Shale Oil and Gas

Midas Letter (09/07/2010)
"According the International Oil Shale Journal, oil shale is an organic-rich fine-grained sedimentary rock that contains significant amounts of kerogen (a solid mixture of organic chemical compounds) from which liquid hydrocarbons can be extracted. Kerogen requires more processing than crude oil, which increases its cost as a crude-oil substitute, both financially and in terms of its environmental impact. Deposits of oil shale occur around the world, including major deposits in the United States. Estimates of global deposits range from 2.8 trillion to 3.3 trillion barrels of recoverable oil.

Oil shale has gained attention as an energy resource as the price of conventional sources of petroleum has risen and as a way for some areas to secure independence from external suppliers of energy. At the same time, oil shale mining and processing raise a number of environmental concerns, such as land use, waste disposal, water use, wastewater management, greenhouse-gas emissions and air pollution. Estonia and China have well-established oil shale industries, and Brazil, Germany, Israel and Russia also utilize oil shale.

Gas can generally be extracted using multistage hydraulic fracing which has become a very economic production technique—especially for near surface deposits. In fact, Encana, Canada's largest natural gas company, predicts the market share of shale gas will grow from its current levels of 16% to more than 50% of all gas sold by 2020. This is because these shale gas 'mega plays' produce gas very cheaply compared to conventional production sources. So, even with gas prices stuck in a low rut, it makes sense to invest in the companies who will be able to deliver gas profitably to a market whose appetite is still increasing. Shale gas plays will displace conventional gas plays from the market over time simply because they are so cheap in the long run."

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