Oil shale is organic-rich shale that yields substantial quantities of oil (shale oil) by heating and distillation. One tonne of oil shale may contain over 200 litres of oil. The organic material in oil shale is kerogen, which can be a precursor to conventional oil reservoirs given appropriate conditions in the crust. Australian oil shale deposits of commercial interest are predominantly in a series of narrow and deep extensional-basins near Gladstone and Mackay in central Queensland. These are thick Tertiary lacrustine (lake-formed) deposits that are relatively easy to mine. They contrast with generally harder carbonate-bearing oil shales (marls) found elsewhere in the world that are more difficult to mine and process.

Southern Pacific Petroleum’s (SPP) oil shale assets were acquired by Queensland Energy Resources Ltd (QERL), a privately owned company, in early 2004. The last systematic review of the in situ mineralisation for these ten oil shale deposits was completed by SPP in 2000 to comply with the JORC Code.

Australia has an estimated 4.6 GL (29 million barrels) of shale oil EDR. This could increase significantly if research and development investigations into the processing of shale oil were to lead to a commercial plant. From 2000 to 2004 SPP developed a demonstration-scale processing plant at the Stuart deposit near Gladstone which produced over 1.5 million barrels of oil using a rotary kiln retort. The shale tonnage processed was small in comparison to the overall resource, so there was no change in the year 2000 reserves estimate at the reported level of precision. Paramarginal and submarginal demonstrated resources are 202.1 GL (1.3 billion barrels) and 3719 GL (23.4 billion barrels) respectively.

Final plant trials at the Stuart demonstration plant were successfully completed in 2004. There was no oil production in 2005. The facility is now on care-and-maintenance in an operable condition. The tests achieved stable production runs at or above 100% of design capacity solid feed rates (6000 t of shale per day) and oil yield (4500 barrels per stream day), while maintaining product quality and adhering to EPA emissions limits.

The oil products from the demonstration plant were Ultra Low Sulphur Naphtha (ULSN) 55–60% and Light Fuel Oil (LFO) 40–45%. The ULSN, which can be used to make petrol, diesel and jet fuel has a sulphur content of less than 1 ppm. To put this into perspective, petrol in Australia previously contained about 500 ppm sulphur. Regulatory guidelines are in place to reduce this to 150 ppm for petrol and to 50 ppm for diesel.

The 2001 survey of energy resources by the World Energy Council reported that Jordan, Australia and Morocco have the largest deposits of ‘proved oil shale in place’. The same survey also reported that production of oil from shale for 1999 was recorded in Brazil at 239 ML and Estonia at 185 ML.

QERL is currently focussing on conducting extensive research and design studies for the next phase of its Queensland oil shale operations based on experience acquired from the Stuart Stage 1 demonstration plant. QERL announced in mid 2004 that the results to date from Stage 1 have demonstrated that large scale oil extraction from the Stuart deposit can be done.

In 2005, QERL made several new box cuts in the Stuart and Condor deposits to obtain fresh representative bulk samples for a series of test runs. Tests included using a pilot gravity-fed ‘Paraho’ retort system in Colorado with a capacity for treating one tonne of shale per hour, which has no moving parts and for which the shale feed does not have to be as finely crushed as it did for the rotary kiln. By early 2007, QERL hopes to be in a position to decide whether to move to front-end engineering and design for a new demonstration plant capable of producing 4500 barrels of shale oil a day. The location is likely to be at the Stuart deposit because the infrastructure is already in place.

Two independent groups, Xtract Energy and Australian Thermal Solutions (ATS), are appraising the potential of a technology called supercritical solvent hydrogenation. Bench tests indicate the oil yield from shale will be much higher than from conventional retorting techniques. The process, including the heating of the shale, is described as being self sufficient with a minimal need for process water, anoxic and carried out at moderate temperatures in enclosed vessels that do not liberate carbon dioxide. ATS plan to establish a one tonne per hour pilot plant in Townsville using oil shale from Julia Creek (Qld).

In the United States (Colorado), Shell has announced it intends to test an in situ extraction process, which involves heating a subsurface deposit to around 350°C over four years to accelerate natural maturation, then using conventional wells and fracture stimulation to extract the oil and gas.