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Home , Nahcolite, Oil shale industry, Piceance Basin

Oil Shale: Is Now the Time?

Jeremy Boak, Director Center for & Research School of Mines, Golden Colorado

Garfield County Energy Advisory Board December 1, 2011 Outline

• What are Oil Shale and ? • Geology, Stratigraphy and Resources • Production Technology in the United States • How Fast Can it Grow? • Responsible Oil Shale Development • Environmental Issues for Oil Shale Production

2 What is oil shale?

• Organic rich mudstone formed in lake or marine environments – Commonly carbonate rich; many not classical clay-rich mudstones (shale) – -rich, primarily algal and bacterial remains – Immature precursor to oil & gas • Produces oil on short term heating to temperatures above ~300°C

3 Global Oil Shale Resource Estimates

4 Shale - the most abundant

5 Shale composition covers a lot of ground

Carbonate Average Shale (1975) Bakken calcareous/ Barnett dolomitic mudstone U. Green River L. Green River Chinese Oil Shale Thailand Oil Shale Polish Gas Shale argillaceous marlstone siliceous Duvernay marlstone Muskwa Besa R. Lower black shale Besa R. Upper black shale Fort Simpson Q+F=Clay argillaceous siliceous mudstone mudstone Carbonate/Clastic

Clay Quartz + Feldspar

6 Oil shale, oil-bearing shale, and gas shale

Oil shale, Shale oil

Oil-bearing shale, Shale-hosted oil

Source - USGS, Petroleum Systems and Geologic Assessment of Oil and Gas in the Gas shale, Uinta-Piceance Province, Utah and Colorado Shale gas

7 Bakken – Green River Comparison

TOC (wt %) 0 10 20 30 40 0 Green River 500 Bakken

1000

1500

2000

2500

3000

3500

8 GEOLOGY, STRATIGRAPHY AND RESOURCES

9 Stratigraphy

Uinta Formation New USGS assessment of Piceance Basin Uinta Tongues Green resources (from Johnson et al., 2010) River West East Tongues

R-8 Zone Oil in place (BBO) L-7/A-Groove # R-7 R zone L zone Note L-6/B-Groove .

b R-6

M 8 189.7 Top A-Groove - top bed 44

n k o e i e t

r L-5 a C

7 191.7 6.3 Mahogany Zone, A-Groove e e t m e u r n n

h R-5 o o e c Z

a

c F 6 185.4 7.8 R-6 , B-Groove r e

n a o i r l

P L-4 E e S a v f i

o 5 198.2 66.1 R-4 e R g

n a n

L-3 R 4 127.1 69.1 e . x

e Total new USGS 1,525.2 R-3 r M a

G L-2 . 3 68.1 22.5 assessment

b R-2 . M

. L-1 b k b M e

M

e 2 66.8 24.1 R-1 Same areas, 1,097.4 h r s c t l C

n u

i L-0 s zones as Pitman o a G l

P 1 195.4 15.5 g

n l u i e v o d R-0 et al. (1989) r n D a A

G 0 83.4 8.3 New areas and 427.8 Total 1305.8 219.7 zones

10 Lake Uinta, 50 million years ago Humid climate, high runoff (rich oil shale)

Water level

1 cm

Shore deposits Littoral, sublittoral carbonates Littoral, sublittoral siliciclastics Laminated oil shale Delta deposits Disturbed oil shale deposits Littoral, sublittoral oil shale Oil shale breccia

11 Alternating with: Arid climate, low runoff (lean oil shale)

Littoral, sublittoral siliciclastic rocks deposits (, nahcolite) Laminated oil shale

12 Lake Stages and Climate

High lake level (S4, 5, & 6)

Rapidly fluctuating lake (S3)

High sand input (S2) Freshwater lake (S1)

13 from Zachos et al., 2001 Deep lake deposits

Halite crystals

Nahcolite crystals

Oil shale

Halite bottom growth

14 Areal Richness of Mahogany Zone

• One zone contains up to 450,000 barrels/acre (BPA) • Overall richness may be more than 1,000,000 BPA

15 Oil Shale Resources of

• Piceance Basin: 1,335 square miles (3,458 km2). • In place resource: 1.52 trillion barrels • : 3,834 square miles (9,930 km2s). • In-place resource: 1.32 trillion barrels • Greater Green River Basin: 5,500 square miles (km2). • In-place resource less than Piceance and more than Uinta Basin. • The Piceance Basin has the smallest area and largest resource.

