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Gloria Gonzalez

Gloria Gonzalez

Gloria is a writer for Environmental Finance.Environmental Finance is the leading global publication covering the ever-increasing impact of environmental issues on the lending, insurance, investment…

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Investors Face Considerable Risks With Unconventional Fossil Fuels

Investors Face Considerable Risks With Unconventional Fossil Fuels

Investors must scrutinize the significant risks associated with production of unconventional fossil fuel sources such as oil shale and coal-to-liquids (CTL), according to a report commissioned by Ceres.

Companies are spending hundreds of millions of dollars on testing, preparation and R&D activities for dozens of US projects because of their vast potential, the report states. In the US, oil shale has technologically recoverable reserves of about 800 billion barrels .

But investors must educate themselves about the considerable risks of producing these energy sources, Ceres, a coalition of investors and environment groups, warned.

Oil shale and CTL production are both carbon and water-intensive, which could become a key issue in water-stressed states such as Colorado and Utah. Federal energy and climate legislation collapsed this year, but the high-carbon intensity of these projects still presents a significant long-term risk that companies should be mitigating, said Dan Bakal, director of electric power programmes for Ceres.

“It’s still our belief we are going to have a cost on carbon,” he said. “It’s taking a little longer than we thought, but it’s certainly within the lifetime of these projects.”

This also raises questions about whether these projects can be viable without carbon capture and sequestration technology, which is very expensive and still faces numerous questions about its commercial viability and public financing levels.

“I think we’ll probably look at these with even greater scrutiny,” said Steven Heim, managing director of Boston Common Asset Management.

More than 25 companies are involved in oil shale development, including ExxonMobil, Chevron and Shell, while Shell, Rentech, Baard and DKRW are involved in CTL development, according to the report.

Equity investors should be diligent in ensuring publicly-traded companies, particularly those such as Rentech that have a greater focus on these projects, are mitigating these risks, Bakal said.

Large-scale bonds aren’t being issued yet for these projects, but that could happen in the near future and debt investors need to do their own research and prod analysts to ensure their work takes these risks into account, Bakal added.

“It’s more of a warning about the risks that are involved, but I also think it’s fair to say we would discourage investment in these kinds of investments unless it’s very clear that all of these risks are being addressed,” he said.

By. Gloria Gonzalez

Source: Environmental Finance

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  • Anonymous on December 17 2010 said:
    Gasification technologies are capable of removing true pollutants and contaminants from unconventionals and coal without the wasteful and exorbitant "carbon capture" component.Carbon capture wastes half the energy produced, and instantly destroys profitability -- and for no good reason except to make a few unscrupulous persons at the top of the carbon trading food chain very wealthy. And let us not forget the politicians whom they have bribed to make it all possible.Shame on "Ceres.org" for taking the same first name as a company that is actually performing a useful service: "Ceres.net".
  • Anonymous on December 18 2010 said:
    Coal to liquids will work, and probably at the present time. I won't go into the details however.As for oil shale, I believe that I had some good things to say about it in my book on oil a couple of centuries ago. Unfortunately, at a dinner after a meeting in Vienna in which I put in a good word for shale, I was called a fool by an American business executive for believing that oil shale made economic sense. He was right and I was wrong, and that incident soured me on that particular resource. And I still don't want to hear anything good about it.
  • Anonymous on December 18 2010 said:
    It is unfortunate that Mr. Banks is willing to dismiss the potential of oil shale on such slim evidence. More than three hundred professional a year come to the Oil Shale Symposium at the Colorado School of Mines every October to get real information about the potential costs, risks, and benefits of oil shale production. It remains to be seen whether the oil shale industry will expand beyond its current relatively modest size. But a great deal is going on in places other than Vienna, and aat companies like Shell, ExxonMobil, Total, Enefit and Schlumberger that suggest that one is not a fool to consider its potential to make economic sense.Jeremy Boak, DirectorCenter for Oil Shale Technology and Research
  • Anonymous on December 18 2010 said:
    The largest obstacles to eventual profitability for oil shales are political. All valid scientific and engineering -- as well as environmental and economic -- objections will be dealt with satisfactorily in time. The biggest danger to the eventual profitability of oil shales is that abundant new fuels and energies will render the resource superfluous.Political obstacles raised by carbon hysterics, faux environmentalists, and dieoff promoters of the Luddite persuasion will be more difficult to dispense with than genuine objections from the real world.
  • Anonymous on December 19 2010 said:
    Will I never. I have spent most of today shoveling snow, and now I encounter two experts who want to shovel something else.My oil book was published in l980. Since that time nothing even slightly impressive has been done with oil shale, although considering the scams and lies that are put into circulatiion by soncerned observers, there is a quantum increase in persons who are ready to believe the opposite. Two of them have commented on my comment.As for what science/technology is goingto do, if the price of oil goes where it went in 2008, I agree that some oil shale might have to be exploited. The cost though, in dollars and environmentally, is likely to be enormous.Incidentally, where symposiums are concerned, nobody in their right mind would take me on in a seminar or meeting, but if there is any REAL evidence that shale oil makes sense I sincerely want to know before my new energy economics book goes to press.
  • Anonymous on December 20 2010 said:
    "Will I never. I have spent most of today shoveling snow, and now I encounter two experts who want to shovel something else."Fred Banks has a terrific sense of humour! And I agree with him about oil shale. I heard a long time ago that it wasn't all it was cracked up to be, despite some powerful lobbying. So long as oil companies are going to carry on searching for the stuff coming out of wells and producing it 'relatively' inexpensively, oil shale will continue to be the poor relation. I also agree with Fred Banks that I'm open to the contrary view with some well presented solid evidence...from independant (is there such a thing in the oil business?)sources.

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