Oil Shale Appears from the Horizon Once Again


Shell (China) Co., Ltd. announced on Sept. 1 that it has
established a cooperative enterprise with Jilin Guangzheng
Mining Co., Ltd. to conduct the exploration and development of
oil shale resources in Jilin province (CCR2005, No. 27).


Facts come to light


In Jilin Shell Oil Shale Development Co., Ltd. Shell owns 61%
equity and Jilin Guangzheng owns 39% equity.   The company will
first of all make a research on the commercial usability of oil
shale resources in Jilin province and then a commercial
demonstration will be conducted using Shell's patent technology
for in-situ conversion. The long-term target of the company is
to develop oil shale resources and achieve the commercial
production of clean and high-quality transportation fuels and
other energy products.
   As a matter of fact, Shell has shown interest in oil shale
resources in Jilin province for quite some time. As early as 2000
Shell started communications with Jilin province. The Jilin
Provincial Government made great efforts in promoting the
commercial functioning of the project, and also organized the
Department of Land Resources and the Bureau of Geological
Exploration to aid in most of the early-stage preparations.
   The real breakthrough was on Dec. 8, 2004. With the support
from the National Development and Reform Commission, the
Ministry of Commerce, the Ministry of Land Resources and the
Ministry of Foreign Affairs, Shell China Group and Jilin Bureau
of Geological and Mineral Exploration and Development signed a
framework cooperation agreement in Hague, Holland.
   Both sides intended to establish a cooperative enterprise in
Jilin to conduct research on oil shale resources in the province.
The target was to promote the development and utilization of oil
shale resources and the production of synthetic transportation
fuels and power.
   Officials from Jilin Department of Land Resources say that
"it is China's first foreign-controlled project in the
exploration and development of mineral resources."
   The president of Shell China Group comments that "we are very
pleased to establish Oil Shale Development Co., Ltd. in Jilin
provine. Jilin has rich oil shale resources that can be developed
in economically feasible ways with environmental protection.
The project may become an important step in the strategy of
energy diversification in China."
   What Shell cares for in its cooperation with Jilin in oil
shale development includes rich oil shale resources in the
province and business opportunities for oil/gas substitutes.




A comeback is staged


With the supply shortage of oil products and price rise of oil,
the price of oil shale keeps going up. The price of oil shale
has increased from around RMB1 200 per ton in 2004 to RMB2 100
per ton today and yet the supply still can not meet the demand.
   There is a high cry in China for a renewal of the attention
and utilization of oil shale resources. The fuel with low heat
value that has kept silent for many years seems to be ready for
a comeback.
To solve the oil/gas supply shortage, thousands of workers
gathered in Guangdong Maoming in the mid-1950s to develop oil
shale resources. The construction of a 3.0 million t/a oil shale
open-pit mine and two dry distillation ovens in the early 1960s
put an end to the history of 'no oil in Guangdong' After the
discovery of Daqing Oilfield, oil shale started to receive less
and less attention.
    A small-scale recovery of oil shale resources in Jilin
province started in the 1950s. Oil shale was mainly processed
into crude oil through the traditional dry distillation process.
The reason for production suspension in Jilin was the same as
that for Maoming.
   The total proven oil shale reserves in China amount to 483.17
billion tons. Guangdong Maoming is the second largest reserve
with 5.1 billion tons. In the new-round nationwide evaluation
of oil/gas resources, the proven oil shale reserves in Jilin
province hold the first place in China, accounting for more than
a half of the national total.
   Experts have suggested that in a scenario of high oil price,
advanced foreign patent technologies should be introduced to
reduce the cost and environment protection problems that have
affected large-scale development of oil shale resources for many
years. The development of oil shale resources in Jilin province
has a bright prospect.
   According to the development program made in Jilin, the
large-scale development and utilization of oil shale resources
will directly promote the petrochemical industry in the province.
The petrochemical industry will then become a pillar sector in
Jilin province.
   Besides, the development and utilization of oil shale
resources will also promote the geological exploration sector
in the province. Other related sectors such as ceramsite baking,
construction material, power generation and transportation will
also have a new opportunity for development.
   After the discovery of Daqing Oilfield, the output of natural
crude oil in China rapidly increased. Outdated technology
prevented efficient oil recovery from oil shale. Several
kilograms of oil required the processing of one ton of oil shale.
Though long neglected, a promising future may lie ahead for oil
shale. The key to the destiny of oil shale lies in cost and
technology.




Shell has real capability


Officials from Jilin Department of Land Resources say that "the
rapid progress of the project is attributed to the following
factors.
      (1) The present status of oil resources in the world has
forced us to seek other substitute energies so as to avoid oil
risks.
      (2) Jilin hopes to maximize development and utilization
of oil shale resources, transform the resource advantage into
an economic advantage and boost the economy of the province."
The reason for Jilin to choose Shell is that Shell owns the most
advanced in-situ conversion process (ICP) in the world. This
technology does not require ground opening hence is suitable for
the oil shale resources in Jilin province which are hidden
underneath cultivated land, as well as follow the requirements
for the construction of an 'ecological province'.
   At present, China only has traditional technology for oil
shale recovery. Open pit recovery like coal mining has to be
conducted and large plots of surface soil are damaged. Oil
produced with this method has low quality and high cost and
generates serious atmospheric pollution and energy waste.
   The in-situ conversion process, developed with huge
investments by Shell, is the most advanced technology for the
recovery of oil shale and other non-conventional resources. Oil
shale has in-situ cracking by means of underground heating, of
which oil and gas are then extracted separately through special
channels.
   The method needs little land area (almost no cultivated land
needed), causes very small damage to environment, no pollution
to atmosphere, and has low cost but high product value. Although
the technology is not yet fully commercialized, technical
problems in key process and equipment hav