Europe Gears Up for the Shale Gale

Shale Gas: Beyond the US and Europe

Shale Oil: The Trend Toward Liquids

Oil Shale: The Rock That Burns

SPECIAL SECTION

SHALE
Cuadrillas drilling site in Singleton, Fylde, UK

Photo courtesy of Cuadrilla Resources.

Europe Gears Up for the Shale Gale

John Sheehan, JPT Contributing Editor

he European shale gas revolution is still in its infancy and though its commercial potential could rival that of North America, significant challenges lie ahead. France has put a moratorium on shale gas activity while a comprehensive study into its environmental impact is being carried out, and its National Assembly has voted in favor of a ban on hydraulic fracturing. The potential for shale gas production in Europe is undoubted, as consultancy IHS CERA estimates that Europes total shale gas in place could be 6,115 Tcf. Among the key challenges that will determine the ultimate productivity in Europe is a regulatory environment that is currently ill-suited to unconventional gas, the company said. Regulations designed for traditional exploration and production

in Amsterdam. We expect Europe to be a significant part of future activity.

Poland Leads the Way

Poland plays host to Europes largest known reserves of shale gas. Leasing activity in the countrys three main basinsthe Baltic Basin, the Podlasie Basin in the east, and the Lublin Basin to the southis well under way. The country is keen to push forward with shale gas production as it looks to break away from its reliance on Russian gas supplies. The US Energy Information Administration (EIA) estimates that Poland has 792 Tcf of risked shale gas in place, with 514 Tcf in the Baltic Basin, 222 Tcf in the Lublin Basin, and the remainder in the Podlasie Basin. Chevron and ExxonMobil have been joined by a large number of smaller players such as DPV Service, Cuadrilla, EUR Energy, and Mazovia Energy in securing acreage across the country. Talisman is carrying out seismic acquisition on concessions in the Baltic Basin and it is on track to spud its first two shale gas wells in the fourth quarter of this year, the company said. It moved into the Polish plays through a farmin arrangement with San Leon Energy for a 60% interest in San Leons three concessions. Talisman is committed to drilling a minimum of three wellsGdansk-W, Braniewo-S, and Szczawnowhich cover 600,000 acres. Three optional wells with horizontal sections will be drilled after a successful first phase of testing. San Leon is also engaged in a five-year exploration and development program on its two concessions, Nowa Sol and Wschowa in the Permian Basin South. Both concessions are on trend with prolific Rotliegendes gas and Zechstein oil production. Nexen recently entered into an agreement with Marathon to jointly explore 10 concessions in Polands Paleozoic shale play and it says it will pump USD 100 million into shale-related activities. Nexen will acquire a 40% working interest in the concessions, which encompass more than 2 million acres. Marathon is acquiring 2D seismic this year and plans to drill one or two wells in the fourth quarter and potentially seven or eight wells during 2012. Another company that has snapped up acreage in Poland is Realm Energy, which holds three licenses in the country. The largest license, Gniew, is located in the Baltic Basin and covers 294,296 acres. Two other licenses, Ilawa, also located in the Baltic Basin, and Wegrow, in the Podlasie Basin, cover 161,109 acres and 180,136 acres, respectively, with Realm holding a 50% position. Realms primary targets in Poland are the multiple shale formations within the lower Silurian, Ordovician, and Cambrian geological periods. The company is designing

3 Legs Resources Lebian drillsite in Poland.

have not been adapted to reflect the character of unconventional gas, said Jonathan Parry, global gas director at IHS CERA. There are significant challenges ahead, including uncertainties over length of tenure, permitting regimes and norms, and water management, among others. However, a host of major and smaller operators are lining up to take acreage in a number of European countries where the shale gale is beginning to blow. Europe is just starting down the path of unconventional production, but we have some activities in the US we would like to leverage in order to move Europe forward on a more accelerated path, Linda DuCharme, director of Europe, Russia, and the Caspian at ExxonMobil, told the recent Gastech conference

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JPT SPECIAL SECTION: SHALE

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seismic programs on its lands and expects to shoot an aggregate 150 sq km of 2D seismic once the necessary permits have been granted and locations have been scouted. In addition, it is currently reprocessing 470 km of existing seismic data. Realm said it intends to move forward with drilling programs on its substantial acreage positions once seismic surveys have been completed and well locationsdetermined. 3Legs Resources holds six hydrocarbon exploration and prospection licenses in the Baltic covering a total area of approximately 1.03 million acres (held through subsidiary company Lane Energy Poland). We are commencing our own exploration program in the heart of Polands Baltic Silurian shale play, said Mike Mullen, the companys chief operating officer. With all the drilling activity that is occurring around our license areas in Poland, it is the ideal time for us to move up our development schedule and begin our seismic acquisition program that will help us select drilling locations in preparation for the drilling of our first well. 3Legs also has two permits covering 620,000 acres in the Krakow region. The work program obligations require one exploration well to be drilled and a certain amount of 3D seismic to be acquired within the first two years. The company is exploring for unconventional gas potential in the Silurian and Ordovician shales and, in partnership with ConocoPhillips, drilled its first two shale gas exploration wells, the Lebien LE1 and Legowo LE1a. The first well on the Lebork concession (Lebien LE1) underwent a singlestage fracture stimulation in November 2010 followed by a period of testing. Further evaluation is ongoing. Polands national gas company, PGNiG, also holds substantial acreage in the region and has 13 of the roughly 60 shale gas licenses issued by the Environment Ministry.

Consistent with projections, the two primary shale target intervals were thicker in the Lebork S-1 well than in the Wytowno 1 well. The Ordovician shale interval in the Lebork S-1 well is approximately 299 ft thick, which is slightly thicker than the 272 ft found in the Wytowno 1 well, the company said. The Cambrian shale also thickened to 49 ft from the 29.5 ft found in the Wytowno 1 well. BNK said this provides further support for its hypothesis about an increasing thickness trend that may continue into deeper portions of the basin. The company anticipates receiving all core analysis back by the third quarter. The log suite in the Lebork S-1 well calculates the highest gas and best properties in the Cambrian shale interval followed by the Ordovician shale interval. BNK said the uncalibrated log suites of both wells indicate higher gas calculations in the Ordovician interval in the Lebork S-1 than in the Wytowno 1, which may change after the logs are calibrated. During the third quarter, the completion will be designed and the first intervals in each well will be fracture stimulated. The company is also planning to drill its first well on the Starogard concession in July.

