UNOCAL TO CLOSE SOLE U.S. COMMERCIAL OIL SHALE PLANT

Unocal Corp. will suspend operations June 1 at the only U.S. commercial scale oil shale project, a 10,000 b/d capacity demonstration plant at Parachute Creek, Colo. Unocal cited continuing negative cash flow because of limited shale oil production for the planned mothballing-despite receiving federal subsidies that could have totaled as much as $400 million to 1996. Shale oil produced at Parachute Creek is sold at a federally guaranteed price of as much as $42.50/bbl, indexed for inflation,

April 8, 1991

2 min read

Unocal Corp. will suspend operations June 1 at the only U.S. commercial scale oil shale project, a 10,000 b/d capacity demonstration plant at Parachute Creek, Colo.

Unocal cited continuing negative cash flow because of limited shale oil production for the planned mothballing-despite receiving federal subsidies that could have totaled as much as $400 million to 1996. Shale oil produced at Parachute Creek is sold at a federally guaranteed price of as much as $42.50/bbl, indexed for inflation, for 7 years (OGJ, June 28, 1982, p. 71).

Outside the U.S., there are commercial scale oil shale industries only in China and the U.S.S.R., according to Paul L. Russell, writing in Oil Shales of the World: Their Origin, Occurrence, and Exploitation (Pergamon Press, Oxford, U.K.) In the U.S.S.R., more than two thirds of oil shale mined is burned directly to generate electrical power, notably in the Baltic states, Russell reported. He cited shale oil production of 4,500 b/d in China as of 1985, down from a peak of 80,000 b/d in 1970.

PROJECT OPTIONS

Unocal Chairman Richard Stegemeier said Parachute Creek operations will be suspended to study possible alternatives for the project's future. Unocal will discuss project options with Bush administration and congressional officials.

Another Unocal official said some alternatives under study include possibly revamping the project to improve economics and then restarting production, noting that federal subsidies would resume with revived output. Unocal has received $114 million of total price supports under its government contract, which expires in 1996.

Stegemeier said, "We have operated the project for nearly 5 years and produced nearly 4.5 million bbl of high quality synthetic crude oil, making this the largest oil shale effort in U.S. history.

"During this time we made substantial progress in developing Unocal's shale oil production technology, but we have not been able to achieve sustained production rates high enough to avoid cash losses."

Unocal started construction of the project in 1980. The capital cost was more than $650 million, most of which was written off company books in 1985 and 1988. Although shale oil production increased in 1990, the project still posted an aftertax loss of $7 million last year vs. a loss of $22 million in 1989.

The project has continued to lose money in 1991, Unocal said.