Posted by: Rocketred
In reply to: None
Date:3/22/2006 8:19:10 AM
Post # of 4656
Shell venture aims at 'oil rocks'
PATRICK BRETHOUR
00:00 EST Wednesday, March 22, 2006
CALGARY -- A new frontier in Alberta's bitumen deposits is opening up, as Royal Dutch Shell PLC launches an effort to unlock billions of barrels of gooey oil trapped in limestone.
Royal Dutch yesterday announced that it is entering the oil sands industry directly. The company -- through U.S. subsidiary Shell Exploration & Production in the Americas -- has paid $465-million for 10 parcels of land west of Fort McMurray, and will set up a Canadian subsidiary separate from Shell Canada Ltd.
The company uses the phrase "oil sands" to describe those leases, but the bitumen in that area is actually encased in limestone, said Robert Bedin, senior analyst at Ross Smith Energy Group in Calgary. Called carbonate, this oil resource has so far proven impossible for the energy industry to exploit.
Today's bitumen industry extracts the tar-like substance from sandstone and dirt, using either mining or steam-assisted extraction.
Neither of those methods work for limestone, which cannot be mined easily and dissolves if water is used.
To further complicate matters, the bitumen in the limestone is broken up into small globules, often not much bigger than two human fingers. It is thought that electrical wires can be used to heat up the bitumen enough to pump it to the surface.
Royal Dutch would not comment in detail about the geology of its newly acquired leases, but a spokeswoman wrote in an e-mail that "some type of enhanced thermal recovery technology will be required to economically develop the resource."
Mr. Bedin said others have tried, and failed, to find a workable technology. "This is a real gamble."
Like any risky bet, a major payoff does beckon -- in this case, an estimated 300 billion barrels of oil locked in the limestone in the Grosmont formation, Mr. Bedin said. (Royal Dutch's leases would cover only a part of that formation, and the company has not released any information on possible reserves.) Only a fraction of those 300 billion barrels could be recovered, even if Royal Dutch does possess a technology that can unlock the oil. However, Mr. Bedin said even a low rate of recovery could mean billions more barrels of oil for the industry.
Royal Dutch is providing few details on its project, other than to make it clear that any project will not begin producing until the next decade, and that the effort is entirely separate from its Canadian subsidiary, Shell Canada.
Wilf Gobert, vice-chairman of Peters & Co. Ltd. in Calgary, said one likely explanation for keeping the firms separate is that the parent company wants undiluted ownership of an oil sands project.
Royal Dutch owns only 78 per cent of Shell Canada, but even more significant, its subsidiary has an existing partnership with Western Oil Sands Inc. and Chevron Corp. in the Athabasca Oil Sands Project.
Under the joint venture agreement for that project, Shell Canada must offer Western Oil Sands Inc. and Chevron Corp. the opportunity to participate in any expansion within a defined region -- an area that covers the leases acquired by Royal Dutch.
The parent company, however, has no such obligation, leaving it free to develop any project on its own.
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