogen rich compounds from liquid to gas. In gaseous phase, these lighter fractions are now far more mobile and can move in the subsurface through existing or induced fractures to conventional producing wells from which they are brought to the surface. The process results in the production of about 65 to 70% of the original “carbon” in place in the subsurface.

“The ICP process is clearly energy-intensive, as its driving force is the injection of heat into the subsurface. However, for each unit of energy used to generate power to provide heat for the ICP process, when calculated on a life cycle basis, about 3.5 units of energy are produced and treated for sales to the consumer market. This energy efficiency compares favorably with many conventional heavy oil fields that for decades have used steam injection to help coax more oil out of the reservoir. The produced hydrocarbon mix is very different from traditional crude oils. It is much lighter and contains almost no heavy ends.

“However, because the ICP process occurs below ground, special care must be taken to keep the products of the process from escaping into groundwater flows. Shell has adapted a long recognized and established mining and construction ice wall technology to isolate the active ICP area and thus accomplish these objectives and to safe guard the environment. For years, freezing of groundwater to form a subsurface ice barrier has been used to isolate areas being tunneled and to reduce natural water flows into mines. Shell has successfully tested the freezing technology and determined that the development of a freeze wall prevents the loss of contaminants from the heated zone.”

It may seem, as O’Conner said, counter-intuitive to freeze the water around a shale deposit, and then heat up the contents within the deposit. It’s energy-intensive. And it’s a lot of work. What’s more, there’s no proof yet it can work on a commercial scale.

Yet both technologies, the freeze wall and the heating of shale, have been proven in the field to work. The freeze wall was used most recently in Boston’s Big Dig project. It was also used to prevent ground water from seeping into the salt caverns at the Strategic Petroleum reserve in Weeks Island, LA.

In short, the individual 'pieces' of a working approach have been demonstrated, but their viability as a systemic whole, particularly on a commercial scale, remain unproven.

Third, a number of other factors have to be taken into account. The energy content of oil shale varies tremendously from region to region. Colorado shale is, by far, the most concentrated and, hence, most attractive. But, the process is both energy and water intensive, and water is at a premium in Colorado. Moreover, 72% of known US oil shale reserves are on government land. This is a fact that cuts both ways. On the one hand, this provides an economic lure; development of the lands could provide a significant revenue stream. On the other, as the case of drilling in the Alaska National Wildlife Refuge shows, exploitation of sensitive government lands can be a political hot potato. The Colorado reserves lie on land surrounded by National Parks and other sensitive areas. So, simply put, in addition to the economic and technology matters, there are also significant political considerations.

Finally, as my earlier research on the history of oil estimates showed, the current political economy of the oil industry accounts for the way assumptions underlying such projections are interpreted. In other words, while the projections are justified in terms of geology and technology, it is the current political economy of the industry which affects whether such estimates incorporate 'optimistic' or 'pessimistic' assumptions about the implications of those factors.  Simply put, when there is lots of shut in short term capacity, the industry thinks that there is lots of energy available and opts for optimistic assumptions about future geology and technology. Alternatively, when demand outstrips supply, there is no shut in capacity, and the industry is doing everything it can to find new sources and get them on to the market, then pessimistic assumptions about future geology and technology become the order of the day. Thus, given the current glut of supply on the market, history suggests we would be wise to question the ultimate validity of these particular projections.

A Reasonably Good Facsimile of a Future with Less Carbon

Bill McKibben suggested in Deep Economy that America could cut its carbon emissions in half, not by going back to primitive village life and donning hair shirts, but by becoming more like Europe, which has half the carbon emissions of the US (and per capita, Canada, for that matter).

An article by George Marshall in New Internationalist Magazine makes the case that Britains could cut their carbon emissions by 80% by living the way they did back in 1972. He seasons personal anecdotes of his life as a boy with statistics that offer proof that we had a pretty decent life back in 1972. We lacked nothing but excess consumption and we had more time together as families and communities, which Robert D. Putnam says in Bowling Alone is the one thing that will really make us happy.

"What will life be like if wealthy countries reduce their greenhouse gas emissions by 80 per cent or more? George Marshall finds a trip down memory lane can teach us plenty about a low-carbon future.

