Economic Evaluation Of Oil Shale Mining In Colorado Using Sensitivity And Risk Analysis

An evaluation of the economics of mining the deep, thick oil shale deposits of the central portion of the Piceance Creek basin, Colorado, U.S.A. is presented in this paper. For the analysis, a modified large scale underground mining system developed by Cameron Engineers, Inc. and the Gas Combustion retorting process developed by the U.S. Bureau of Mines were used to determine capital investment and annual operating costs. A modified risk analysis computer program was then used to calculate DCFROI’s for various grades of oil shale and selling prices of partially refined shale oil. Sensitivity analyses were performed to quantify the affect of bonus bid payments, operating costs, capital investment, and all costs on DCFROI. In addition, a probabilistic evaluation was made to determine the risk involved in obtaining desired rates of return. Results of the economic evaluation indicate that for current selling prices of crude oil a high risk is involved in obtaining a DCFROI of 15%, unless only higher grades of oil shale are mined. However, mining only the higher grade oil shales, 125 l/mt (30 gpt) and above, would effectively reduce the potentially mineable resources by 90%. Risk can also be reduced through higher selling prices of shale oil. Sensitivity analyses indicate that the capital investment has a three times greater effect on required selling price than total operating costs.