Red Leaf Resources Inc. has entered into a joint venture (JV) with a U.S. subsidiary of France's Total SA to develop oil shale in the Uinta Basin in Utah.
Under the terms of the JV, Red Leaf and Total E&P USA Inc. will demonstrate the commercial scalability of Red Leaf's EcoShale In-Capsule system, an "ex-situ" process where shallow oil shale formations are mined and then placed into large sealed capsules before undergoing a slow pyrolysis reaction. Red Leaf said its EcoShale process has a lower environmental footprint compared to other "ex-situ" technologies.
Oil shale is not the same as shale oil. Oil shale comes from kerogen-rich rocks closer to the surface than shale oil formations. The rocks have to be heated to extremely high temperatures to convert the kerogen into oil. The economics and environmental concerns of oil shale are considerably different from those of shale oil.
Total will reportedly finance 80% of the demonstration, which could cost about $200 million and will be conducted on approximately 11,000 jointly held acres of oil shale leasehold estimated to contain several hundred million barrels of recoverable hydrocarbons. Total will also fund 80% of the first $200 million in commercial production costs. The JV also grants Total, now a Red Leaf shareholder, the right to license the EcoShale process for use in future oil shale projects worldwide.
"This joint venture with Red Leaf furthers our commitment to developing unconventional resources," said John Bannerman, CEO of Total E&P USA Inc. "Given the magnitude of oil shale resources, in particular in the U.S., we believe that this project has an important long term potential for global energy markets."
Utah Gov. Gary Herbert also lauded the Total-Red Leaf partnership. "As Utah is focused on our long-range, strategic plan to keep energy prices low and supplies stable, I'm pleased to see more investment and energy development happening," Herbert said. "We're committed to ensuring that Utah remains a leader in energy production and exports."
In a related development, Calgary-based Questerre Energy Corp. announced Thursday that it has entered into its own JV with Red Leaf to develop its oil shale acreage in Wyoming, and to obtain licenses to utilize the EcoShale process. Questerre also said it has recently invested $40 million in Red Leaf, acquiring less than 6% of the company's equity.
To close the JV with Total, Red Leaf closed on a private placement of common stock for about $100 million.
In late March Utah regulators issued Red Leaf -- a Delaware corporation based in Sandy, UT -- a permit to extract oil shale from up to 1,500 acres in the Uintah Basin (see Shale Daily, April 3). The project could become the largest oil shale mining operation in Utah.
Paris-based Total SA is also a 50% partner with Genie Energy in American Shale Oil LLC, a research and development project based near Rifle, CO, that is looking for ways to develop oil shale, as opposed to shale oil (see Shale Daily, March 16).
In January, Total announced that it was acquiring a 25% interest in Chesapeake Energy Corp.'s holdings in eastern Ohio's portion of the Utica Shale for $2.32 billion (see Shale Daily, Jan. 4). The energy giant first entered the U.S. shale business in late 2009 when it acquired a 25% interest in Chesapeake's Barnett Shale properties for $2.25 billion.