January 1, 2008

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Tapping the Uintah Basin


Tapping the Uintah Basin

Oil Exploration Gets a Boost in Eastern Utah

Spencer Sutherland

January 1, 2008

With oil prices rising to the highest point since the Iran/Iraq war of the early 1980s, the oil industry is looking to the past to reduce the United States’ future dependency on foreign oil. The century-old technique of shale oil extraction has been updated for modern times and is gaining steam in Utah’s Uintah Basin. It is estimated that the world’s conventional crude reserves amount to 1.3 trillion barrels. Of that total, 262 billion barrels are found in Saudi Arabia. Though only 22 billion barrels of conventional oil are located in the United States, the U.S. is home to the largest concentration of oil shale in the world; more than 2.6 trillion barrels of recoverable oil are found in Utah, Colorado and Wyoming alone. Oil vs. Oil Shale The idea behind extracting conventional crude oil is quite simple - find the oil, drill a hole and stand back while the oil shoots out. Keep pumping the oil until the well runs dry. Oil shale extraction is a bit more difficult. Oil shale is a sedimentary rock that contains significant amounts of kerogen, a solid mixture of chemical compounds. The rock is mined out of the earth and then transported to a processing facility, called a retort. The kerogen is heated to a high enough temperature to make the shale turn into gas and oil vapor. The gas and oil vapors are separated from the spent shale and cooled, causing the oil to condense. The oil can be used as heating fuel or upgraded to be used as transportation fuel. One ton of shale rock will typically produce between 30 and 60 gallons of shale oil compound. Economically Viability All of the extra effort leads to higher production costs. However, with rocketing crude oil prices and more efficient extracting methods, oil shale is becoming a cost-effective alternative. Millennium Synfuels (the result of a merger between Vernal-based Oil Tech Inc. and Australian mining company Ambre Energy) is piloting a new retort in the Uintah Basin. The company’s vice president of project development, William Sarunic, says oil shale is becoming a legitimate fuel contender. “U.S. oil production has gone beyond its peak,” Sarunic says. “If you want to have oil security for the long term, you will have to look elsewhere.” Oil security has a lot to do with oil stability, Sarunic explains. The typical oil field in Texas or the Middle East has a life span of 10 to 30 years. The first two to three years have the highest yield before it significantly drops off and continues for the next 10 to 15 years at a drastically reduced rate. As the field gets older, costs keep increasing because the yield drops off. Conversely, a mining operation enjoys a relatively fixed cost for the life of the operation. Oil shale technology has historically been hampered by the fluctuating crude oil markets. “Ten or so years ago, when oil was $10 to 15/barrel, there were more attractive options to pursue [than shale exploration]. In the 1980s and ’90s, when oil prices peaked, everyone got excited about oil shale. Then OPEC dropped the price and oil shale development work was put on hold,” Sarunic says. Millenium Synfuels has aggressively resumed that development work. It maintains 34,000 acres of land lease in Utah and is in the process of commercializing its retort technology. Its retort produces a gas stream of a composition suitable for fueling a gas turbine power plant, high value liquids suitable as chemical and refinery feedstocks, and a clean burning high-energy char. While Millenium is working with coal and oil shale, more than a dozen oil companies are exploring conventional oil in the Basin. “Utah has a lot of oil and gas deposits. They’re small – not big oil fields like Texas or the Middle East – and they’re [composed of] heavy crude.” This makes it more expensive to process crude oil from Utah fields, but is still economical with the current high price per barrel, Sarunic says. Education and Industry Oil extraction and exploration industries in the Uintah Basin will be able to benefit from the area’s academic minds. Thanks to a $15 million donation by Vernal residents Marc and Debbie Bingham, Utah State University plans to build an entrepreneurship and energy resource center on its Uintah Basin Regional Campus in Vernal. Rob Behunin, assistant to the president for special projects at USU, says the center will house full analytical labs to help meet the needs of both government and industry. “Students will be involved in a living laboratory here in the Basin,” Behunin says. Students and professors at the university will be available to do research and experimentation ranging from testing water displaced by mining to determining what to do with spent oil shale. “We may not be able to answer every question here, but our students and professors can help find the answers through a much larger academic and scientific network.” Behunin also says the new center will give students the chance to work with government entities, intern with extraction companies and will likely lead to jobs after graduation. “The industry and government agencies want to hire students who are trained in the Uintah Basin and Natural Buttes area. They want students who live here, who know the area, and who have family and political ties.” Life Beyond the Boom What will happen to Vernal and the Uintah Basin when the oil dries up or the shale runs out? Thanks to the “most progressive and visionary city council and county commission in a long time,” Behunin feels that the community has done well to protect itself from a boom-bust mentality. “We’re seeing the landscape and complexion of Vernal changing in very dramatic ways with new development and new industry,” Behunin says. “Extraction is driving this surge, but Vernal and Uintah County are well positioned to diversify the economy, and we’re seeing new things crop up all the time. “Whenever the surge decides to come down,” Behunin continues, “and sometime in the future it will – that’s the nature of nonrenewable resources – Vernal and Uintah County will be well positioned in what its doing. The confidence level is riding high.”
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