Supermajors Take Aim

Larger operators are also getting involved in Poland. ExxonMobil has built a large acreage position in the Podlasie and Lublin Basins of eastern Poland, the location of a potential new shale gas play. The company has total holdings of more than 1.6 million acres. Frances Total has just announced an agreement with ExxonMobil to farm into the Chelm and Werbkowice exploration concessions with a 49% interest. The work program for each of the concessions involves acquisition of seismic data, drilling of an exploratory well, and a production test if drilling results are encouraging. ExxonMobil has already acquired seismic and drilled an exploratory well on the Chelm concession, the results of which are being evaluated. Aurelian Oil and Gas also has acreage in the southern Permian Basin and in the Carpathian Thrust Fold Belt in southern Poland, Slovakia, and central Romania. Activity is less advanced in the Lublin Basin, where Halliburton completed the Markowola-1 exploration well in the PionkiKazimierz license for PGNiG last year. Results were mixed, and further tests are being carried out. Halliburton said significant production of shale gas could begin in Poland within three to four years if economic production of the reservoir is proved.

BNK Spins the Bit

BNK Petroleum has an interest in six total concessions in Poland that total 1.6 million gross acres (1.1 million net acres). The concessions in Saponis, Starogard, Slupsk, and Slawno are located in northern Poland and total about 730,000 gross acres. BNKs plan is to test multiple targets in the Silurian, Ordovician, and Cambrian shales that are located at depths ranging from 7,000 ft to 12,500 ft. The first well, Wytowno 1, began drilling in December 2010 and was completed in the first quarter this year. The well encountered encouraging gas shows and log responses, the company said. Currently BNK is awaiting the results of the core analysis so that the logs that were run can be properly calibrated. In May, BNK said its Lebork S-1 well has been drilled, cased, and cemented to its total depth of 11,779 ft. It said that during drilling, numerous gas shows were recorded over 935 ft of the Lower Silurian, Ordovician, and Cambrian shales. The gas shows consisted mainly of methane gas. The strongest gas shows were in the Cambrian shale though gas shows in the other intervals may have been diminished because of hole coring of the other intervals.

Eastern Europe Eagerly Awaits

Outside of Poland in Eastern Europe, the search for shale gas is ramping up, but geological challenges are causing headaches for explorers. In Hungary, disappointing results from drilling in the Mako Trough led to ExxonMobil and MOL withdrawing from an exploration project there. Partner Falcon Oil, which holds 247,000 acres in Hungary, is looking for new partners.

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Table 1. Shale Gas Resources

Country France Germany Netherlands Norway U.K. Denmark Sweden Poland Turkey Ukraine Lithuania Others (3) Technically recoverable shale gas resources (Tcf) 180 8 17 83 20 23 41 187 15 42 4 19

Source: US Energy Information Administration.

The three companies had teamed up to drill the Foldeak-1 well, which was completed at a depth of approximately 12,632 ft (3,850m) within the Szolnok formation but was later abandoned. In Bulgaria, six licenses have been awarded to five companies, including BNK Petroleum, TransAtlantic Petroleum, Chevron, and Integrity Towers. In the Ukraine, the Dnieper-Donets Basin is being targeted for shale gas potential. It is estimated by the EIA to contain 48 Tcf of shale gas resources. Total and Eurogas have teamed up to hunt for shale gas in that basin. The Ukraines state-run energy firm, Naftogaz, and ExxonMobil signed a memorandum to cooperate on searching for shale gas deposits in the country. The Ukrainian government is also in talks with Chevron and Shell about shale operations, as it looks to lessen its reliance on Russia for its energy needs. In Romania, East West Petroleum has acquired acreage in the Pannonian Basin, which has been the site of extensive successful oil and gas exploration. East West said unconventional hydrocarbon resource plays have been recognized on the acreage and it plans an extensive study and evaluation of these potentially large, untapped resources. TransAtlantic Petroleum is planning to drill a well to test the Silurian-age shale on its Sud Craiova Block E III-7, onshore western Romania. And Chevron picked up three shale gas exploration blocks in the Carpathian-Balkanian Basin in the country.

gas in place of western European shales at 1,505 Tcf of which 372 Tcf is estimated as technically recoverable (Table 1). Environmental concerns are likely to play a big part in whether the shale gale takes off in western Europe. In France, shale gas is contained in the Paris Basin and the Southeast Basin, and exploration has sparked a major political row. French Prime Minister Francois Fillon extended a moratorium on research and drilling for shale oil and gas, pending reports commissioned by the government to establish the impact of drilling on the environment. The countrys National Assembly has voted in favor of a ban on fracturing. The bill now needs to be approved by the Senate. If the bill is approved, it will revoke the permits of companies carrying out fracturing there, although it does not outlaw the extraction of shale gas itself. Companies that rushed to grab land in France now have a nervous wait to see what will happen next. In the Paris Basin, which has similar traits to the Bakken formation in the US, companies such as Toreador Resources, Vermilion Energy, Realm, Hess, and Elixir Petroleum have all taken acreage. Vermilion said that it remains in discussion with regulatory authorities regarding the evaluation of resource play potential in France, including the Lias Shale oil play in the Paris Basin. The proposed drilling of two vertical wells through the shale and recompletion of the shale in a number of existing wellbores has been deferred as a result of the recent government pronouncements, and a timeline and framework for further activities have yet to be established. Paris-based independent Toreador Resources is leading the way in the search for French shale after securing more than half of the exploration permits in the Paris Basin. However, it is delaying its proof of concept exploration program. The program is aimed at determining the type of petroleum resources contained in the tight rock within the Liassic Shale at a depth of between 7,546 ft and 9,843 ft as well as their economic potential. Last year, France granted three exploration permits: one to oil major Total and two to US-based energy exploration company Schuepbach Energy for periods of between three and five years to explore in the southeast part of the country. GDF Suez has since entered partnership talks with Schuepbach. Total announced in January that it was planning to farm out up to a 50% interest in its 100% operated South East Basin, Montelimar Permit acreage in southeast France. This significant shale gas opportunity could hold up to 85 Tcf of initial gas in place. Totals Montelimar Permit, which was granted for a five-year period, covers a surface of 4,327 sq km that spans from the south of Valence to the Montpellier region in southern France. Operations in the South East Basin remain on hold until a decision on further activity is taken by the government.

