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San Leon taps new technology for Morocco shale-oil project

San Leon Energy is looking to push its Moroccan oil-shale plans forward after expanding its position at the Tarfaya prospect

London-listed explorer San Leon Energy is looking to push its Moroccan oil-shale plans forward after expanding its acreage position at the Tarfaya prospect and signing an agreement to bring new development technology to the project.

San Leon has acquired four new blocks in its existing 6,000 square kilometre acreage position at the Tarfaya oil-shale prospect on the coast of Morocco, the company said in a statement.

San Leon hopes to produce oil and electricity from the Tarfaya oil-shale deposit, which it has estimated holds 500 million barrels of difficult-to-recover unconventional reserves.

The company acquired exploration rights for Tarfaya in 2008 and has been testing in situ vapour-extraction (IVE) technology to develop the project. IVE injects heated gas into the borehole to help release hydrocarbons from oil shale underground so it flows to the surface as in a traditional well. San Leon has drilled three test wells, two of which have found oil-shale deposits at a depth of around 200 metres, ideal for the IVE technology.

The recently acquired acreage, though, includes potentially exploitable oil shale at much shallower depths, not suitable for San Leon’s in-situ extraction process. To tap those resources, San Leon has signed a co-operation agreement with Enefit Outotec Technology (EOT), an Eesti Energia and Outotec joint venture. EOT has developed a process in which oil shale mined at the surface, or ex situ, can be processed through a plant to produce liquid fuels and electricity.

The first plant of its kind started operation in Estonia earlier this year, and EOT is now looking for opportunities to take the technology to oil-shale projects in Morocco, Jordan and the US.

As part of the San Leon-EOT agreement, oil-shale samples will be taken from Morocco and run through the plant that EOT has up and running in Estonia to test the production potential of the shallow deposits at Tarfaya, San Leon chairman Oisin Fanning told PEU.

Fanning added that he was “very confident” that those tests would prove the projects’ commercial feasibility.

San Leon says that pursuing both in situ and ex situ techniques simultaneously improves the attractiveness of early-stage commercialisation. “The dual strategy of applying Enefit’s proven ex situ retorting technology to the shallow resource while we pursue, in parallel, our current in situ program in the deeper zone will ensure maximum early commercialisation of the Tarfaya oil-shale resource,” Fanning said.

If early tests in the Estonia plant prove the Moroccan oil shale’s potential, San Leon would then look to start construction on an oil-shale processing plant in Morocco. At that stage, San Leon would look to bring a partner with oil-shale experience in to help develop the project. “We have a partner in mind that we can take the project forward with,” Fanning said, though he declined to name the potential party.

The Tarfaya project may hold significant production potential. San Leon has pointed to an open-pit-mining pilot project Shell carried out near its acreage in the 1980s that found sufficient reserves to sustain production of 50,000 barrels per day (b/d) for more than 30 years.

High costs and environmental concerns have sunk oil-shale projects elsewhere, but San Leon sounds optimistic it can overcome these challenges. The breakeven price on the project is around $40 a barrel, and Fanning said that the project “is definitely viable in the current high oil price environment.”

The company is also confident that environmental concerns will not slow the project. San Leon put its drilling programme on hold earlier this year after it became concerned that a local aquifer might be affected by its drilling operations. The site's desert location makes protection of local water resources paramount, though the company appears to have put the problem behind it.

Beyond water protection, the company said there are relatively few environmental concerns because of the project’s remote location. “Developing oil-shale projects in Colorado and Morocco are very different propositions,” Fanning said, “there are completely different environmental risks.” In the US, oil-shale development, particularly surface mining, has been criticised for its large footprint as well as the risk of pollution from the disposal of waste material produced in the mining process.

San Leon’s plan, which has received strong backing from the Moroccan government, has not attracted the same environmental criticism. Morocco has identified 10 different shale-oil deposits that hold an estimated 50 billion barrels of oil, making it a potentially huge domestic energy source for the country, which has virtually no proved conventional reserves.

 

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