PRELIMINARY MINING ECONOMICS FOR MODIFIED IN SITUPROCESS*

Ronald B. Stone

Fenix Scisson, Inc.

5805 East 15th Street

Tulsa, Oklahoma 74115

Introduction

This paper presents some of the high

lights of the Phase II study effort conducted

under U.S. Bureau of Mines Contract No.

S0241073, and documented in the Final Report

entitled, "Technical and Economic Study of

the Modified In Situ Process for Oil Shale",

available through NTIS.

A thorough understanding of the economic

implications inherent in various factors in

the design of a complex facility, as

required for modified in situ production of

oil shale, will be needed if sound, econom

ical designs are to be achieved.

The Phase I effort, consisting of a

technical analysis of the process from a

mining standpoint, was reported briefly at

the 9th Oil Shale Symposium (April 29-30,

1976).

This paper highlights the effect of

variables in mining and processing of oil

shale that have an impact on mine design

and, ultimately, upon costs.

Background

The conclusions of the technical analysis

were that two mining system designs were

feasible for further study:

(1) Room and pillar- vertical drill and

blast concept,

(2) Tunnel boring- horizontal ring

drill and blast concept.

The room and pillar- vertical drill and

blast system (fig. 1) was considered tech

nically feasible in the current state of the

art, because it employed only the techniques

and equipment that are commonly used today.

This system approximates the one used by

Occidental Petroleum Corporation.

The tunnel boring- horizontal ring

drill and blast system (fig. 2) was consid

ered to be a second generation system in

which as much excavation as possible was

done by boring, and restabilization of

burned-out retorts was used to increase

?Results of work conducted under Phase II of Figure 1

U.S. Bureau of Mines - Contract #S0241073

Room and pillar -

vertical

drill and blast concept.

extraction ratio and resource recovery.

Resource recovery, using the tunnel boring

system, is increased by approximately 42

percent over recovery by conventional room

and pillar mine.

Figure 2. - Tunnel boring- horizontal ring

drill and blast concept.

Results

Technical analysis produced an apprecia

tion for the complex nature of a modified

in situ design. Because of the complexity

of the calculations to meet contract require

ments for cost benefit and cost trade-off

studies, and the inherently large number of

variables that must be considered in these

calculations, we decided to develop a com

puter program to provide the answers. Using

such a program would increase both efficiency

and accuracy of the computations needed to

improve the quality of the analysis. These

goals were achieved. In the process, we

developed a valuable tool for evaluating any

combination of the many design factors with

minimal effort; at the same time, a much

better understanding was afforded of the

complex and involved relationships inherent

in the design.

The basic computer program is a mathe

matical model of the various elements of the

design, including rock mechanics, retorting,

blasting, ventilation, quantities, and costs.

Sub-routines are interrelated so that a

change in one is properlyreflected in the

others .

All costs are based on January 1975 fig

ures."Operating"

costs are reported as

"cost ofsales"

which includes the direct,

indirect and fixed costs normally reported

to an operations manager."Capital"

costs

are reported as "initial capital costs",

including pre-construction, plant and equip

ment and initial development costs. Tract

bid payments were not included in the cal

culations because the study was made on a

generic basis, not for a specific site.

Reinvestment and expansion investment costs

were not calculated for each case, but were

calculated for a separate discounted cash

flow return on investment (DCFROI) portion

of the study of the two systems. Results

of cost comparisons were reported both in

terms of dollars-per-barrel anddollars-

per-cubic meter of daily production.

The first comparison was between the

two mining systems (table 1) . Major design

variables were held constant for both cases.

Results show that the room and pillar method

is more capital intensive but has a lower

cost of sales than the tunnel boring method.

The basic reason for the higher cost of

sales for the tunnel boring method is the

cost of stabilizing burned out retorts to

obtain increased resource recovery.