French Shale Moratorium

Western Europe plays host to a significant number of shale gas basins, which are made up of Carboniferous, Permian, Jurassic, and Ordovician-age shales. The EIA estimates risked

ExxonMobil at Forefront in Germany

In Germany, the search for unconventional gas is being spearheaded by ExxonMobil. Over the next five years the company could spend up to USD 1 billion exploring

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for shale gas in North Rhine-Westphalia and Lower Saxony where it holds six exploration licenses. The licenses cover 3.2 million acres of the Lower Saxony, Ibbenburen, and Ruhr Basins, and include potential shale gas and coalbed methane exploration plays. ExxonMobil operates all these licenses, with a 67% interest in five of them, and a 100% interest in the sixth. Exploration drilling will continue this year to evaluate a number of unconventional play concepts. The company has drilled five exploratory wells in shale sediments in the country. Other companies that have secured exploration permits in Germany include BASFs oil and gas arm Wintershall, Gaz de France, BNK Petroleum, BEB, and Canadas Realm Energy. Realm has announced plans to explore for oil and gas potential in the Posidonia and Weald shales. Realm was awarded a wholly owned shale exploration concession in Germany in May 2010. The Aschen concession lies in the Weser-Ems region in the Lower Saxony Basin and covers an area of 15,888 acres. It contains two mature, organically rich shale formations and several partially appraised oil and gas fields. 3Legs Resources has a 630,000 acre exploration permit and will be testing Permian-Carboniferous horizons in the Bodensee trough. The license areas are located in southern Germany around and to the northeast of Lake Konstanz and contain obligations to acquire 2D or 3D seismic and drill one exploration well during the first three years. BNK Petroleum has leased 3,745 sq km of land for gas exploration, including shale opportunities in west and central Germany. The company has two concessions in North RhineWestphalia and a 300,000 acre concession in Lower Saxony. It also has three concessions in Thuringia totaling 770,000 acres and in March 2010, BNK was awarded a concession that totaled 840,000 acres, bringing BNKs total holdings in Germany to about 2.4 million acres. All of BNKs concessions were acquired for their potential for shale gas. Across its acreage BNK is primarily targeting three shales. Some concessions also have the potential for Bakken-like unconventional oil, coalbed methane, and tight gas sands, the company said.

UK Activity Picks Up
Shale gas drilling in the UK was given the go-ahead in May by the government in a new report looking at the impact it could have on water supplies, energy security, and greenhouse gas emissions. The inquiry found no evidence that the hydraulic fracturing process involved in shale gas extraction poses a direct risk to underground water aquifers provided the drilling well is constructed properly. It concluded that, on balance, a moratorium in the UK is not justified or necessary at present. Members of Parliament nevertheless urged the Department of Energy and Climate Change to monitor drilling activity extremely closely in its early stages to assess its impact on air and water quality. Tim Yeo, chairman of the committee that looked into fracturing, said: There has

been a lot of hot air recently about the dangers of shale gas drilling, but our inquiry found no evidence to support the main concern, that UK water supplies would be put at risk. There appears to be nothing inherently dangerous about the process of fraccing (sic) itself, Yeo said, and as long as the integrity of the well is maintained, shale gas extraction should be safe. The governments regulatory agencies must of course be vigilant and monitor drilling closely to ensure that air and water quality is not being affected. However, a week after the inquiry, Cuadrilla Resources halted drilling for shale gas in England after scientists said two small earthquakes might be linked to hydraulic fracturing. The British Geological Survey recorded a 1.5 magnitude quake near Blackpool in northwest England, within 1.2 miles of the gas well. A 2.3 magnitude quake was recorded nearby inApril. Cuadrilla Resources has been actively exploring Cheshires Bowland Shale. Cuadrilla began drilling for natural gas at its first location, Preese Hall 1, located approximately five miles east of Blackpool, in August 2010. The company completed its first phase of exploration in December 2010, which involved drilling a vertical exploratory well with total depth of around 9,000 ft. The second phase of the exploration program began in March. This phase involves stimulating rocks surrounding parts of the vertical well using hydraulic fracturing. Cuadrilla said that once this phase is completed, it will be able to determine whether there are commercial quantities of natural gas present at the drilling site. Celtique Energie holds licenses in three areas of the UK: the Cheshire Basin, East Midlands, and the Weald Basin. In the Weald Basin, Celtique has a 50% share in licenses covering 1,000 sq km. It says these have conventional Triassic potential and unconventional oil and gas potential in the Jurassic Liassic shales. IGas has operations across northwest England and the North Wales coast and has license interests in Staffordshire and Yorkshire. In total it has interests in licenses covering 1,756 sq km. IGas says that at its Point of Ayr acreage, initial indications are that the shale extends over the whole acreage and has an expected average thickness of more than 800ft. The company said a significant proportion of its acreage in the northwest Englandfrom Ellesmere Port in the west in PEDL 190 to the Trafford Centre in the east within PEDL 193is considered to have shale that has a high potential to be hydrocarbon bearing. However, UK Energy Minister Charles Hendry has made it clear that shale gas developers will face challenges. He told a House of Commons committee: Some of it is under very heavily populated areas of the country [and] there has to be approval given from people whose land is being drilled underneath and this could make things much more complicated. Approval from landowners is not required in the United States.

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Hendry said he did not anticipate the government offering any special support to encourage the development of shale gas. I cant see any reason for changing the support that is offered to the industry, he said. I think it would be a market-driven exercise, but subject to very strict safety and environmentalprotections. Elsewhere in northern Europe, Cuadrilla Resources and DSM Energie bought permits in the Netherlands, while BG also has a large exploration tract on the east Netherlands border with Germany. Cuadrilla plans to drill the Netherlands first unconventional gas well in Boxtel in North Brabant province later this year. Cuadrilla is partnering with Energie Beheer Netherlands, a natural gas exploration, production, transportation, and sales company owned by the Dutch government. Plans are to drill three wells. The Dutch Energy Council, the highest advisory body of the Dutch government in energy affairs, has come out strongly in favor of the development of unconventional gas in the Netherlands. The council has recommended a number of policies that should stimulate the exploitation of shale gas and coalbed methane in the Netherlands. In Scandinavia, shale gas potential is mostly to be found in the Cambrian/Ordovician Alum Shale, but results so far have been mixed. In Sweden, Shell took a position in the Alum Shale and acquired 400 square miles of acreage. The company has drilled three wells, but results have proved disappointing. Shell said recently that it is not going to renew its exploration licenses in Scania (southern Sweden) after the analysis of the three wells drilled showed that no gas could be produced from the Alum Shale there. Meanwhile, Gripen Gas has picked up five exploration permits in stergtland in central Sweden. The five exploration licenses (Ekeby, Hov, Eneby, Orlunda and Skedet) establish Gripen Gas as the principal acreage holder in the Cambro-Ordivician basin of stergtland. The basin contains over 50 recorded gas seeps. The exploration licenses have been awarded for an initial period of three years, which may be extended for a further three years. The licenses lie close to the industrial complex of Linkping where a growing energy demand exists. In southern Europe, BNK Petroleum has acquired new exploration acreage in Spain to pursue a shale gas opportunity. BNKs subsidiary Trofagas Hidrocarburos won a new 61,470 acre oil and gas exploration concession in the autonomous community of Cantabria onshore Spain with work commitments that include geological studies in the first year, and drilling up to four vertical wells in each of four subsequent years. JPT

