Oil shale: questions and opportunity

As I write this President Bush is expected to discuss offshore oil drilling in America, and the opportunity of Oil Shale mining. In recent years I have heard a lot about oil shale and its mining, but I really didn’t know anything about it. Like most I expect the thought of oil shale made me think of a rock that is filled or comprised of oil. That is not the case.

Oil shale is a fine grain rack filled with kerogen. In heating the oil shale a gas from the kerogen is released which can be used in heating homes and creating power, or the gas can be cooled to create a synthetic petroleum-like oil. The use of that oil is similar to the uses for crude oil, but they are not the same thing.

How much oil shale is there, and is anyone using it? Those are the next questions I had. The answer may well surprise you as it surprised me. There is estimated to be 3 trillion barrels of oil equivalent of oil shale in the world. The United States is one of the major sources of deposits in the world with 1.8 trillion barrels equivalent under Colorado, Wyoming, and Utah. This is in comparison to the 267 billion barrels of oil estimated in Saudi Arabia (as of 2006). And currently first world and emerging nations including Germany, Russia, China, Israel, Brazil, and Estonia all have varying degrees of oil shale industries producing energy and fuel. Who knew.

Now consider this, mining companies - such as BHP Billiton, Anglo American, Kazakhmys, Vedanta Resources, Xstrata – and oil companies have been having a strong year as energy is on the forefront of political and investment minds. With the rise in speculation of crude oil prices, rising gasoline and home heating oil prices, and calls for alternative energy sources oil shale stands to be more actively in the public domain than ever before.

Now since there is no oil shale market (yet) and given that mining shale is a very different process from drilling for oil, I would imagine that several oil companies will be looking for acquisitions and joint-venture deals with mining companies that have the ability and experience in this field. Schlumberger, Shell, EnCana, Chattanooga Corp, Fushun Mining Group, Tosco Corporation, Petrobras, Viru Keemia Gripp are just a few involved in some aspect or projects with oil shale. I doubt that the number of companies will decrease in the coming years.

Opportunity abounds for the investor and individual that seeks it. How you take advantage of this potential is up to you. But I would expect that oil shale will become a greater factor in at least American energy future plans than ever before.