To gain a better understanding of the

effect of each of the many variables on

cost, the following factors were selected

as having a direct bearing on costs:

Production rate (P)Grade (G)Retorting efficiency (RE)Entry size (ES)Burn rate (BR)Depth (D)Swell factor (SF)Retort height (RH)Equipment selection

Permissible regulations

Table 1 a and b - Comparison of base case

computer runs for two mining methods

Table 2 a and b - Change in production

Method

Cost of

Sales ($/BPD)

Initial Capital

Cost (000$/BPD)

S/BPD 5 7 9 11 13 S/BPD 3 5 7 9 11

Room & Pillar

Tunnel Boring

8.77

11.79

6,946

6,626

Design Constants

P - 50,000 BPD BR - 0.5 in/hr

G - 20 GPT SF - 25 percent

D - 1,000 ft RE - 60 percent

RH - 230 ft

Method

Cost of

Sales ($/CuM/Day)

Initial Capital

Cost (S/CuM/Day)

$/CuMPD 35 45 55 65 75 $/CuMPD 20 30 40 50 60

Room & Pillar 55.16 43,689

Tunnel Boring 74.16 A1.676

Design Constants

P - 7949 Cubic Meters/Day BR - 1.27 Centimeters/Hour

G - 68.68 Liters/Tonne SF - 25 Percent

D - 304.8 Meters RE - 60 Percent

RH - 70.10 Meters

The basic technique for comparisons is

to use a base case and change one variable

at a time to establish relative change.

Hereafter, cost comparisons apply to the

room and pillar method only, but the results

would be similar for the tunnel boring

method.

Comparison of Variables

Change- in-Product ion Rate - This change

does not appear to have a large effect on

cost. We did not have the opportunity to

select the appropriate equipment size for

the various production rates. Given proper

data, there would probably be a larger

change than shown in table 2. Optimum pro

duction for a single facility appears to be

below 50,000 BPD (7949 CuMPD) . It appears

that the economics of scale of the operation

have been exceeded at 50,000 BPD (7949 CuMPD),

Costs reported for a 25,000 BPD (3975 CuMPD)

Production

Rate

Barrels

per day

Cost of

Sales ($/BPD)

Initial Capital

Cost (000S/BPD)

$/BPD 5 7 9 11 13 $/BPD 3 5 7 9 11

25,000

* 50,000

75,000

9.16

8.77

8.94

7,768

6,946

6,965

* Base Case

Production

Rate

Cubic Meters

per day

Cost of

Sales (S/CuM/Day)

Initial Capital

Cost ($/CuM/Day)

S/CuMPD 35 45 55 65 75 S/CuMPD 20 30 40 SO 60

3975

* 7949

11924

57.61

55.16

56.23

48,859

43,689

43,809

production rate should not be considered

entirely valid; they can be bettered by

properly sizing the mining equipment.

Change of Grade - This change (table 3)

has a dramatic effect on cost. The 25

gallons-per-ton (124.02 liters-per-tonne)

line is not reported because it has too low

a resource recovery for the base conditions.

In this instance, a much more sophisticated

rock mechanics design technique would prob

ably yield a stable configuration. This

technique would require a stability analysis

of the pillar on an incremental basis (from

top to bottom) with each major kerogen-rich

zone being analyzed separately, but as a

part of the whole, rather than the present

technique of analyzing and designing only on

the richest zone. Computer runs made for

the tunnel boring system tend to confirm

this trend.

Change of Burn Rate - This change (table

4) has a relatively large effect in the

range of 0.5-2 in. per hour (1.27 cm- 5. 8 cm

per hour), but does not have a significant

impact between 2.0 and 4.0 in. per hour

(5.8 cm-10.16 cm per hour). The effect of

lower burn rates on cost can be attributed

to satisfying the air requirements per

retort but at levels not exceeding the

capacities of the individual drifts. Higher

Table 3 a and b - Change in grade Table 5 a and b - Change in depth

Grade

Gallons

per ton

Grade

Liters /Tonne

51.51

* 68.68

124.02

Cost of

Sales ($/BPD)

$/BPD

11.83

8.77

Initial Capital

Cost (000$/BPD)

$/BPD

9,718

6,946

3 5 7 9 11

Not Reported Due To Low Resource Recovery

500 foot depth only

Cost of

Sales ($/CuM/Day)

$ /CuMPD

74.41

55.16

35 45 55 65 75

Initial Capital

Cost ($/CuM/Day)

$/CuMPD

61,124

43,689

20 30 40 50 60

Not Reported Due To Low Resource Recovery

152.4 Meters depth only

5a

Depth

Feet

Cost of

Sales (S/BPD)