Shale Gas:
Promising Prospects Worldwide
Robin Beckwith, Sta Writer JPT/JPT Online

hale gas is everywhere. Chinas estimated technically recoverable shale gas resources, at 1,275 Tcf, are almost 50% greater than those touted in the US. Argentina, with 774 Tcf, contains 150 Tcf more than all of Europe. These numbers were spelled out in World Shale Gas Resources: An Initial Assessment, a study released April 2011 under the auspices of the US Energy Information Administration (EIA), which commissioned the study from Advanced Resources International (ARI). China, in fact, ranks first in shale gas resources, followed by the US, Argentina, Europe, Mexico, South Africa, Australia, and Canada. Although the study is preliminary and excludes areas like Russia and the Middle East, there is no doubt shale gas resources exist in abundance worldwide. The numbers ARI arrived at are rough. With more extensive data and more time to assess it, ARI stated, the amounts would be higher. However, Donald L. Gautier, chief of the US Geological Survey (USGS) World Petroleum Project, introduced a note of caution regarding the EIA studys figures. The USGS is in the midst of its own assessment of global continuous accumula-

Concurrent shale gas completions operations at c-34-L Apache Horn River in northeast British Columbia, Canada. Photo courtesy: Apache Corporation; Ben Affleck, photographer.

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tions, including technically recoverable gas from source rock systems such as gas shales. Initial results from the first basins assessed will be released within the next few months. According to Gautier, the USGS approach, which is geologically based, probabilistic, and emphasizes application of well performance data from analog shale plays in North America, is quite different from that of ARI. I wouldnt be at all surprised if the results are as different as the methodology, he said.

exploitation. By 1992, when the incentive ended, the resulting infrastructure, critical mass, and expertise were in place to continue economically without incentives.

China: Drilling, Learning

Americas shale gas production alone has exceeded that of total Chinese gas output. That gives us a lot of confidence, Zhang Dawei, deputy director of the Strategic Research Center for Oil and Gas in Chinas Ministry of Land and Resources (MLR), said in an April news report. According to the Chinese governments 12th FiveYear Plan (20112015), that country aims to double natural gas consumption from 4% of its total energy mix to 8% in 2015 (in comparison, coal consumption is targeted to decrease from 70% to 63%). The EIA estimates Chinas 2009 natural gas consumption at 3.075 Tcf, driven by the needs of a vast population approaching 1.4 billion, 47% of whom live in cities spread out over a land area of close to 9.57million sq km. In the International Energy Outlook 2010, however, the EIA projects that China fails to achieve its targeted natural gas share, due to continuing reliance on coal. According to the EIA, natural gas will provide 5% of Chinas energy mix in 2020. China began importing liquefied natural gas (LNG) in 2006. A shift toward reliance on its shale gas resources might undercut demand for LNG imports. However, Woodside Petroleum chief executive Don Voelte (quoted before he stepped down 30 May 2011) indicated China has more regasification terminals scheduled to start up in 2011, with LNG demand set to grow by about 17% annually to 24 million tonnes in 2016. Chinas MLR will soon hold an auction for eight shale gas exploration blocks covering 18,000 sq km in southwest Sichuan, central Hubei, Guizhou, and direct-controlled municipality Chongqing. The auction, originally scheduled for November 2010, was delayed reportedly to open the bidding for increased competition with the goal of quickening the pace of shale development. Six domestic companies have been short-listed by the MLR to bid on the blocks: PetroChina, China Petroleum & Chemical, China National Offshore Oil Company (CNOOC), Shaanxi Yanchang Petroleum Group, China United Coal Bed Methane, and Henan Provincial Coal Seam Gas Development and Utilization. Shale gas drilling in China is just beginning. PetroChina, which produces nearly 80% of Chinas total gas output, completed drilling Chinas first horizontal shale gas well late March 2011 in Sichuan province. Following December 2010 drilling of a vertical shale gas test well in Yuanba, a district about 500 km from Sichuan province capital Chengdu, Sinopec plans to drill its first horizontal shale gas well mid-2011 in Fuling, not far from Yuanba and in the same prolific geological Sichuan Basin. In December Shell and Petrochina, 13 months after inking a joint exploration agreement, spudded the Yang 101 evaluation well on the Fushun-Yongchuan shale gas block

Shale Gas Economic Requisites

While shale yields approximately 20% (4.8 Tcf in 2010, according to the EIA) of US natural gas consumption, this resource has yet to contribute more than negligibly in regions elsewhere. Yet many countries, buoyed by and in some cases participating in US shale gas exploitation, appear poised to initiate shale gas development within their borders. However, with a lack of shale drilling and completion services, as well as gas production and transportation infrastructure, promising shale gas reservoirs need at least five to 10 years before production would be economic. The shale gas story in North America has been an overnight revolution that has taken 30 years to develop, ARI president Vello Kuuskraa said in an email statement. It has often been said that this revolution is the result of developments in hydraulic fracturing and horizontal drilling. But it is no easy matter to apply these technologies successfully on any given well. As Apache global technology consultant George E. King pointed out in paper SPE 133456, No two shales are alikeUnderstanding and predicting shale well performance requires identification of a critical data set that must be collected to enable optimization of the completion and stimulation design. There are no optimum, one-size-fitsall completion or stimulation designs for shale wells. So, while the EIA study helps locate possible sweet spot areas within worldwide shale gas plays, these cover huge extents of land whose specific geophysical characteristics will need to be discovered and delineated well by well, field by field. For shale gas extraction anywhere in the world to become economic, a host of factors, pulled by demand, need to gather momentum. These include the presence of technically experienced, well-supplied and -equipped drilling and completions service companies with a low cost base and the critical mass necessary to learn and respond quickly to new developments in modeling, planning, fluids, and proppants technology. A good measure of transparency or knowledge transfer is also criticalsimilar to requirements in most areas throughout Nor th America to reveal fracturing and production-performance data within six months following execution, which competitors can then plunder for insight. Some form of government support is a likely ingredient for shale gass ultimate economic success. For example, the US benefited from a tax incentive created in the 1980s, which, along with high gas prices, jump-started US tight gas

