Oil Shale - Economics

Economics

The amount of economically recoverable oil shale is unknown. The various attempts to develop oil shale deposits have succeeded only when the cost of shale-oil production in a given region comes in below the price of crude oil or its other substitutes. According to a survey conducted by the RAND Corporation, the cost of producing a barrel of oil at a surface retorting complex in the United States (comprising a mine, retorting plant, upgrading plant, supporting utilities, and spent shale reclamation), would range between US$70–95 ($440–600/m3, adjusted to 2005 values). This estimate considers varying levels of kerogen quality and extraction efficiency. In order to run a profitable operation, the price of crude oil would need to remain above these levels. The analysis also discusses the expectation that processing costs would drop after the establishment of the complex. The hypothetical unit would see a cost reduction of 35–70% after producing its first 500 million barrels (79×10^6 m3). Assuming an increase in output of 25 thousand barrels per day (4.0×10^3 m3/d) during each year after the start of commercial production, RAND predicts the costs would decline to $35–48 per barrel ($220–300/m3) within 12 years. After achieving the milestone of 1 billion barrels (160×10^6 m3), its costs would decline further to $30–40 per barrel ($190–250/m3). Some commentators compare the proposed American oil-shale industry to the Athabasca oil-sands industry (the latter enterprise generated over 1 million barrels (160,000 m3) of oil per day in late 2007), stating that "the first-generation facility is the hardest, both technically and economically".

In 2005, Royal Dutch Shell announced that its in-situ process could become competitive for oil prices over $30 per barrel ($190/m3). A 2004 report by the United States Department of Energy stated that both the Shell technology and technology used in the Stuart Oil Shale Project could be competitive at prices above $25 per barrel, and that the Viru Keemia Grupp expected full-scale production to be economical at prices above $18 per barrel ($130/m3).

To increase efficiency when retorting oil shale, researchers have proposed and tested several co-pyrolysis processes.

A 1972 publication in the journal Pétrole Informations (ISSN 0755-561X) compared shale-based oil production unfavorably with the coal liquefaction. The article portrayed coal liquefaction as less expensive, generating more oil, and creating fewer environmental impacts than extraction from oil shale. It cited a conversion ration of 650 litres (170 U.S. gal; 140 imp gal) of oil per one ton of coal, as against 150 litres (40 U.S. gal; 33 imp gal) of shale oil per one ton of oil shale.

A critical measure of the viability of oil shale as an energy source lies in the ratio of the energy produced by the shale to the energy used in its mining and processing, a ratio known as "Energy Returned on Energy Invested" (EROEI). A 1984 study estimated the EROEI of the various known oil-shale deposits as varying between 0.7–13.3 although known oil-shale extraction development projects assert an EROEI between 3 to 10. According to the World Energy Outlook 2010, the EROEI of ex-situ processing is typically 4 to 5 while of in-situ processing it may be even as low as 2. However, according to the IEA most of used energy can be provided by burning the spent shale or oil-shale gas.

The water needed in the oil shale retorting process offers an additional economic consideration: this may pose a problem in areas with water scarcity.