Will Oil Shale Make America an Oil-Exporting Nation explained by professional Forex trading experts the “ForexSQ” FX trading team.
Will Oil Shale Make America an Oil-Exporting Nation?
Definition: Oil shale is a type of sedimentary rock that’s rich in kerogen. This substance is not liquid petroleum, but organic matter from prehistoric marine plants and animals. Kerogen can be converted into oil if heated long enough. Oil shale should not be confused with shale oil, which is actual oil trapped in layers of shale rock.
Oil shale is not yet commercially viable. However, Congress made exploration of oil shale a national priority in the “Oil Shale, Tar Sands, and Other Strategic Unconventional Fuels Act of 2005.” As a result, the challenges in producing oil from the kerogen-rich shale are being overcome by new technologies.
This has the potential to make the U.S. an oil-exporting nation, thus eliminating its dependence on foreign oil.
Oil Shale Reserves
While oil shale is found around the world, the U.S. has the largest reserve, estimated at between 1.3 to 3 trillion barrels, in the Green River formation in Colorado, Utah, and Wyoming. Even if only 800 billion barrels can actually be recovered, this is still three times greater than the 262.6 billion barrels in Saudi Arabia’s oil reserves. U.S. oil shale reserves could supply American oil needs, about 20 million barrels a day, for 100 years. (Source: “American Oil Find Holds More Oil Than OPEC,” ABC News, November 13, 2012. “Oil Shale Guide,” U.S. Bureau of Land Management.)
Nearly three-quarters of the oil shale reserves are owned by the U.S. government, thanks to the 1910 Pickett Act. This set aside reserves in California and Wyoming to supply oil for the U.S. Navy, which was switching from coal to oil to power its ships.
The Navy developed the Naval Petroleum and Oil Shale Reserves Program through 1925. It was expanded by President Roosevelt for World War II. The nation’s first strategic reserve, Elk Hills in California, produced oil for the Navy, and was then sold to Occidental Petroleum for $3.65 billion in 1998 — the largest privatization in U.S. history.
However, the shale reserves are still owned by the U.S. Bureau of Land Management.(Source: “Oil Shale Reserves,” Daily Reckoning,)
Oil Shale Extraction
Normally, Nature takes millions of years of pressure and heat to convert the kerogen in oil shale to crude oil. Man can speed up this process by mining the shale in open pits. It’s then heated in a process called retorting. The oil then must be separated from the rock and collected. This process is expensive, creates open pits that can be seen from space, and results in tons of toxic sand that must be safely deposited.
Shell has developed a process to heat the shale underground that accelerates this natural process. This in-situ conversion process heats the shale to 650 – 750 degrees Fahrenheit for two to three years. This releases the kerogen oil and gas, which is then pumped to the surface. (Source: “Oil Shale Overview,”Institute for Energy Research.)
Oil shale extraction is more expensive to produce than conventional oil, but it’s still cost effective at today’s oil prices. It costs $40-$80 a barrel to recover, making it almost worth it at around $100 a barrel. It’s energy intensive, but no more so than extraction of shale oil and other “tight” oil.
It’s true that 25% of the energy produced must be used to extract the next barrel. However, this ratio is already being used with conventional steam extraction of “heavy” oil. Furthermore, the end product is much lighter and cleaner than most crude oil.
Environmental groups are more concerned about the amount of water needed to produce oil shale. This is of particular concern in the West. Between one to three units of water are needed to produce one unit of oil shale. However, this is roughly one-tenth the water needed to produce biofuels, which require heavily-irrigated corn as its base material.(Source: Jeremy Boak, Director of Center for Oil Shale Technology and Research, Colorado School of Mines)
Although promising, insitu extraction still must solve massive technological problems. The biggest is making sure the oil doesn’t leach into the surrounding water table.
The best way to do this is freeze the water around the extraction site. You can easily see that keeping water frozen around an area that’s been heated to 750 degree is a technical and expensive challenge.
Last but not least, shale oil extraction could threaten wildlife habitat, increase air pollution, and generate toxic waste. Global warming is also an issue. Each unit of oil shale produced generates up to 20 units of CO2, compared to 4 units of C02 for every unit of crude oil. Therefore, the most important determinant is improvement in extraction technologies, rather than oil price. (Sources:Natural Resources Defense Council, Oil Shale by the Numbers, August 2008; Interview with Gavin Longmuir, a consultant with International Petroleum Consultants Association, Inc. He has over 25 years experience as a petroleum engineer in the global oil industry, specializing in the development of future oil fields, economic evaluations of exploration opportunities and assessment of new technologies.)
Will Oil Shale Make America an Oil-Exporting Nation Conclusion
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