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ECONOMICS, BARRIERS, AND RISKS OF OIL SHALE DEVELOPMENT IN THE UNITED STATES
Khosrow BiglarbigiHitesh Mohan
Peter CrawfordMarshall Carolus
INTEK, Incorporated
28th USAEE/IAEE North American Conference
New Orleans, LA
December 4, 2008
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America’s Oil Shale
• Resource• Technology• Economics• Environmental• Path Forward
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What is Oil Shale?
RockKerogen
Pyrolysis
Upgrade
700 - 800 °F
Syn- Crude
Naphtha
Gasoline
Jet Fuel
Diesel
HC Gas
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Most Concentrated Hydrocarbon Deposit
2 Trillion Barrels
6 Trillion Barrels
Source: US DOE, 2004
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Oil Shale Production ApproachesOil Shale Production Approaches
Mining Retort UpgradingResource Refinery
Surface ProcessSurface Process
Drilling Heating UpgradingResource Refinery
In Situ ProcessIn Situ Process
Source: US DOE, 2004
Choke Point
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Shell In-Situ Conversion Process
Source: US DOE, 2008
High Value Products
Pilot Test (Colorado)Pilot Test (Colorado)
Light Surface Processing
HEATER
PRODUCER
OVERBURDEN
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Other Examples of In-Situ Technology
Pilot Tests (Colorado)Pilot Tests (Colorado)
IDT–EGL Resources ProcessChevron Process
FracturesFractures
Injector
Producer
Source: US DOE, 2004
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Alberta Taciuk Processor (ATP)
Pilot Test (Utah)Pilot Test (Utah)
PreheattubesVapour
tube
Combustionzone Retort
Preheattubes
Coolingzone
Oil shalefeed
750°C
500°C 250°C
Source: US DOE, 2006
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Other Surface Retort Technology
• Gas Combustion Retort (GCR)
• High thermal efficiency
• High retort efficiency
• Present use– Petro-six operating in Brazil
– Paraho Process being tested for a major project abroad
Oil MistExtractors
Raw Shale
Spent Shale
RESIDUE COOLING
COMBUSTION
STRIPPING
PYROLYSIS
PREHEATINGMIST FORMATION
Oil MistExtractors
Raw Shale
Spent Shale
RESIDUE COOLING
COMBUSTION
STRIPPING
PYROLYSIS
PREHEATINGMIST FORMATION
RESIDUE COOLING
COMBUSTION
STRIPPING
PYROLYSIS
PREHEATINGMIST FORMATION
Source: US DOE, 2007
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First Generation Project Costs
Item Unit Range
Capital Cost $/BPD
O&M Cost $/Bbl 12-20
40K-55K*
* Barrel of Daily Capacity
Source: INTEK Inc., 2006
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Canadian Oil Sands Operating Costs
Source: Suncor, 2008
$0
$5
$10
$15
$20
$25
$30
$35
$40
2006 2007 2008
$35
$30
$23
Do
llar/
Bar
rel
Year
12
Source: Canadian Association of Petroleum Producers, April 2008
$1,0
00 p
er B
bl
of
Dai
ly C
apac
ity
140000
0
20
40
60
80
100
120
Suncor -Millennium
Albian Syncrude -Aurora 2 &
UE 1
Nexen – OPTI
CNRL -Horizon
Shell -Muskeg &Scotford
PCA/UTS Fort Hills
$3 Billion $11 Billion
100,000 Bbl/D Project
2001 2003 2006 2007 2008 2010 2011
Canadian Oil Sands Capital Costs
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Economic Price for Oil Shale Technology20
07 D
oll
ars
Per
Bb
l
Source: INTEK Inc., 2008
$0
$10
$20
$30
$40
$50
$60
$70
True In-Situ Surface Mining UndergroundMining
Modified In-Situ
Rate of Return - 15%
$38
$47
$57
$62
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Cashflow of a Generic Oil Shale Project
-1000
-800
-600
-400
-200
0
200
400
600
800
1000
1200
5 10 15 20 25 30 35 40
After Tax
Before Tax
Year
Cu
m.
Dis
cou
nte
d C
ash
flo
w (
MM
$)
Room for Government Action
Source: INTEK Inc., 2008
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Impact of Incentives on Generic Cashflow
-1000
-800
-600
-400
-200
0
200
400
600
800
1000
1200
5 10 15 20 25 30 35 40
After Tax
Before Tax
Year
Cu
mu
lati
ve D
isco
un
ted
Aft
er
Tax
Cas
hfl
ow
(M
M$)
$10/Bbl Production Credit$5/Bbl Production Credit15% investment Credit10% Investment CreditAccelerated Depreciation
Source: INTEK Inc., 2008
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Oil Shale Environmental ImpactsAir Quality
Oil Shale Processing
HCGas CO2 SOx NOx
• CO2 Enhanced Oil Recovery• Sequestration• Other Industrial Uses
Capture and Clean Existing Technology
Process Plant Use
Source: SPE #110590, 2007
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Land Use Depends On The Process
• 1 MMBbl/D Production for 40 Years– Surface: 31 Square Miles
– In-Situ: 14 Square Miles
• Example for 2.5 MMBbl/D Industry: – 52 Square Miles
2.5 MMBbl/d
52 Square Miles
Green River
17,000 Square
Miles
Source: SPE #110590, 2007
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Water Requirements
• 1-3 Barrels of Water per Barrel of Shale Oil
• Challenges:–Water rights–Water availability–Ground water protection–Water runoff
Source: US DOE, 2007
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Development Hurdles
• Access to Land– 70% on Federal Land– BLM issued final regulation (November 18, 2008)
• RD & D
• Environmental Permitting
• Fiscal Regime
• Public Education
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Total Resource6 Trillion Barrels
High Quality Resource2 Trillion Barrels
Technical Recovery
1 Trillion Barrels
Reserves600 – 750Billion Bbls
The Prize
$50 - $65 / Bbl
@
Source: INTEK Inc., 2008
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0
500
1,000
1,500
2,000
2,500
2005 2010 2015 2020 2025 2030 2035
Year
Th
ou
san
d B
bl/
DProjected Production Potential
(Shale Oil in the U.S.)
Base
Tax Incentives
RD&DAccelerated Scenario
Measured Scenario
Business as Usual
Source: US DOE, 2007
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Example Benefits of Oil Shale DevelopmentCumulative (Over 25 Years)
Item RD&D
Direct Public Sector Revenues 85
Value of Imports Avoided 325
Production 12.8
Direct Federal Revenues 48
Direct Local/State Revenues 37
Contribution to GDP 1300
New Jobs 300
Unit Base Incentive
Billion $ 25 48
Billion $ 70 170
Billion Bbls 3.2 7.4
Billion $ 15 27
Billion $ 10 21
Billion $ 310 770
1000 FTE 60 190
Source: INTEK Inc., 2007
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Summary
• Over 6 trillion barrels of in place resource
• The most concentrated hydrocarbon deposits on Earth
• Conversion technologies are advancing rapidly
• Sustained production potential of up to 2.5 MMBbl/Day
• Substantial economic benefits to the Nation
• Requires concerted effort by the private sector, Federal & State governments, and local communities