What is 'Oil Shale'

Oil shale is a sedimentary rock formation containing kerogen. Kerogen is a type of organic matter that yields oil and gas and will burn when exposed to flame. The term shale covers a variety of sedimentary rock formations containing a combination of clay and other minerals.

The difficulty inherent in recovering petroleum from oil shale has traditionally made resources containing it unconventional plays in the oil and gas industry.

BREAKING DOWN 'Oil Shale'

To be considered an oil shale, a formation must contain enough bituminous materials to produce flammable, petroleum-like liquids. In general, rocks mined from an oil shale formation will burn without further processing. Recovering oil from shale requires unconventional production techniques. Unconventional oil production is commonly seen as more costly than conventional oil production, less efficient, and is likely to cause environmental damage. 

Recovery of oil shale typically involves either surface or sub-surface mining to extract the minerals, which are then sent elsewhere for additional processing. Some patents exist for processing methods which take place without mining the minerals first, known as in situ retorting. The use of these methods is currently limited, and most in situ processes appear to be experimental at this time.

Note that oil shale differs from shale oil, which refers to pockets of gas or liquid petroleum that occur within shale formations, such as the Bakken formation in North Dakota, Montana, Saskatchewan, and Manitoba. Hydraulic fracturing and other unconventional drilling techniques allow access to shale oil reserves, whereas the petroleum in oil shales remains embedded in the rock itself after mining, absent further processing.

Extracting oil shale deposits has been criticized for harming the environment. In addition to the impact of surface mining on the landscape, most processes use a significant amount of water and introduce pollutants into both air and surface water. Processing oil shale is also energy-intensive, contributing to carbon dioxide emissions.

 Short History of Oil Shale

The Green River Formation in Colorado, Utah, and Wyoming hosts the most significant deposits of oil shale in the world. Historically, however, Estonia has processed the majority of the oil shale extracted worldwide, predominately for use in power plants. Substantial oil shale resources also exist in China, Russia, and Brazil.

Shale became a strategic asset during the Second World War when the United States sought a secure source of oil. Commercial development began in the 1960s, but the difficulty of extracting and producing oil from shale made it a less attractive resource compared to oil from conventional wells.

Oil shale processing became popular during the oil crisis of the 1970s. During this time, when high prices briefly made oil shale economically viable in comparison to more conventional plays. Reductions in oil prices in the early 1980s reduced corporate interest again until the early 2000s when declining global reserves of conventional oil began to drive renewed interest in unconventional plays.

RELATED TERMS
  1. Peak Oil

    Peak oil is the point at which global oil production will hit ...
  2. Crude Oil

    Crude oil is a naturally occurring, unrefined petroleum product ...
  3. Oil Field

    An oil field is a tract of land used for extracting petroleum, ...
  4. Enhanced Oil Recovery (EOR)

    Enhanced oil recovery is the process of obtaining stranded oil ...
  5. Exploration & Production - E&P

    An exploration & production company is known to be in a specific ...
  6. Integrated Oil & Gas Company

    An integrated oil and gas company is a business entity that engages ...
Related Articles
  1. Investing

    Shale Oil vs. Oil Shale: What's the Difference?

    Discover the biggest difference between oil shale and shale oil, and which one is still a money-making proposition.
  2. Investing

    Will Shale Oil Companies Go Bankrupt?

    An overview of shale oil companies and the threats they face in the aftermath of the decline in crude oil prices.
  3. Investing

    U.S. Shale Oil Production: The Rise and Fall

    Low oil prices are taking their toll on U.S. shale oil producers, but their rise over the last decade is evidence of increasing U.S. energy independence.
  4. Investing

    The 3 Best ETFs to Bet On a U.S. Shale Industry Rebound (XES, PSCE)

    Learn three ETF strategies and corresponding ETFs to bet on a rebound for U.S. shale oil, including indirect plays, hedging and focused exposure strategies.
  5. Financial Advisor

    Oil Prices Expected to Surge in 2017

    Oil has made headlines for its plummeting prices this year. When will prices rise again?
  6. Investing

    Have We Found the Bottom of the Oil Market?

    Are oil prices finally in a position to rise in 2016 or is another year of low prices ahead of us?
  7. Insights

    Who Wins With Low Energy Prices? 

    Low oil prices are here to stay for some time. Which economies will benefit or lose from the low oil price regime?
  8. Investing

    Peak Oil: What To Do When The Wells Run Dry

    Find out how to invest and protect your investments in this slippery sector.
  9. Insights

    Why U.S. Shale Stocks Are Ailing

    U.S. shale producers will keep producing despite a lackluster market reaction to OPEC's latest decision.
RELATED FAQS
  1. Why are stocks and oil so correlated right now?

    Learn whether the stock market and oil prices will continue their highly correlated price relationship or decouple again ... Read Answer >>
  2. What country is the world's largest oil producer?

    Learn which countries are considered to be the largest oil producers in the world, whether natural gas and biofuel are taken ... Read Answer >>
  3. What percentage of the global economy is comprised of the oil & gas drilling sector?

    Read about a rising industry that already composes as much as one-twentieth of total global economic output: the oil & gas ... Read Answer >>
  4. What is the relationship between oil prices and inflation?

    Understand how the price of oil and inflation are often seen as being connected in a cause and effect relationship. Read Answer >>
Hot Definitions
  1. Risk Tolerance

    Risk tolerance is the degree of variability in investment returns that an individual is willing to withstand.
  2. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  3. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  4. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  5. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  6. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
Trading Center