Transcript Slide 1

INTEK
Oil Shale Development Economics
May 16, 2007
Khosrow Biglarbigi
INTEK, INC.
EFI Gas-to-Market Conference
The Westin Edmonton
14-16 May 2007
Economic Discussion
• Part I - Project Economics
– Project costs
– Economic price
– Cash flow
• Part II – A new oil shale industry
– Potential size
– Economic hurdles/solutions
– Benefits on U.S. economy
2
National Oil Shale Model
3
Resource Base Analyzed
• Industry nominated tracts
• 79 Billion Barrels of resource
in place
• Detailed geologic &
petrophysical data
Western Oil Shale
4
Technologies Considered
Surface Mining / Surface Retort
Underground Mining / Surface Retort
Slope Mine
Crusher Conveyer Crusher Conveyer Retort Plant
ine
Trucks Conveyer Crusher Conveyer Retort Plant
eM
Shovel
Waste
Disposal
Slo
p
Waste
Disposal
Overburden
Oil Shale
Oil Shale
Mining
Mining
2
1
Partial Upgrading
Partial Upgrading
To Market
To Market
Modified In-Situ
Step 2
Step 1
Create Void by Mining Rublize shale by explosions
True In-Situ
Step 3
Initiate combustion
3
Virgin
Shale
Retorted Shale
4
Combustion Front
Free oil movement
Mined Shale
Mined Shale to
surface retorts
Shale oil to refinery
5
Project Costs
Canadian Oil Sands
1
O &Projects
M Costs
First Generation
0.9
35.00
0.8
Production Cost, 2004 US $
Item
Unit
30.00
25.00
Range
0.7
0.6
*
Capital Cost
20.00
K$/SDB
40-55
15.00
10.00
0.5
0.4
0.3
*
O&M Cost
$/Bbl
5.00
12-20
0.2
Alberta Oil Sands Production, MMBbl/Day
40.00
0.1
0.00
*Inclusive of mining,
retort, & upgrading
Production Costs: Oil & Gas Journal, July 14, 2003, V. 101.27
1981
1984
1994
1998
1999
2001
0
2003
2005
Production Volumes: Canadian Association of Petroleum Producers, Historical Statistics
6
However, the Capital Costs are Increasing
(Source: CAPP, March 2007)*
Capital Cost of 100,000 bbl/day project
$3.3 billion
$10 billion
Capital $ per bbl/day
120 000
100 000
80 000
60 000
40 000
20 000
0
Production
Start Date
Suncor Millenium
Albian
Syncrude
- Aurora 2
& UE 1 *
NexenOPTI
CNRL Horizon
2001
2003
2006
2007
2008
*Presented at the 2007 EIA conference, Washington. D.C.
Shell Muskeg &
Scotford
2010
7
Economic Price for Oil Shale Technology
Generic Projects (Price: $/Bbl)
Rate of Return – 15%
70
$57.00
2004 Dollars
60
$52.00
$43.00
50
40
$35.00
30
20
10
0
True
In-Situ
Surface
Mining
Underground
Mining
Modified
In-Situ
8
Breakdown of Economic Price for Generic
Surface Project
45
40
$/Bbl
35
30
$43/Bbl
Taxes
$8
Transfer Payments
$6
Risk Premium
$4
25
20
Operating Costs
$17
15
10
5
Cost of Capital
$8
0
9
Cashflow of a Generic Oil Shale Project
1200
Cumulative Discounted After Tax Cashflow (MM$)
1000
800
600
Before Tax
Room for Government Action
400
200
0
5
-200
-400
10
15
20
25
30
35
40
Year
After Tax
-600
-800
-1000
10
Impact of Incentives on Generic Cashflow
1200
Cumulative Discounted After Tax Cashflow (MM$)
1000
800
600
Before Tax
400
200
After Tax
0
5
-200
-400
-600
-800
10
15
20
Year
25
30
35
40
$10/Bbl Production Credit
$5/Bbl Production Credit
15% investment Credit
10% Investment Credit
Accelerated Depreciation
-1000
11
Projected Production Potential (BOE)
(Shale Oil in the U.S.)