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in southwestern Sichuan province. According to reports, Shell will spend as much as USD 1 billion a year over the next five years on shale gas in China, drilling a possible total of 17 wells, some of which will be for shale gas. Industry sources said Shell in mid-March 2011 spudded two more shale gas exploration wells on the Fushun Block. Spurred by identification in the five-year plan as one of Chinas top targets for technological breakthroughs, shale gas research could receive significant government funding. Chinas National Energy Administration is setting up a shale gas laboratory in Langfang, near Beijing, financed mostly by PetroChina, which will reportedly become Chinas national shale gas research center. Chinese firms are also learning firsthand about technically sound and economical shale gas well development through positions outside its bordersfor example, spending well over USD 6 billion on North American shale gas assets in first-quarter 2011. PetroChina announced early February 2011 it paid USD 5.5 billion for a 50% interest in EnCanas Cutbank Ridge business assets, representing current production of about 255 MMcfe/d; proved reserves of about 1.0 Tcfe, as of yearend 2010; and about 635,000 net acres of land straddling the British Columbia and Alberta boundary. This is, to date, the largest Chinese investment in a foreign natural gas asset. The price tag represents 3.8% of EnCanas 2010 estimated production for 24% of its market capitalizationindicative of PetroChinas eagerness to buy. In addition, in first-quarter 2011, CNOOC won approval from Australias Treasurer to invest in a coal seam gas and shale gas exploration prospect in Queensland. CNOOC Gas & Power Groups farm-in agreement commits it to spend at least AUD 50 million for a 50% stake in Exomas five exploration permits in the Galilee Basin and gives it options to buy 173.2 million shares in Exoma, amounting to a 35% stake based on Exomas current share base. Some joint ventures are forming between service companies within and outside China. For example, the Weir Group and Shengli Oilfield Highland Petroleum Equipment announced in November 2010 the formation of a joint venture to provide high-pressure well service pumps and related flow control equipment to Chinas developing shale gas industry. The joint venture will be owned 60% by Weir and 40% by Highland and will be based in Dongying, Shandong province.

Heading back from the drilling camp to Ensign Rig 16 on Beach Energys first shale gas exploration well, Encounter-1, near Innamincka in South Australia. Photo courtesy: Beach Energy Limited.

Argentinas Shale Gas Surprise

Within Argentinathe worlds eighth-largest country, whose total area is 2.78 million sq km15.33% of its vehicles run on natural gas. These 1.9 million vehiclesapproximately 15% of the worlds total number of natural gas-fueled cars, according to the International Association for Natural Gas Vehiclespower a continuing demand for natural gas, as do the electricity needs of its 46.8 million people. This looks promising for companies like YPF, which last December reported discovering an estimated 4.5 Tcf of shale natural gas reserves south of Loma La Lata in Ar-

gentinas Neuqun Basin. According to the EIA, this basin Argentinas largest shale prospectis estimated to contain up to 408 Tcf of technically recoverable shale gas resources. There are caveats, however. The deposits are not yet proven and will be more expensive to extract than conventional natural gas. In addition, there are stringent government controls on prices companies like YPF can charge for gas to Argentine customers. With YPFs announcement in May 2011 of the countrys largest oil find in two decades approximately 150 million bbl of crude oil equivalent in potential shale reserves in the same Loma La Lata field Miguel Martinez, chief operating officer at YPFs parent Repsol, has publicly expressed doubts the company would put a priority on developing its shale gas. However, a government incentive program, called Gas Plus, is in place that allows companies extracting unconventional gas to charge higher prices. For example, Apache said it has drilled more than 70 unconventional wells in four Neuqun fields since 2008. In April, its production under the Gas Plus program reached 75 MMcf/d with an average price of USD 4.93/Mcf. The company said it is evaluating the potential of unconventional resources in the low-permeability Precuyo formation and Los Molles and Vaca Muerta shales in Argentinas Neuqun Basin. Results from Apaches well ACS-15h, in the Anticlinal Campamento field, southern Neuqun province, were released in May. ACS-15h tested at a rate of 7 MMcf/d after multistage hydraulic fracturing. The well has a 2,800 ft horizontal section at 12,800 ft true vertical depth. Apache has an 85% interest, and Pampa Energia, Argentinas largest power generator, 15%. While Apache has identified further locations to drill near ACS-15h in AC field, it will study the longer-term performance of the first well before drilling others. According to King, Apaches Argentine shale gas development trials have required gathering of pumping resources from all over the country and pulling engineering talent from both North and South America.

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Present in Argentina since 1978, Total, through its subsidiary Total Austral, operates 28% of the countrys gas production. Mid-January, Total acquired interests in four exploration licenses in Argentina in partnership with YPF to appraise their shale gas potential. Located in the Neuqun Basin, the licenses were awarded by the provincial authorities for a six-year period. Total has additional significant shale gas positions in Argentina, including 85% stakes in the La Escalonada and Rincn La Ceniza blocks in the same shale gas play, acquired early 2010. As operator, the company is currently conducting geological, seismic, and petrophysical studies in these blocks. Total is executing plans to drill exploration wells in 2011 to evaluate the plays potential.

the departments of trade and industry as well as science and technology. No deadline for the moratoriums end was given. All drilling applications in the Karooincluding those already submittedwill not be approved until the research is carried out, concluded, and pronounced on, the spokesman said.

Riches Down Under

The EIA identified major shale gas in four main Australian assessed basins. It stated that further potential might exist in other basins, not assessed due to budget and data constraints. With geologic and industry conditions resembling those of the US and Canada, according to the EIA, the country appears poised to commercialize its gas shale resources on a large scale. The Cooper Basin, Australias main onshore gas-producing basin, could be the first to develop, although its Permian-age shales have a nonmarine (lacustrine) depositional origin and the gas has elevated CO2 concentrations. Beach Energy started drilling its first two shale gas exploration wells in Marchthe Encounter-1 and Holdfast-1both in the Cooper Basin. Encounter-1s shale target zone was about 395 m thick. Flow stimulation of both wells began in June. A pilot production program, primarily driven by equipment availability, is targeted to begin early 2012. Beach has a memorandum of understanding with Japanese company Itochu, whereby Itochu is considering the construction of an LNG facility that could be supplied by Beachs shale gas, should it be produced in commercial quantities. Other prospective shale basins in Australia include the small, scarcely explored Maryborough Basin in coastal Queensland, which contains prospective Cretaceous-age marine shales that are over-pressured and appear gas saturated. The Perth Basin in Western Australia, undergoing initial testing by AWE and Norwest Energy, has prospective marine shale targets of Triassic and Permian age. Finally, the large Canning Basin in Western Australia has deep, Ordovician-age marine shale that is roughly correlative with the Bakken, Michigan, and Baltic basins. The cost of drilling a well in Australia is estimated at USD 7 million to USD 10 million, considerably higher than the USD 3 million to USD 6 million typically encountered in the US. The size of the resource appears to be driving activity, with operators willing to pay higher prices while learning, with the prospect of future lower costs and plenty of resources remaining to extract. In addition, an Australian firm has made a bold move into a US shale gas play, with the intention to gain more than financially. In first-quarter 2011, BHP Billiton acquired all of Chesapeake Energys interests in the Fayetteville Shale, including the midstream pipeline system, for USD 4.75 billion. The shale assets include 487,000 acres of leasehold and producing natural gas properties located in Arkansas, USA. In a press release, BHP Billiton chief executive J. Michael Yeager said, Longer term, the expertise we gain here will be usable elsewhere. JPT

Mexicos Treasure
While the EIA estimates the presence of 681 Tcf of shale gas in Mexico, and despite the close proximity of successful shale gas plays in the US, such as the Eagle Ford Shale in South Texas, no shale gas exploration drilling has yet occurred in Mexico. Pemex plans to drill the countrys first shale gas test well sometime later this year, very likely targeting the Eagle Ford Shale in Coahuila state.