Imagine reducing emissions by 80 per cent. It seems huge and daunting without a technological revolution. But imagine achieving that target just by turning the clock back to the time when emissions were still at that level. For example, how far back would you have to go to reduce by 80 per cent the amount that British people fly?

1972. Yes, 1972. It really isn’t so long ago – and if it does seem a long time, consider that to halve flights you only have to go back to 1993.

When we try to envision a low-carbon society we often forget that one is still alive in our collective memories. Nearly half the current population of Britain was alive in 1972 and it was hardly the dark ages. People lived, laughed, and loved just as much as now.

The early 1970s marked the first time in Britain when people’s basic needs were largely met. Yes, there were still pockets of absolute poverty, but by and large, people were housed, fed, clothed, and in work. They had weekends off, annual holidays and spare cash for entertainment and leisure. It was not a time of great plenty – but of ample sufficiency.

For every sector, the figures tell the same story – had we chosen to keep that standard of living and applied our ingenuity to making it better, fairer and more efficient, we would not now be facing catastrophic climate change. I feel a deep sadness that we did not make that choice, but some hope in the knowledge that a potentially sustainable society has occurred within my lifetime.

With this in mind I have been re-examining my own memories of 1972, supplemented by the statistical evidence.1 I want to know how it felt to live with lower consumption and lower expectations. What lessons can we learn, and can we move forward in a way that is intelligently informed by our own recent past?"

Coal: Act Locally, Think Globally .... NOT!

Interesting article in the NYTimes on the global trade in coal. The basic point: while developed countries move to limit the use of coal as a fuel for electrical generation in order to reduce emissions, that very same coal is being sold to China. Moreover, where the coal was traditionally burned close to where it was mined, now it is shipped thousands of miles -- with the additional cost in emissions. And, to make it even more problematic, as demand has grown so has the price and, hence, more production and new mines. In short, local action to reduce emissions is going for nothing at the global level as those emissions are merely being relocated.



The graph above shows that the vast majority of countries are either importing less coal or exporting more of it. The one major exception, China, which has gone from a net exporter to a net importer in the two years between 2007 and 2009.



As the above map shows, there are a large number of countries involved in the trading of coal. The bulk of the shipments to China, however, come from Australia and Indonesia.

Will the Real #1 Driver of Climate Change Please Stand Up?

As I study energy and climate, statistics fly at me from every direction and it gets really hard to sort things out. Everything, it seems, is "the largest single producer of carbon emissions" and there is no way to sort out which really is the largest.

NASA recently conducted a study of all the major sources of greenhouse gas emissions and their net effects on climate change.

http://www.energybulletin.net/node/51744

Clearly, electric power production is the largest single source of C02, but it is offset by aerosol-cloud effects and sulfates that actually cause global cooling, thus the net global warming effect of electricity production is about the same as the Industry sector.

Likewise, the road transportation sector produces less C02 than the Industry and power sectors, but road transportation does not have the aerosol offsets that would reduce it's impact on global warming. Thus, while the road transportation sector produces less C02, it actually contributes more to global warming than Industry and Power—today.

However, if you look at the title of the article, it says "Road Transportation Emerges as Key Driver of Warming." While is this is true in a qualified sense (it is "a" key driver), that statement doesn't make as much sense when you look at the first graph. Electric power production produces the most C02, and in fact, the NASA data shows that in the future, assuming BAU, electric power production will continue to be the largest driver of global warming, with road transportation second. As we build cleaner power plants that produce fewer aerosols, the warming effect of power production will increase dramatically. Road Transportation as "the" key driver only appears when you look at the second graph, which is an estimate of emissions for 2020.

What the article doesn't consider is the behavioral effects of car use. Driving increases casual consumption exponentially. The reason why we shop more, eat out at restaurants more, live, work and play at greater distances, is because of the power and convenience of the automobile to get us to every destination cheaply and efficiently. Cars exponentially increase the speed and amount that we are able to consume. This increased consumption creates a demand for more products and services, which in turn creates a demand for more electric energy production and more industrial production, which also leads to an increase in road transportation. So in that sense, road transportation is indeed a KEY driver in global warming. Ecologists call this effect a "positive feedback loop."