Initial Capital

Cost (000$/BPD)

$/BPD 5 7 9 11 13 S/BPD

6,982

6,946

urce Reco

3 5 7 9 11

500

* 1,000

1,500

9.18

8.77

Not Re veryported Due To Low Reso

* Base Case

Depth

Meters

Cost of

Sales (S/CuM/Day)

Initial Capital

Cost (S/CuM/Day)

S/CuMPD 35 45 55 65 75 S/CuMPD 20 30 40 50 60

152.4

304.8

457.2

57.74

55.16

Not Rep

43,915

43,689

rce Recovorted Due To Low Resou ery

* Base Case

Table 4 a and b - Change in burn rate

Burn Rate

Inches

per hour

Cost of

Sales (S/BPD)

Initial Capital

Cost (000S/BPD)

S/BPD 5 7 9 11 13 S/BPD 3 5 7 9 11

* 0.5 8.77 6,946

2.0 8.29 5,434

4.0 8.30 5,307

* Base Case

Burn Rate

Centimeters

Hour

Cost of

Sales (S/CuM/Day)

Initial Capital

Cost (S/CuM/Day)

$ /CuMPD 35 45 55 65 75 S /CuMPD 20 30 40 50 60

* 1.27

5.08

10.16

55.16

52.14

52.20

43,689

34,179

33, 380

* Base Case

burn rates, not having an effect on cost,

indicate the need to spread out the opera

tion and enlarge the drift to meet ventila

tion requirements and each retort more

rapidly. This, in turn, means that more

mining areas are active and more equipment

is required.

Change in Depth - This change (table 5)

does not have a major effect on capital cost;

only the cost of sales is affected to any

degree. The 1500-ft (457.2 m) depth is not

reported because of low resource recovery.

This depth could possibly be designed for

adequate resource recovery by using an in

cremental pillar design, rather than a

weakest point. The system design used,

which minimizes the number of shafts re

quired, is partially responsible for the

small effect of depth on cost. Cost of

constructing and operating shafts is quite

small when compared to total capital and

operating costs. Major items related to

depth are shafts, hoisting, pumping, pipe

lines, electric feeder lines and ventila

tion.

Change of Swell Factor - This change

(table 6) produces a definite improvement in

cost, directly related to reduction of the

swell factor. Overall costs of the process

will be improved by reducing swell factor

to the lowest practical value consistent

with the pressure losses in the retort.

This is an area in which field research will

pay high dividends by developing the optimum

drilling and blasting technique to produce

the proper size of rubble. The goal of

drilling and blasting should be to obtain

uniform fragmentation of the oil shale

while minimizing the fines generated in the

blasting process. Reduction in swell factor

tends to make the entire mining process more

efficient as there is less swell room exca

vation per ton of material to be rubblized

thus achieving a lower ton-ratio. Table 7 a and b Change in retorting

efficiency

Table 6 a and b - Change in swell factor

Swell Factor

Percent

Cost of

Sales (S/BPD)

Initial Capital

Cost (000S/BPD)

S/BPD 5 7 9 11 13 S/BPD 3 5 7 9 11

15

20

* 25

7.96

8.38

8.77

6,387

6,659

6,946

=

* Base Case

Swell Factor

Percent

Cost of

Sales (S/CuM/Day)

Initial Capital

Cost (S/CuM/Day)

S/CuMPD 35 45 55 65 75 S/CuMPD 20 30 40 50 60

15

20

* 25

50.07

52.71

55.16

40,173

41,884

43,689

* Base Case

Retorting

Efficiency

Percent

Cost of

Sales (S/BPD)

Initial Capital

Cost (000S/BPD)

S/BPD 5 7 9 11 13 S/BPD 3 5 7 9 11

* 60

65

70

8.77

8.22

7.78

6,946

6,549

6,239

* Base Case

Retorting

Efficiency

Percent

Cost of

Sales (S/CuM/Day)

Initial Capital

Cost (S/CuM/Day)

S/CuMPD 35 45 55 65 75 S/CuMPD 20 30 40 50 60

* 60

65

70

55.16

51.70

48.93

43,689

41,192

39,242

* Base Case

Table 8 a and b - Change in entry height

Change in Retorting Efficiency- This

change (table 7) has an inverse effect on

costs; as the efficiency rises, costs drop.