16 Carbonate Minerals in Colorado, Utah, and Wyoming • The Piceance Basin contains the second largest deposit of sodium carbonate as Nahcolite (NaHCO3) in the Parachute Creek Member of the GRF. • The world’s largest deposit of sodium carbonate is in the Green River Basin of SW Wyoming as (Na3(CO3)(HCO3)·2H2O) in the Wilkins Peak Member of the GRF. • Uinta Basin contains minor deposit of bedded sodium carbonate minerals in the GRF 17 near Duchesne, Utah. OIL SHALE PRODUCTION TECHNOLOGY

18 ATP Retort at Fushun China

19 Enefit 280 Under

July 7, 2011

20 Enefit 280 Under Construction

October 11, 2011

21 Shell In-Situ Conversion Process (ICP)

‣ Electric resistance heaters gradually heat shale in subsurface

‣ Applicable to oil shale and heavy oil/bitumen

‣ Accelerates natural maturation of kerogen by gradual heating in oil shale

‣ High recoveries & light products yielding high quality transportation fuels

22 Better Feedstock For Upgrading

45 API 19 API Shell In Situ Gravity Gravity Pyrolysis

Surface Retort Pyrolysis 12 350°C In Situ SHALE OIL EXAMPLE 10 Naphtha - 30% NAPHTHA JET DIESEL RESID

8 Diesel - 30% Jet - 30% 6 ° Resid - 10% Weight % 800 C Surface 4 Retort 2 Like Solid

0 0 5 10 15 20 25 30 35 40 45 50 100 120 Number

23 Freeze Wall for Ground Water Protection

• Closely space boreholes circulating liquid ammonia freeze mobile ground water • Buffer zone isolates heated block from freeze wall • Production wells remove mobile water from block before heating • Heaters pyrolyze rock in heated zone to recover • Additional wells circulate water through heated block to “steam clean” any trapped hydrocarbons • Freeze wall allowed to thaw when cleaning is complete

24 ExxonMobil Electrofrac™ Process

• Create electrically conductive fractures (vertical or horizontal) • Planar heat source more effective than radial conduction from wellbore • Typical simulation – 150 foot height – 5-year heating converts 325 feet of oil shale – 120-ft fracture spacing – 74% heating efficiency

25 AMSO CCRTM Process

• AMSO’s patent-pending CCRTM* process uses convection to accelerate heat transfer throughout the retort • Faster heat transfer in the process enables fewer wells, hence less surface impact, to extract the shale oil * Conduction, Convection and Reflux

26 AMSO 2011 Pilot Test and Features of the Process • Minimal surface footprint • Protection of aquifers • Low water usage • High energy efficiency • Low gas emissions • High-value jobs

27 Chevron Approach – Rubblization & Injection

• Rubblization is breaking a zone of reservoir into discrete chunks of rock. In other words, generating fractures in the x,y, and z planes

• Adjacent aquifers and fractures can limit the amount of surface area generated by conventional fracturing. Rubblization can provide the high surface area needed for our conversion chemicals within a compact zone.

28

Potential Rubblization Methods

• Thermal (Cryogenic?) – Rock shrinks when cooled. Extreme cooling will cause it to go into tension (vs. its normal state of being in compression) – The rock is weak in tension – The coefficient of thermal expansion varies with layers, resulting in varying amounts of shrinkage, and shear stresses which aid rubblization – A large amount of cooling is needed – Some control over where the cooling is done • – Timed to generate “constructive interference” – Drilling intensive – Control over height and direction. Ability to “generate shapes”

29 EcoShaleTM In-Capsule Process

• Combines the benefits and avoids the shortcomings of both in-situ and surface • Oil shale is mined and placed in an excavation that has been lined with an impermeable clay liner • Expendable closed wall heating pipes are placed horizontally throughout the capsule • A liquid drain system is included in the bottom of the capsule; perforated pipes at the top of the capsule collect hydrocarbon vapour • Clay liner completes the containment structure on top, with overburden subsequently replaced to start immediate reclamation • burners produce hot exhaust gas that is circulated through the capsule • Produces a high grade, light synthetic crude