South Africa: At a Standstill

South Africas estimated 480 Tcf in technically recoverable shale gas resources are a possible boon to its population of 49 million, which relies heavily on coal. According to the EIA study, South Africa has one major sedimentary basin that contains thick, organic-rich shalesthe Karoo Basin in central and southern South Africa. The Karoo Basin is large (236,000 sq miles), extending across nearly two-thirds of the country, with the southern portion of the basin potentially favorable for shale gas. However, the basin contains significant areas of volcanic (sill) intrusions that may impact the quality of the shale gas resources, limit the use of seismic imaging, and increase the risks of shale gas exploration. The Karoo is also an ecologically sensitive region, home to rare species such as the mountain zebra and riverine rabbit. In addition, it contains valuable farmland. On 21 April 2011, South Africas cabinet placed a moratorium on oil and gas exploration licenses in the Karoo region. Cabinet has endorsed the decision by the department of minerals to invoke a moratorium on licenses in the Karoo, where fracking (sic) is proposed, the government said in a statement. Several companies are eyeing shale gas in the region. A Sasol/Chesapeake/Statoil joint venture has a Technical Cooperation Permit (TCP) for 34,000 sq miles; Anglo American, a TCP for 19,300 sq miles; Falcon Oil and Gas, a TCP for 11,600 sq miles; and the leader, Royal Dutch Shell, a TCP for 71,400 sq miles. A cabinet spokesman said the department of minerals and resources would lead a task team to explore the implications of hydraulic fracturing, which would include

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JPT SPECIAL SECTION: SHALE

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The Trend Toward Shale Oil

Robin Beckwith, Sta Writer JPT/JPT Online

he shale gale is not all about natural gas. While US shale gas drilling continues, it now is primarily to hold acreage and build gas reserves. As illustrated in Fig. 1, there is a definite trend in the US away from natural gas to crude oil. Many companies have pulled rigs from development drilling in gas shales to explore wet gas and oil-bearing shale plays. Lured by the prospect of high-value oil, whose margins promise a much higher return than those for natural gas, shale oil in US plays like the Bakken, Eagle Ford, Niobrara, Leonard (or Avalon), and Monterey is being extracted from low-permeability rock in increasingquantities. For example, while 33 permits were issued in 2008 for drilling in the Eagle Ford Shale, for the first 11 months of 2010, 1,018 permits were issued. Oil and condensate production has also sharply increased in the Eagle Ford, from a combined 0.8 million bbl in 2009 to roughly 3.9 million bbl in the first 10 months of 2010. A recent studyThe Economic Impact of the Eagle Ford Shale, prepared by the Center for Community and Business Research, University of Texas at San Antonioforecasts annual Eagle Ford oil production at 15 million bbl for this year, rising consistently until 2020, when it is projected to reach 111.5 million bbl. In 2008, the US Geological Survey estimated that the US portion of the Bakken formation contains between 3 billion and 4.3 billion bbl (a mean of 3.63 billion bbl) of undiscovered, recoverable oil, ranking it among the largest US oil plays ever. Production in 2009 reached nearly 8 million bbl per month from roughly 4,500 producing wells. Oil production in North Dakotain the heart of the Bakkenincreased from 35 million bbl in 2005 to nearly 80millionbbl in 2009.

Fig. 1In the US, capital investment in drilling for crude oil is climbing, while it is declining for natural gas. Courtesy: Aperio Energy Research.

Technology Is the Enabler

The technology drivers that lifted gas recovery from 1% to 50% in the Barnett, stated Apache global technology consultant George E. King, will ultimately be the springboard that drives oil recovery from the initial 1% to 1.5% in the Bakken and Eagle Ford oil-producing shales to much higher values. Continental Resources, the number one driller and lease holder in the Bakken as of November 2010, with 864,559 net acres, has been driving its production upward with advances in technology. For example, in 2009, it performed the first 24-hour continuous hydraulic fracture in the North Dakota portion of the play. In 2010, Continental developed a drilling concept it calls the Eco-Pad, whereby the company drills multiple horizontal wells from a single

pad with zero boundary-line setbacks. This concept is expected to reduce drilling and completion costs per well by approximately 10%, with about 70% less surface footprint area than four conventional drilling pads and only one access road. The US National Energy Technology Laboratory cited the following as key to the Bakkens oil-rich future: Further deployment of microseismic fracture monitoring is necessary to enable increased understanding of fracture propagation and extent in the Bakken system, resulting in better hydraulic fractures and enhanced production. With laterals now extending beyond 10,000 ft, precise well placement control is crucial, as is the ability to deliver a smooth wellbore that enables single-trip fracturing and completion equipment installation. Single-well fracture programs of 30 stages or more are vitaland have been proven possible. For example, in 2010, Brigham Exploration completed a 35-stage fracturing program on its Figaro 29-32 horizontal well (20,673 ft total depth) that used 3.1 million lbs of proppant. Increasing the ability to pump ever larger multistage hydraulic fracturing jobs will improve economics in the Bakken play. Resolving water issues is a requirement in the Bakken, where typical water use for hydraulic fracturing is 1.5 million to 4.0 million gallons per well. Surface water in the Williston Basin is in short supply. The cost of acquiring hydraulic

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fracturing water, and for disposal of flowback and produced water, can range from USD 2 to USD 11.75 per bbl.