RD&D
Accelerated
Tax Incentives
Measured
Base
12
Potential Influence of Oil Shale
Development
World Demand
Effects on
Consumer Spending
Change In
Oil Price
Drilling Rigs
OPEC
Oil Shale
Investments
World Supply
Skilled Labor
Steel Pipes
Power
Heaters
Reduces Call
on OPEC
Oil Shale
Development
Shale Oil
Production
Reduces
Imports
Oil Shale Direct
and Indirect Jobs
Impact on
National
Economy
Local, State,
Federal
Treasuries
Contribution to
GDP
13
Favorable Fuel Prices Will Increase Consumer
Discretionary Spending, Non-Petroleum Jobs, And GDP
Oil Price
Effects on
Consumer Spending
World Demand
Change In
Oil Price
Drilling Rigs
OPEC
Oil Shale
Investments
World Supply
Fuel Price
Skilled Labor
Steel Pipes
Power
Heaters
Reduces Call
on OPEC
Oil Shale
Development
Shale Oil
Production
Reduces
Imports
Oil Shale Direct
and Indirect Jobs
Impact on
National
Economy
Local, State,
Federal
Treasuries
Consumer
Discretionary
Spending
Industrial
Energy
Spending
Contribution to
GDP
Non Petroleum
Contribution
to GDP
Non Petroleum
Driven
Jobs
14
Impact of Increased Production on Future Prices
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$-$0
EIA High Price
EIA Reference Price
Reductions from Reference Prices
0
(2)
$/Bbl
$/Bbl
Impact on Oil Prices
(4)
Base Case
Measured Case
Accelerated Case
(6)
(8)
2005
2010
2015
2020
2025
2030
2035
15
Savings to U.S. Consumers
1,000
(Cumulative)
900
$200 to $900 Billion
800
Billion 2004 Dollars
700
600
500
400
Base Case
300
Measured Case
200
Accelerated Case
100
0
2005
2010
2015
2020
Year
2025
2030
2035
16
Contribution to GDP
1,400
Up to $1.2 Trillion
1,200
(Cumulative)
Billion 2004 Dollars
1,000
800
600
Base Case
400
Measured Case
Accelerated Case
200
0
2005
2010
2015
2020
Year
2025
2030
2035
17
New Jobs
350
Up to 250,000
Thousand Labor Years
300
250
200
150
Base Case
Measured Case
100
Accelerated Case
50
0
2005
2010
2015
2020
Year
2025
2030
2035
18
Savings on Foreign Imports
350
2500
Up to $325 Billion
2000
Billion 2004 Dollars
250
1500
200
Base Case
150
1000
Measured Case
100
Accelerated Case
500
Oil Shale Production (MBOE/Day)
300
50
0
0
2005
2010
2015
2020
Year
2025
2030
2035
19
Direct Local, State, And Federal Revenues Will Increase
by $25 to $85 Billion by 2035
90
2500
(Cumulative)
2000
Billion 2004 Dollars
70
60
1500
50
40
1000
Base Case
30
Measured Case
20
Accelerated Case
500
Oil Shale Daily Production (MBOE/Day)
80
10
0
0
2005
2010
2015
2020
Year
2025
2030
2035
20
Summary
• Provide Long Term Sustained Production
• With Substantial Benefits to the U.S. Economy:
– Contribution to GDP: up to $1.2 Trillion
– New Jobs: 250,000
– Reduction in Foreign Imports: $325 Billion
– Consumer Savings: $900 Billion
– Additional Investments: $145 Billion (Stimulated)
– Public Revenues: up To $85 Billion
• Concerted Efforts by Government and Industry Needed to
Capitalize on this Opportunity
21
Acknowledgements
Office of Naval Petroleum
& Oil Shale Reserves
Office of Petroleum Reserves
U.S. Department of Energy
22