This is a logical result and is to be

expected. Research by chemical engineers

should be continued at a high level with its

objective being increased retorting

efficiency as the grade of shale

decreases. Greater retorting efficiency

will increase resource recovery and make more

of the reserves economically available for

production. A better understanding of the

retorting reaction is needed to make pre

dictions as to the additional amount of kero

gen obtainable from the walls and pillars of

the retort.

Change in Entry Height - This change

(table 8) produces a surprise: capital cost

increases with a smaller entry. The unex

pected effect was traced to an increase in

the number of air and exhaust shafts needed

because of the lower capacity of smaller

tunnels and drifts to carry air for ventila

tion. In our final report to the Bureau of

Mines, we investigated this variable further

and found it affected many of the input val

ues. In fact, of 90 values listed, 39

changed with reduction in drift height; of

these 39 values, 21 decreased and 18 in-

Entry Height

Feet

Cost of

Sales (S/BPD)

Initial Capital

Cost (O00S/BPD)

S/BPD 5 7 9 11 13 S/BPD 3 5 7 9 11

20

* 30

8.77

8.77

7,490

6,946

8b

* Base Case

Entry Height

Meters

Cost of

Sales (S/CuM/Day)

Initial Capital

Cost (S/CuM/Day)

S/CuMPD 35 50 55 65 75 S/CuMPD 20 30 40 50 60

6.096

* 9.144

55.16

55.16

47,111

43,689

* Base Case

creased. This change produced a compensat

ing reaction in cost of sales and increased

initial capital investment. This exercise

especially well demonstrates the value of

having a computer design model. Such a

model provides the designer with a valuable

tool to test alternative ideas and deter

mines economic feasibility before committing

large sums of money to mine development.

Change in Retort Height - Table 9 is

made up for 15 gallons-per-ton (51.5 liters/

tonne) only, rather than the incomplete base

case, because a full range of values is

available for this grade. As would be

Table 9 a and b - Change in retort height Table 10 a and b - Equipmentselection

Retort Height

Feet

Cost of

Sales (S/BPD)

Initial Capital

Cost (000S/BPD)

S/BPD 5 7 9 11 13 S/BPD 3 5 7 9 11

230

380

530

11.59

10.46

9.46

9,195

8,992

8,651

Retort Height

Meters

Cost of

Sales (S/CuM/Day)

Initial Capital

Cost (S/CuM/Day)

S /CuMPD 35 45 55 65 75 S/CuMPD 20 30 40 50 60

70.10

115.82

161.54

72.90

65.79

60.63

57,835

56,495

54,413

10a1

Equipment

Cost of

Sales (S/BPD)

Initial Capital

Cost (000S/BPD)

S/BPD 5 7 9 11 13 S/BPD 3 5 7 9 11

FEL-T-C **

LHD-FB ***

8.77

7.67

6,946

5,935

Equipment

Cost of

Sales ($/CuM/Day)

Initial Capital

Cost (S/CuM/Day)

S/CuMPD 35 45 55 65 76 $/CuMPD 20 30 40 50 60

FEL-T-C **

LHD-FB ***

55.16

48.24

43,689

37,330

* Base Case

** Front-end Loader-Truck-Crusher

*** Load-Haul-Dump Feeder Breaker

expected, table 9 shows that variation in

retort height has a major effect on the

costs. While costs decrease as the retort

height increases, resource recovery also

decreases as the retort height increases,

conversely decreasing the life of the prop

erty. The decrease in resource recovery is

traceable directly to the rock mechanics

requirements for slender, stable pillars.

These requirements are related to the L/R

ratio of the pillars which, in turn, affects

extraction ratio, a part of the resource

recovery calculation.

Equipment Selection - This item (table

10) also has a significant effect on cost.

The initial design base case visualized the

use of large, front-end loaders and haul

trucks for the load-and-haul cycle, with the

rock being crushed before delivery onto a

conveyor belt. However, a significant cost

reduction is achieved when load-haul-dumps

(LHD) are combined with feeder-breakers.

The inherently more efficient operation of

the LHD and feeder-breaker units, with

resulting lower unit operating costs and

fewer units required, reduces costs. The

need to match equipment to specific portions

of the work is apparent. Several other

equipment categories, such as drilling and

raise and tunnel boring, merit the same

detailed study manner to effect further

cost reductions.