Global Response to Shale Oil

The following are some examples of worldwide shale oil activity: China National Offshore Oil Company will pay USD 570 million for a 33.3% stake in Chesapeakes oil-rich shale leasehold acres in northeast Colorado and southeast Wyoming. It has also agreed to fund 66.7% of Chesapeakes share of drilling and completion costs until an additional USD 697 million is paid, anticipated by year-end 2014. In May, YPF announced it had made a large shale oil discovery at Loma La Lata in Neuqun province, Argentina. Estimated at 150 million bbl, it is equivalent to 6% of that countrys reserves, which in 2009, according to the US Energy Information Administration, totaled 2.62 billionbbl. This follows on the heels of another discoveryan estimated 4.5 Tcf of shale natural gas reservesmade last December in the same Loma La Lata area. When Repsol (YPFs parent company) chief operation officer Miguel Martinez was asked by Dow Jones Newswires about the potential of shale resources to boost Repsols reserves, he said generally speaking, my bet would always be against shale gas. Apache announced plans mid-May to explore for oil in shale formations in Egypts Western Desert. Thomas Voytovich, head of the companys Egyptian unit, said that shale formations in the East Bahariya Block, where the company holds 74,000 acres, could hold 700 million to 2.2 billion bbl of crude oil. Egyptian officials have approved the drilling of two shale wells, likely to be spudded in the second half of 2011. Two Japanese firms have bought into US oil shale acreage. Mid-October 2010, Itochu agreed to buy a 25% stake in an oil shale project in Wyoming from Fidelity Exploration & Production, a unit of MDU Resources Group. Itochu is buying a share of about 88,000 acres in the Niobrara in southeastern Wyoming. Terms of the sale were not disclosed. Marubeni will buy a stake in a US shale oil project from Marathon Oil for about USD 270 million. Under terms of the deal, announced in early April 2011, Marubeni will receive a 30% working interest in Marathons 180,000 acres in the Niobrara in Wyoming and Colorado for USD 5,000 per acre. Marathon will be operator of the jointly owned acreage. Australian junior Petsec plans to sell its minority stake in the WZ6-12 and WZ12-8 West oil fields in Chinas Beibu Gulf to fund its push into US shale oil operations, chairman Terry Fern said at the companys annual general meeting

Chesapeake Energy drilling rig located in the Barnett Shale (Tarrant County, Texas). Photo courtesy: Gary Wilson.

18 May 2011. We take the view that gas is unlikely to move much above the USD 4 to USD 5/Mcf price range within the next three years, so we are directing our attention more to oil, he said. We believe the quickest and least risky acquisition of sizable oil reserve additions is through shale oil, onshore Louisiana and Texas. Our strategy is to be an early mover in areas where the shale source rocks are liquid-rich and to acquire high-quality acreage before it becomes extremely competitive and costly to lease. Petsec has set itself a target of adding net reserves of more than 35million barrels of oil from its shale oil plays in Louisiana and Texas over the period from 2011 to 2013. JPT

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Oil Shale: The Rock That Burns

Robin Beckwith, Sta Writer JPT/JPT Online

he term oil shale refers generally to fine-grained sedimentary rock that contains solid bituminous materials, called kerogen, which can be converted into liquid and gaseous hydrocarbons (petroleum liquids, natural gas liquids, and methane) when the rock is heated in the chemical process of destructive distillation known as pyrolysis. Oil shale is found in a variety of depositional environments, including fresh water to highly saline lakes, epicontinental marine basins and subtidal shelves, and in limnic and coastal swamps, commonly in association with deposits of coal. Unlike crude oil or even tar sands, oil shale has not been subject to high enough heat over a long enough period of time to break the complex solid hydrocarbons down into lighter, liquid and gaseous compounds. One of its defining characteristics, however, is that it contains enough oil to burn without further processing, giving rise to its Ute Indian name, the rock that burns. According to Jeremy Boak, director of the Center for Oil Shale Technology and Research, oil shale is not a misnomer, as is commonly held. If oil shale is not shale, he said, then neither is the Barnett, the Haynesville, the Niobrara, or the Eagle Ford. The difference is that shale oil, as currently used for plays like the Bakken and Eagle Ford, refers to rock that contains liquid hydrocarbons, and oil shale refers to rock that yields hydrocarbons upon heating under appropriate conditions. Many names have been used for oil shale over the centuries, such as albertite, algal coal, alum shale, bituminite, boghead coal, cannel coal, gas coal, kerosene shale, kukersite, schistes bitumineux, stellarite, tasmanite, torbanite, and wollongongite. Some of these names are still in use. The organic matter in oil shalecomposed chiefly of carbon, hydrogen, oxygen, and small amounts of sufur and nitrogenis predominantly kerogen, which by definition is an organic material that is typically insoluble in ordinary organic solvents. The mineral and elemental content of oil shale differs distinctly from coal. The ash (or mineral) content of coal is generally less than 40 weight percent (wt%), whereas oil shale commonly has an ash content greater than 60 wt%. The organic matter of oil shale typically has a higher hydrogen and lower oxygen content than that of lignite and bituminous coal.

Typical oil shale rocks.

Oil Shale Production Techniques

Oil shale can be mined and processed to generate oil that is similar to oil pumped from conventional oil wells, although its API gravity is generally lower. Extracting oil from oil shale is more complex and expensive than conventional or even unconventional oil extraction. Because of

its insolubility, once it is mined, the organic matter must be retorted at temperatures of 900F to 950F to decompose it into shale oil and gas. Mined byproductssuch as uranium, vanadium, zinc, alumina, phosphate, sodium carbonate minerals, ammonium sulfate, and sulfurcan add considerable value to some oil shale deposits. However, the mineral byproduct could be uneconomic to produce. For example, on some US Federal oil shale lands, deposits of nahcolite (a naturally occurring form of sodium bicarbonate, or baking soda) are intermixed with the oil shale. Relative to oil and other petroleum products, nahcolite is a low-value commodity, and its price would likely fall even further if its production increased significantly. Only a limited portion of the resource occurs at depths accessible to open-pit or underground mining operations. Accessing and recovering a large percentage of existing oil shale will likely require the development of in-situ technologies for processing oil shale underground. In-situ solutions obviate problems associated with mining, handling, and

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JPT SPECIAL SECTION: SHALE

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Stage After Stage

Table 1. World Oil Shale Resources of Signicant Interest

Country Oil Shale Reserves (Million Tonnes) 301,556 3,5470 14,310 11,734 10,446 8,167 5,242 4,531 24,944 2,290 2,192 1,000 816 550 7,804 408,602 Oil Shale Reserves (Billion Bbls) 2,085.3 247.8 100 82 73 53.4 34.2 31.7 16.3 16 15.2 7 5.7 4 54.5 2,826.1 684 Global Rank Annual Oil Shale Production 2005 (Thousand Tonnes)

USA Russia Zaire Brazil Italy Morocco Jordan Australia Estonia China Canada France Egypt Israel Others (13) Total Known

1 2 3 4 5 6 6 8 9 10 11 12 13 14 345 180 159

adsorbent carbons, carbon black, bricks, construction and decorative blocks, soil additives, fertilizers, rock wool insulating material, and glass. Most of these are produced in small quantities or are in the experimental stage. Some uses backfired. For example, Swedens alum shale was burned with limestone to manufacture breeze blocks, a lightweight porous building block used widely in the countrys construction industry. Production stopped when it was recognized the blocks were radioactive and emitted unacceptably large amounts of radon.