30 HOW FAST CAN IT GROW?

31 Historic oil production

10,000,000

1,000,000 9.8 %

100,000 8.7 %

US Oil 1862-1919 10,000 Production (BOPD) Tar Sand 1968-2007 US Oil Growth Tar Sand Growth 1,000 1980 2000 2020 2040

32 Projected production

10,000,000 15.5%

5.7%

1,000,000 14.3%

100,000 Oil Shale Oil Shale 1999-2030 U. S. Shale Gas 1990-2007 Bakken Production

Production (BOEPD) 10,000 U. S. CBM 1993-2009 Oil Shale Trend Shale Gas Growth 1,000 1980 1990 2000 2010 2020 2030 2040 2050

33 Growth rate of major petroleum resources

10000000 Canada Oil Sand U. S. Shale Gas Bakken 1000000 Eagle Ford Gas (BOE)

9% Eagle Ford Oil

100000 15% 55% Barrels perBarrels Day 10000

1000 1960 1970 1980 1990 2000 2010 2020 2030

34 Historic Oil Shale Production

50 US Figure courtesy of 45 China Alan Burnham 40 Sweden 35 30 Germany 25 Russia 20 Scotland 15 10

Mined Shale, Million 5 0

35 Projected Global Oil Shale Production

225 200 United States 175 China Sweden 150 Germany 125 Brazil 100 Russia Scotland 75 Estonia 50 25 Mined shale, million tonnes 0

1880 1900 1920 1940 Year1960 1980 2000 2020

36 RESPONSIBLE OIL SHALE DEVELOPMENT

37 Alternative B - Oil Shale (2008)

Colorado – 359,798 Utah – 630,971 acres Wyoming – 1,000,453 acres acres

38 Colorado RD&D

39 Jordanian Government Focus

• Government is aware of the importance of investments in and potential environmental impacts from oil shale development • Government focusing on: – Protecting environment from possible serious impacts &high risk hazards – Ensuring practical regulations applied to various oil shale processes – Appropriate monitoring of potential pollutants • The environment regulation must be: – Adaptable to address new environmental issues – Balanced against companies’ need for a stable investment framework • The royalty structure must – Provide adequate encouragement to interested companies, – Provide reasonable return to the people of Jordan

40 Environmental framework

• Jordanian environmental laws stem from: • Ministry of Environment • Ministry of Water and Irrigation • Ministry of Health • Jordan Institution for Standards and Metrology (JISM) • Oil shale projects will be required to comply with • World / IFC Guidelines • The Equator Principles • Reasonable and prudent operator standards • Emission Limit Values as specified for the oil shale

41 Other Governmental Authorities

• By-laws of relevance to oil shale industry impacts are also issued by other different responsible governmental authorities: – Ministry of Energy & Natural Resources: Energy & alternative energy sources & power production projects – Ministry of : Monitoring soil & protecting biodiversity – Natural Resources Authority: Minerals exploitation & natural resources regulations – Civil Defense: Hazardous materials & explosive chemicals – Royal Society for The Conservation of Nature: Conservation of rare species & natural reserves – Ministry of and Antiquities: Archeological & cultural heritage – Ministry of Municipals Affairs: Land use planning, urbanization, local – Ministry of Labor: Labor and occupational health

42 Summary of Environmental Framework for Oil Shale Industry in Jordan

43 Concession Agreement Fiscal Terms

• Production Bonus – $10 million at 2 million barrels 60 120 • Royalty – Sliding scale form 1% – 5% based on oil price – Brent reference • Petroleum Tax – Sliding scale from 15%-65% based on ratio of Revenue / Costs

Oil Price – Brent $/bbl Royalty Brent < 60 1% 5 60 ≤ Brent ≤ 120 (5%-1%)/(120-60)*(Brent-60)+1% 1.25 Brent > 120 5%

Revenue /Cost Tax

R/C < 1.25 15%

1.25 ≤ R/C < 5 (65%-15%)/(5-1.25)*(R/C-1.25)+15%

5 ≤R/C 65%

44 44 44 ENVIRONMENTAL ISSUES FOR OIL SHALE PRODUCTION

45 Environmental Issues for Oil Shale Development

• Issues – Water quantity and quality – Carbon footprint – Air quality – Surface and ecosystem impact – Social and economic impacts • Data needs – Definition process – Baseline collection – Management – Dissemination • Model development • Impact assessment & policy • Technology development for mitigation

