Petroleum News: U.S. turns attention to shale, tar sands: "Nominations have so far been received for 10 parcels in Colorado, eight in Utah and one in Wyoming, with bidders including Chevron, ExxonMobil, Anadarko and Royal Dutch Shell. Contracts are expected to be awarded this spring.": Posted Sunday 22 January 2006

BLM leasing oil shale properties as part of Energy Policy Act of 2005 push; nominations received, awards expected in spring

Gary Park

For Petroleum News

While Canada lags far behind the United States in exploiting coalbed methane and shale gas, the U.S. is venturing into one of its northern neighbor’s specialties.

The U.S. Bureau of Land Management took the first steps in December towards leasing oil shale and tar sands prospects in Colorado, Utah and Wyoming by initiating efforts to establish a regulatory regime for commercial development.

It is part of a push under the Energy Policy Act of 2005 to open up more unconventional resources by allowing commercial leasing of oil shale and tar sands in 2007.

The targeted areas for oil shale are the Piceance and Washakie basins in Colorado, the Uintah Basin in Utah and the Green River and Washakie basins in Wyoming.

Some estimates put the resource at 1 trillion barrels, although only a small percentage is likely to be recoverable.

Tar sands opportunities are believed to exist in some sedimentary regions of the Colorado Plateau in Utah, similar to the bitumen deposits that are key oil sources in Canada and Venezuela.

Advances in technology targeted

The bureau hopes that advances in extraction technologies will make it possible to avoid the negative environmental impacts when oil shales were leased on federal lands in the 1970s, but careful steps will be taken to prevent a repetition.

Oil shale research, development and demonstration projects started in June when the bureau invited bids for 10-year, 160-acre properties covering a total 16,000 acres in the three states. That area is thought to hold 2.6 trillion barrels of oil.

Nominations have so far been received for 10 parcels in Colorado, eight in Utah and one in Wyoming, with bidders including Chevron, ExxonMobil, Anadarko and Royal Dutch Shell. Contracts are expected to be awarded this spring.

Canadian technology may be needed

But embarking on U.S. shales may involve a transfer of technology from Canada.

At a meeting last summer between U.S. lawmakers and the Canadian Association of Petroleum Producers, the congressional representatives started probing their guests about the chances of applying oil sands technology in the shales.

Not that the Canadians were unwilling to share their know-how but they made it clear that there is a considerable difference between oil sands (where the a grain of sand is coated with water and oil, posing the challenge of breaking the bond between oil and water), while with shale oil, the oil is bonded directly to rock, making it much harder to separate.

Oil sands pioneer Suncor Energy has learned that lesson to its cost, writing off a C$200 million investment in an Australian shale oil venture, conceding that its technology worked only in a test environment.

CAPP President Pierre Alvarez has said the shale oil puzzle needs a major research and development undertaking.

He said a massive R&D effort is required to exploit 70 percent of oil trapped underground and that, in turn, demands a coherent North American energy policy at a time when both the U.S. and Canadian governments have drastically reduced their research budgets.

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