Global Oil Shale Market is Worth $2.88bn in 2011

The Oil Shale Market 2011-2021

By: Matthew Jones, Visiongain

Global oil shale resources are enormous, standing at around 4.8 trillion barrels according to the World Energy Council’s Survey of Energy Resources 2010 (WEC SER 2010). Though it is unclear precisely what percentage of these resources is recoverable, it is certain that global oil shale resources dwarf reserves of conventional oil. It is therefore unsurprising that oil shale is so widely discussed as a potentially major energy source.

Yet oil shale is not a new phenomenon; it has been utilised around the world in various places and at various times for more than 150 years. But the high costs of oil shale extraction, together with the ready availability of conventional oil reserves, made the process uneconomic for most of its history and a significant global oil shale industry has failed to develop over that time. When substantial investments in oil shale have been made in the past, such as in the US in the late 1970s and early 1980s, they ended in dramatic failure with the cancellation of billion dollar projects. In fact, there have been so many false starts that a saying has developed in the West of the United States: Oil shale has a promising future: it always has and it always will.

However, many are hopeful of a dramatically different outcome this time around as a combination of high oil prices, improved extraction technologies, and increasing global energy demands have reignited interest in the oil shale industry over the past few years, with a number of countries currently seeking to establish major domestic oil shale markets.

Though oil shale resources are found in close to 40 countries around the world, only three currently have produce oil from shale on a commercial scale: China, Estonia and Brazil. All three rely upon the traditional and most extensively tested method of oil shale extraction, which involves mining the oil shale and retorting it above ground to release a substance called kerogen, which can be converted into oil.

Companies in the United States are pioneering a new ‘in-situ’ method of extraction, which involves retorting the oil shale underground.  This process is less damaging to the landscape than above ground retorting, and may also be substantially less harmful to the environment. Moreover, the process is capable of recovering deeply deposited oil shale and can recover much lower-grade oil shale than conventional mining methods. A number of companies, including Shell, ExxonMobil and Chevron, are in the process of developing and testing unique in-situ extraction technologies, which they hope to use on a commercial scale within the next ten years.

According to the WEC SER 2010, the United States has by far the greatest oil shale resources in the world, possessing more than 3.7 trillion barrels of in-place oil shale resources, which equates to 77.4% of the global total. The majority of these resources are located in the Green River Formation, which is spread over parts of Colorado, Utah and Wyoming. Though some companies, such as Enefit American Oil and EnShale Energy, are planning oil shale projects based on the mining and above ground retorting technique, the majority of companies involved in the Green River Formation are developing in-situ technologies. A number of pilot projects have already been set up, and there is competition over which company will be first to establish commercial production.

With more than 35 billion barrels in estimated reserves, China has the world’s second greatest in-place resources of oil shale, while the country is currently the world’s biggest producer of shale oil with 7,600 barrels per day in 2008 according to the WEC SEC 2010, though recent additions mean this figure is now larger. As with many other energy sources, China is currently investing heavily in oil shale development, with a number of projects planned over the next five years. Though these projects are currently based on traditional mining and above ground retorting techniques, Visiongain also expects China to attempt to acquire the newer technologies currently being developed in the United States.

Jordan has ambitious plans to expand its oil shale industry over the next few years having signed contracts with Eesti Energia, Jordan Oil Shale Company and Karak International Oil to construct plants in the country. Jordan is also home to the Oil Shale Cooperation Centre, an organisation set up in 2010 to promote cooperative oil shale development and technology transfers between Jordan, Egypt, Morocco, Turkey, and Syria.

Estonia, which already has an established oil shale sector, also has plans to construct new oil shale plants over the next ten years, as well as updating its existing facilities to meet EU standards, while the government of Uzbekistan announced in February 2011 that under its new five-year-plan it would be seeking $850m in foreign investment in its oil shale sector by 2015, which will include the construction of two oil shale plants.

A number of other countries, including Australia, Israel and Morocco, have also announced plans to construct pilot oil shale projects over the next few years, with the aim of achieving commercial production within the next decade. Moreover, countries like Syria and India, who have thus far done little to exploit their oil shale resources, have expressed their desire to establish major oil shale industries in the future and are in the process of seeking investors.

However, over the next ten years the industry will be faced with a number of restraints, chief amongst which is cost. The fact that the industry is highly regulated, together with the fact that exploration work does not always lead to an operations phase, means than even the initial costs of assessing the potential for oil shale development are expensive. Substantial testing then has to be carried out over a sustained period of time before a project can be established, while construction of a plant often has to be accompanied by other infrastructure costs, such as roads, pipelines and power connections. Once up and running, operational costs are significant because of the complexity of extracting oil from shale. Added to this are the costs of meeting environmental regulations, which are likely to increase in the future as the pressures to tackle global warming continue to increase.

Moreover, the oil shale market faces the potential problems of high emissions of carbon dioxide, considerable water requirements, disruption to wildlife and plant life, and contamination of land and even water supplies, while it will also be restrained by the effects of a weak global economy.

All this means that there remains a great deal of uncertainty within the oil shale market. The combination of high oil prices, increasing global energy demand, and improving extraction methods, together with the ever present desire for nations to enhance their energy security, creates a substantial opportunity for global oil shale resources to be exploited on a commercial scale. Considerable investments are already being made, and spending is likely to increase rapidly over the next ten years, Visiongain believes.

But the long term profitability of the oil shale industry will depend heavily upon the success of the new in-situ technologies currently being tested and demonstrated in the US. If these technologies prove themselves to be technically, economically and environmentally viable on a commercial scale, then the potential exists for companies to export them around the world.

Visiongain's The Oil Shale Market 2011-2021 report details the prospects for this dynamic energy sector with detailed forecasts from 2011-2021. For more information on the report please click HERE