Producing shale oil on a large scale is one of the possible
alternatives for reducing dependence of the United States on imported
petroleum. Industry is not producing shale oil on a commercial scale now
because costs are too high even though industry dissatisfaction is most
frequently expressed about "non-economic" barriers: innumerable permits,
changing environmental regulations, lease limitations, water rights
conflicts, legal challenges, and so on. The overall purpose of this
study is to estimate whether improved technology might significantly
reduce unit costs for production of shale oil in a planned large-scale
industry as contrasted to the case usually contemplated: a small
industry evolving slowly on a project-by-project basis.
In this preliminary phase of the study, we collected published data
on the costs of present shale oil technology and adjusted them to common
conditions; these data were assembled to help identify the best targets
for cost reduction through improved large-scale technology They show
that the total cost of producing upgraded shale oil (i.e. shale oil
accpetable as a feed to a petroleum refinery) by surface retorting ranges
from about 18to28/barrel in late '78 dollars with a 20% chance that
the costs would be lower than and 20% higher than that range. The
probability distribution reflects our assumptions about ranges of shale
richness, process performance, rate of return, and other factors that
seem likely in a total industry portfolio of projects.
About 40% of the total median cost is attributable to retorting, 20%
to upgrading, and the remaining 40% to resource acquisition, mining,
crushing, and spent shale disposal and revegetation. Capital charges account for about 70% of the median total cost and operating costs for
the other 30%.
There is a reasonable chance that modified in-situ processes (like
Occidental's) may be able to produce shale oil more cheaply than surface
retorting, but no reliable cost data have been published; in 1978, DOE
estimated a saving of roughly $5/B for in-situ.
Because the total costs of shale oil are spread over many steps in
the production process, improvements in most or all of those steps are
required if we seek a significant reduction in total cost. A June 1979
workshop of industry experts was held to help us identify possible
cost-reduction technologies. Examples of the improved large-scale
technologies proposed (for further evaluation) to the workshop were:
- Instead of hydrotreating raw shale oil to make syncrude capable of
being refined conventionally, rebalance all of a refinery's
processes (or develop new catalysts/processes less sensitive to
feed nitrogen) to accommodate shale oil feed -- a change analogous
to a shift from sweet crude to sour crude.
- Instead of refining at or near the retort site, use heated
pipelines to move raw shale oil to existing major refining areas.
- Instead of operating individual mines, open-pit mine all or much
of the Piceance Creek Basin.
- Instead of building individual retorts, develop new methods for
mass production of hundreds of retorts
