Petrobras, Mitsui Sign Accord to Study Utah Oil-Shale (Update2)
By Jeb Blount
June 9 (Bloomberg) -- Petroleo Brasileiro SA, the Brazilian oil company that plans to spend $112 billion over five years to expand operations, and Mitsui & Co. signed an agreement to study the extraction of oil from shale deposits in Utah.
Petrobras,as the company is known, Mitsui and Oil Shale Exploration Co., based inVernal, Utah, will study the development of more than 30,000 acres(12,140 hectares) of leases containing an estimated 2.7 billion barrels of recoverable shale oil, according to statements from the companies today.
Petrobrasand Mitsui each have the right to as much as 20 percent of Oil ShaleExploration, the largest non-government holder of oil-shale rights inUtah. The U.S. has an estimated 2.5 trillion barrels of oil shale, morethan double the world's 1 trillion barrels of conventional oilreserves, said Daniel Elcan chief executive officer of Oil Shale Exploration.
``TheU.S. has enough oil shale to provide all our country's needs for 100years,'' Eclan said in a telephone interview. ``Petrobras's technologyhas been working for three decades and we believe it will work heretoo.''
The estimated amount of recoverable oil is about half toa quarter of Petrobras' Tupi field, a 5 billion- to 8 billion- barrelBrazilian offshore discovery announced in November that is the biggestWestern Hemisphere oil find since 1976.
Commercially Viable
Withoil prices at all-time highs, alternative oil sources such as shale andoil-sands have become commercially viable and new U.S. leasing ruleshave opened up shale reserves to oil companies, Eclan said.
He expects to be producing oil from shale in three to four years.
Shaleis a fissile rock composed of layers of claylike, fine-grainedsediments. Oil is extracted from it by heating and distilling. Theshale on Oil Shale Exploration's private and government-leasedproperties will be mined underground.
Petrobras's oil-shaleextraction process uses low temperatures, has no moving parts andproduces far lower carbon emissions than making oil from otheralternative sources such as coal, he said. Water isn't needed tooperate or cool the process; it is a byproduct of their system, said Demarco Epifanio, the Petrobras International Unit executive responsible for the project.
``I have no doubt this will be a success,'' he said. ``Everyone else is selling an idea while we have a project that works.''
Expanding Output
Petrobras,which has been producing oil from shale commercially for 30 years inBrazil's Parana state, is seeking to expand oil output in the U.S. andother markets and to use its patented Petrosix processing technology to diversify the sources of oil, according to the statement.
Thecompany only produces about 3,800 barrels of oil a day using itsprocess in Brazil. If it's proven viable, the Utah project, which willreceive $12 million for studies over the next 12 months, can producemuch more, Epifanio said.
``Petrobras never does anythingsmall,'' he said. ``In Brazil we developed this 30 years ago out ofnecessity. We didn't have many other sources of oil, but we have beendeveloping and perfecting the technology since then and are looking forprojects that would allow us to use it on a larger scale.''
Cheaper Sources
Expansionof shale-oil output in Brazil has been limited by cheaper sources ofoil from the country's offshore fields. Petrobras refines kerosene,fuel oil, cooking gas, and naphtha, a raw material for plasticsproduction from shale in Brazil.
``We want to save our reserves of shale right now, it makes more sense to develop offshore oil,'' he said.
The U.S. has the world's largest reserves of oil shale, Brazil's reserves are the second-largest, he said.
Petrobraspreferred shares, the company's most-traded class of stock fell 11centavos, or 0.2 percent, to 47.48 reais in Sao Paulo.
To contact the reporter on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net
Last Updated: June 9, 2008 20:13 EDT