World Oil Shale Resources

The largest known deposit is in the Green River formation in the western US, containing an estimated 213 billion tons of shale oil (1.5 trillion bbl). Overall US reserves are estimated at 2 trillion bbl (301 billion tons). For many reasonspredominant among them lack of infrastructure, reliable recovery technologies, and adequate water resourcesshale oil in todays world market is not competitive with petroleum, natural gas, or coal. However, it is produced in three countries that possess easily exploitable deposits of oil shale but lack enough comparable fossil fuel resources (Table 1). Estonia, with an estimated resource of 16.3billion bbl, produces 345,000 tonnes annually; Brazil, with 82 billion bbl, produces 159,000 tonnes annually; and China, with 16 billion bbl, produces 180,000 tonnes annually. According to the World Energy Council, oil shale resources of approximately 2.8 trillion bbl or 408.6 billion tonnes, exist worldwide. A new USGS assessment has revised these numbers upward, but the figures are incomplete, as those for Wyoming have yet to be published. The estimated world total is likely to exceed 4.1 trillion bbl. To put this in perspective, 2009 global crude oil proved reserves totaled an estimated 1.3 trillionbbl, and 2008 worldwide coal reserves totaled an estimated 948 billion short tons. Oil shales range widely in organic content and oil yield. Commercial grade quantities of oil shale, as determined by their yield of shale oil, range from about 100liters to 200 liters per tonne. The USGS uses a lower limit of about 40 liters per tonne for classification of US Federal oil shale lands. Elsewhere, a limit of 25 liters per tonne has beensuggested. Deposits range from Cambrian to Teriary age, occurring in minor, uneconomical accumulations to huge deposits occupying thousands of square kilometers and reaching thicknesses of 700 m or more.

Source: Dyni, World Energy Council, 2007.

disposing of large quantities of crushed rock. In addition to potentially recovering a greater amount of the total section of oil shale, using underground slow heating methods, with lower temperature requirements (650F to 700F) than surface retorting, has the added advantage of producing a superior quality shale oil, reducing some of the upgrading needed before delivery to refineries can occur. Boak notes a third alternative, called in-capsule processing, pioneered by Red Leaf Resources. This approach involves mining the oil shale, he said, then placing it in a structured cell or capsule resembling a landfill or heap leach mineral recovery cell, heating it with hot gases injected into the lower part of the cell, and recovering the products through pipes in the upper part of the cell. According to Boak, the completed retort is designed to be left in place.

Centuries of History
The promise of oil shale has tantalized humankind throughout the world since long before 1912 when the USwhose awareness of the strategic signficance of its huge oil shale resources was dawning along with the countrys nascent dependence on petroleumestablished the Office of Naval Petroleum and Oil Shale Reserves. For centuries, people have been fascinated by what happens when oil shale is heated. Apothecaries and physicians in Austria used oil from shale for medicinal purposes as early as 1350. In

Uses for Spent Shale

Notably in Germany and China, the heat energy obtained by the combustion of the organic matter in oil shale has been used in the cement-making process. According to the US Geological Survey (USGS), other products that can be made from spent oil shale include specialty carbon fibers,

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Fig. 1 Oil shale mined from deposits in Brazil, China, Estonia, Germany, Russia, and Scotland, 18802010. Graph copyright: Schlumberger. Used with permission.

England, the first known patent for a way to extract and make great quantities of pitch tarr and oyle out of a sort of stone was issued in 1694. According to paper SPE 116570 (Crawford et al.), oil shale was used in Sweden, Scotland, and France as early as 1637 as a source of fuel. Before, during, and following World War II, Sweden produced oil from alum shales, until 1966 when other fuels became more readily available. During this period, Sweden mined about 50 million tons of oil shale. In North America, the first small processing facility for oil shale was opened in Alberta, Canada, in 1815. By the eve of the US Civil War, more than 50 companies in Canada and the US were retorting shale to distill oil from rockalthough in small quantitieswhose uses included kerosene and lamp oil, paraffin, fuel oil, lubricating oil and grease, naphtha, illuminating gas, and ammonium sulfate fertilizer. With the rise in the more easily extracted crude oil beginning in 1859, interest in oil shale generally waned. However, awareness of oil shales vast potential produced an investment boom in the US between 1917 and the late 1920s, and sporadic development from the early 1970s onward. Oil shale has been mined commercially in Germany, China, Scotland, Russia, Brazil, and Estonia (Fig. 1). World oil shale production peaked in 1980 when 47 million tons were mined, two-thirds of it in Estonia where it was used mainly for fuel in several large electric power plants. Several other countries have attempted or currently have an oil shale mining industry, including Australia, Sweden, Canada, Israel, Jordan, and Morocco.

Estonias Problematic Example

Oil shale serves as the main fuel for power generation only in Estonia, where the oil shale-fired Narva power plants ac-

counted for 95% of the countrys electrical generation in 2005. According to I. Opik, in The Future of the Estonian Oil Shale Energy Sector, 22 million tons of oil shale were produced in 1997 from six room-and-pillar underground mines and three open-pit mines. Of this amount 81% was used to fuel electric power plants, 16% was processed into petrochemicals, and the remainder was used to manufacture cement as well as other minor products. E. Reinsalu, in Criteria and Size of Estonian Shale Reserves, said state subsidies for oil shale companies in 1997 amounted to USD 9.7 million. More recent figures are forthcoming that could paint a somewhat different picture. Interest in oil shale has grown since 2000, with a rise in studies, conferences, symposiums, and associations devoted to exploring its potential. Yet challenges abound. John R. Dynis summation of Estonias oil shale situation, which appears in the USGS report, Geology and Resources of Some World Oil-Shale Deposits, dated June 2006, points to problems emblematic of those facing the industry as awhole: The future of oil shale mining in Estonia faces a number of problems, including competition from natural gas, petroleum, and coal. The present open-pit mines in the kukersite deposits will eventually need to be converted to more expensive underground operations as the deeper oil shale is mined. Serious air and groundwater pollution have resulted from burning oil shale and leaching of trace metals and organic compounds from spoil piles left from many years of mining and processing the oil shales. Reclamation of mined-out areas and their associated piles of spent shale, and studies to ameliorate the environmental degradation of the mined lands by the oil shale industry are under way. JPT

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