TomCo, Red Leaf hit stumbling block with shale technology

Oil mining company TomCo Energy announced on Tuesday that it has received an update from its technology provider, Red Leaf Resources, containing information which it considers to be material to Red Leaf’s Early Production System capsule, and to its development timetable.

The AIM-traded company said Red Lead recently completed a preliminary front-end engineering design (pre-FEED) commercial study for the EcoShale technology on its Seep Ridge lease in Utah.

Based on the results of the study, the Red Leaf board has approved plans to proceed with the development of the commercial demonstration project, or EPS capsule at Seep Ridge.

However, Red Leaf’s joint venture partner and shareholder Total E&P USA Oil Shale, has advised Red Lead that it is not prepared to move forward with an EPS.

Ongoing discussions between Red Leaf and Total are continuing, TomCo said, in order to determine the best path forward, with Red Leaf conducting the basis of design study for the EPS capsule in the meantime.

It has advised TomCo that the study should be completed this autumn.

The key cost components for a commercial project at Seep Ridge, assuming at least 30,000 barrels per day of production, were $31.8m for a one million barrel capsule, and $4.1bn for working gas units and the central processing plant.

Red Leaf has said the capsule costs are in line with their objectives, however the processing plant costs are higher than it had originally budgeted, though there would be room for cost savings with further development and time devoted to plant optimisation.

“We are pleased with the major design improvements on the EcoShale In-Capsule Process, most of which can be applied directly to TomCo's Holliday Block project,” said TomCo CEO Chris Brown.

“However the total costs per barrel, including capital costs, look to be at the top end of previous expectations for Seep Ridge and the ramifications for TomCo's Holliday Block clearly needs further study.”