Permissibility- A proposal to open a

new mine in the deeper, central part of the

Piceance Creek basin (Colorado) ,where gas

is almost certain to be present, immediate

ly raises questions of permissibility and

the effect of"permissible"

regulations.

Table 11 represents the impact on cost of

these regulations if all underground equip

ment is included. Related costs, as shown,

reflect fire protection control, ventila

tion, equipment and explosives. Some of the

proposed equipment cannot be certified at

present because no large engine testing

facility is available. No permissible ex

plosives are currently in use in experi

mental oil shale mines and, if they are not

required, their impact on cost may not be

as great as shown.

Composite Runs - The effect of combining

various good or positive parameters into a

new set of operating conditions is partially

demonstrated in table 12. The result is a

domino effect: costs decrease more rapidly

than would be expected by arithmetic pro

gression. This process illustrates the com

plex interactions which occur in the design

of a modified in situ facility. It also

gives research and engineering some pre-

Table 11 a and b -

PermissibilityTable 12 a and b - Composite runs

Cost of

Sales (S/BPD)

Initial Capital

Cost (0OOS/BPD)

S/BPD 5 7 9 11 13 S/BPD 3 5 7 9 11

* Nonpermissible

Permissible

8.77

11.70

6,946

8,712

lib

* Base Case

Cost of

Sales (S/CuM/Day)

Initial Capital

Cost (S/CuM/Day)

S/CuMPD 35 45 55 65 75 S/CuMPD 20 30 40 50 60

* Nonperaissible

Permissible

55.16

73.59

43,689

54,797

* Base Case

liminary goals to achieve:

Optimize burn rate

Lower swell factor

Increase retorting efficiency

. Select proper equipment

Adjust mine opening size to be com

patible with equipment size.

Other Investigations-

During the course

of this study, otherinvestigations were

conducted as a part of the total effort:

(1) Scheduling- Critical paths were

constructed for both room and

pillar and tunnel boring systems,

(2)Multi- level development

- Improving

resource recovery by shortening

retort pillars and using multi

level mining. No significant

improvement was found without

restabilization.

(3) Combination in situ and surface

retorting- A brief study of the

combination system was conducted

and, on the basis of information

then available for surface retort

ing, the system showed signifi

cant improvement in both cost of

sales and initial capital cost.

(4) Energy balance - The systems postu

lated will produce a positive

energy ratioof from 5.25 to

13.95, depending upon the par

ticular combination of variables

and conditions.

P - 7949 CuM/Day

G - 68.68 Liters/Tonne

D - 304.8 Meters

RH - 70.10 Meters

BR

SF

RE

DH

Equip.

1.27 Cm/Hr

25 percent

60 percent

9.14 Meters

5.08 Cm/Hr 10.16 Cm/Hr

20 percent 15 percent

65 percent 70 percent

6.09 Meters 6.09 Meters

FEL-TR-CRUSH LHD-FB LHD-FB

* Base Case

The economic evaluation used consisted

of a discounted cash flow. Return on invest

ment calculation (fig. 3) shows rate of

return plotted against selling price per

barrel. The plot gives an indication of the

economic feasibility of the process. This

calculation does not include bonus bid pay

ments. These are a front-end cost, reduc

ing discounted cash flow return on invest

ment by some unspecified amount, depending

upon the tract bid price.

(Bonus Bid Payments Not Included)

(Bonus Bid Payments Not Included)

b

^Y"^/)^Room & Pillar Mining

Y\ Base Case 40

I I 20.0-

O E1 /

| Tunnel Boring Mining

Base Case 40

10.0-

O c

8 o

50"

1

1

1

1

1

I . . j

10.0 15.0 20.0 25.0 30.0

60 90 120 150 180

Selling Price of Shale Oil ($/bbl.) and ($/CuM)

Selling Price of Shale Oil ($/bbl) and ($/CuM)

Figure 3. - Return on investment vs selling

price.

Summary

1. We conceived and designed two mining

systems .

2. We developed a computer program to

model the systems.

3. We made studies of the effect of

significant variables on cost.

4. We made an economic evaluation of the

two mining systems.