Solid Oxide Fuel

by Dan Denning

I find myself unexpectedly back in Colorado for several weeks. While I’m here, I’m going to do some more follow-up on the oil shale story. I know there’s been a lot of excitement about the prospect of turning shale into oil lately. As far as I know, however, we’re no closer to any actual commercial production of shale to oil than we were a few months ago. Here’s how things stand.

Just over a week ago, the Bureau of Land Management rejected eight proposals for developing oil shale technology on public lands. One of the companies included Exxon. The BLM said the rejected candidates did not have concrete-enough plans to meet the agency’s project timetable.

The project, by the way, is a demonstration project. The agency asked the private sector to submit proposals for pilot projects to develop the shale. What the agency – and some of the serious players in the bidding – is seeking is proof-of-concept technology. They would like a company to demonstrate, on a small scale, what it would try to do on a commercial scale.

No one is going to be “drilling” for oil shale anytime soon. That’s just not where the project is yet. Shell, Chevron, and EGL Resources all survived the first cull and will wait further announcements from the BLM in early summer. The agency is presenting the submitted plans to the public on Colorado’s Western Slope to solicit feedback from the local communities.

Shell is still the single-best beet to turn its in-situ conversion process into viable commercial production. But there’s a long way to go between here and there. For me, the big mystery is what Shell will be using for the heating units inserted 1,000-2,000 feet under the ground to “cook” the surrounding shale and release the kerogen.

There is some very interesting fuel cell technology (that doesn’t involve hydrogen) that might suit Shell’s needs very well. A solid oxide fuel cell, for example, puts out an enormous amount of heat and can potentially power itself from the natural gas surrounding the shale bed. You’d have a self-powering heater working with great efficiency, almost too good to be true.

The good news is that one of the companies developing solid oxide fuel cell is based right here in Colorado. I’m planning to go visit next week. I’ll let you know what I find out. And in the June letter of SI (thinking ahead), you’ll read more about fuel cells and how they’re enhancing the coal gasification and liquefaction process.

What’s the point of all this research into unconventional hydrocarbon resources? Well, there’s a madman in Iran. There are madmen, in fact, all over the globe. And some of them seem to be itching for a fight. Oil prices may be in the early stages of some shocking rises.

Meanwhile, America does have abundant energy reserves…but they are locked in sources that, up until now, have been more expensive to develop and, in some cases, are rather unclean. But markets work. High oil prices have incentivized the development of other energy sources. That’s where the energy sweet spot is right now. And that’s what I’ll be writing about next month.

Dan Denning
The Daily Reckoning

Editor’s Note: Dan Denning is the editor of Strategic Investment, one of the most respected “big-picture” investment newsletters on the market. A former specialist in small-cap stocks, Dan has been at the helm of Strategic Investment since 1999 – where, drawing from his network of global contacts, he has designed an investment strategy that takes into account global political and economic trends.