Uinta due $200 million oil shale joint venture

French, Canadian, and private US companies are set to launch a $200 million joint venture to develop oil shale in the Uinta basin of Utah.

The US affiliate of Total SA, Paris, will fund 80% of the cost of an early production system to demonstrate the commercial scalability of a proprietary process owned by Red Leaf Resources Inc., Sandy, Utah, a private Delaware corporation.

As part of its agreement with Red Leaf, Total has the right to license Red Leaf’s patented EcoShale In-Capsule Process for use at other future oil shale projects worldwide and has become a shareholder of Red Leaf. Red Leaf reported completing a $100 million equity offering in connection with the closing of the JV with Total.

Red Leaf holds 18 mineral leases totaling 17,000 acres of state owned and managed school trust lands in the Uinta basin. Red Leaf said the leasehold, estimated to contain 1.5 billion bbl of oil in place, represents some of the best surface minable properties for oil shale and contains some of the richest shale in the US.

Overburden thickness averages 60 ft with a resource seam at least equivalent. Oil shale in the Uinta basin averages of 25 gal/ton with some areas exceeding 70 gal/ton.

Meanwhile, Questerre Energy Corp., Calgary, recently acquired nearly 6% of Red Leaf equity for $40 million. Questerre also formed a joint venture with Red Leaf to develop oil shale acreage in Wyoming and signed an agreement to obtain licenses to use the Red Leaf process.

Questerre has a 20% working interest in the 5,120-acre Wyoming project, which is at an earlier stage than the one in Utah. Work set for mid-2012 is to gather more data to validate the existing resource assessment and compatibility with the EcoShale process, Questerre said.

John Bannerman, chief executive officer of Total E&P USA Inc., said, “The partnership with Red Leaf furthers our commitment to developing unconventional resources.”

Red Leaf said a Uinta basin pilot test of its proprietary technology validated the technology modeling and engineering design aspects and yielded 29° gravity oil that consisted of about 65% paraffin and naphtha and 12.6% hydrogen.

The test also produced a 39° gravity condensate with 55% paraffin and naphtha and 12.9% hydrogen. Sulfur content was 2,200 ppm, and nitrogen content was 1-1.2 wt %. The produced oil contained almost no entrained solid fines from the shale ore, Red Leaf said.

James Patten, president and chief executive officer, joined Red Leaf in 2007 from Battelle Corp. of Ohio, where he had developed unconventional oil programs since 2000.