46 Site Water Use Depends upon Reclamation Efficiency

16

Shell OST 14 oil) New 12

10

8

6

4

2

Site Water Use (barrels/barrel Site Water Use (barrels/barrel 0 0 0.2 0.4 0.6 0.8 1 Reclamation Efficiency

47 Oil shale richness controls CO2 release

800 700 600 500 ( million ( million tons)

2 400 300 200 Annual COAnnual 100 0 0 10 20 30 40 Fischer Assay

48 Additional CO2 release from Nahcolite

0.35 Nahcolite

0.3 19% 0.25

0.2

0.15 (tons per barrel)

2 0.1 CO 0.05

0 0 5 10 15 Production Quality (FA*FA%*Power plant eff.)

49 SHALE GAS AND SHALE-HOSTED OIL

50 Recognized shale gas basins widely distributed

51 Shale is a very impermeable rock

Tighter than Tight Tight Conventional

Granite 0% porosity

Montney Shale General oilfield rocks

Good Shale Barnett Sidewalk

Extremely Very Tight Tight Tight Low Moderate High

0.0001 0.001 0.01 0.1 1.0 10.0 Permeability (mD) 52 Source: modified after US DOE Study, 2005 Shale reservoirs must be fractured to produce

53 Graphic by Al Granberg Knowing where your fractures are is essential

54 Knowing where your fractures are is essential

Horn River microseismic Barnett Shale microseismic Planar Fracture growth? Complex fracture growth

SHmax>=Shmin

55 Water issues are significant for shale gas & oil

Guar gum/Hydroxyethyl cellulose KCl 560 ppm 600 ppm Ethylene glycol 430 ppm (Na,K)2CO3 110 ppm Isopropanol NaCl 100 850 ppm ppm Borate 70 ppm Citric acid 40 ppm Petroleum distillate Acid N,n-dimethyl formamide 880 ppm 1230 ppm 20 ppm Gluteraldehyde 10 ppm

• Water quantity and quality • Fracturing fluid disposal/contamination – Surface spill or release – Casing failure – Fracturing upward to aquifer?

56 Fracturing fluid additives include familiar and exotic ingredients

57 Aquifers must be protected from producing zones

58 BACK-UP MATERIAL

59 Richness of Mahogany Zone

60 Lake margin deposits

Progradation of delta (Yellow Creek)

Littoral, sublittoral stromatolites

61 Site Water Use Depends upon Oil Extraction Efficiency

18 Shell OST 16 New 14 12 10 8 6 4 2 Site Water Use (barrels/barrel oil) Site Water Use (barrels/barrel 0 0.3 0.4 0.5 0.6 0.7 0.8 Oil Extraction Efficiency

62 Lake Uinta, 50 million years ago

Margin Center

Littoral, sublittoral carbonates Shore sandstones (delta) Laminated oil shale (halite, nahcolite)

63 AMSO Process Features

• Minimal surface footprint • Protection of aquifers • Low water usage • High energy efficiency • Low gas emissions • High-value jobs

64 Red Leaf Resources EcoshaleTM Technology The EcoShale In-Capsule Process

• Clay Liner • Closely Spaced Heat Pipes • Skid Mounted Equipment • Mined /Void Volume • Sloped Drainage • Vapor/Prompt Oil Recovery • In-Pit Extraction

65 OIL AND GAS FROM THE GREEN RIVER FORMATION

66 Producing Oil Fields of the Green River Formation

Source - USGS, Petroleum Systems and Geologic Assessment of Oil and Gas in the Uinta-Piceance Province , Utah and Colorado

67 Oil Production from Green River Formation Fields (BBO)

Cumulative Fields 2008 2009 2010 Production

BLUEBELL 2,170,166 2,216,764 1,436,909 168,256,774

ALTAMONT 1,427,141 1,707,755 1,684,601 125,924,864

RED WASH 381,585 377,705 284,608 85,962,385

WONSITS VALLEY 345,459 299,099 206,193 51,280,150

MONUMENT BUTTE 4,234,316 4,636,580 3,749,010 46,251,817

OTHER GRF 2,437,672 2,003,559 1,703,816 63,928,511

TOTALS 10,996,339 11,241,462 9,065,137 541,604,501

State Total 22,039,614 22,943,850 18,157,832 1,396,246,479

% 49.9% 49.0% 49.9% 38.8%

68