Last week President Obama announced that he would open federal waters off the Atlantic coast from Delaware south, portions of the eastern Gulf of Mexico and portions of the Arctic Ocean north of Alaska to oil and gas exploration and development.
A stated objective of this move is to reduce United States dependence on foreign oil. Implied within the objective is that opening these offshore areas to oil drilling will lead to a long-term increase in the U.S. oil production rate. The possibility of that happening is zero. The best that can be hoped for is a slight decrease in the annual decline rate of U.S. oil production.
Listening to talk radio and some politicians in recent years, one would get the impression that any new oil exploration and drilling in the U.S. has been prevented for a long time by the influence of environmental extremists. Although that may be popular rhetoric, the reality is that in the last 15 years large areas of the deepwater Gulf of Mexico (GOM) and National Petroleum Reserve-Alaska (NPR-A) have been opened.
What is important with respect to the opening of the deepwater GOM and the NPR-A is that as of 15 years ago, those 2 areas were among the 3 most geologically favorable areas in the U.S. that hadn’t been previously developed, with the deepwater GOM by far the most favorable. Over the last 15 years, there has been intense oil exploration and development in those 2 areas.
How has that oil development impacted U.S. oil production over the last 15 years? In only 1 year of the last 15 has the U.S. oil production rate increased, in 2009, and that took bringing on 5 major deepwater GOM projects ( >50,000 b/d peak production rate) within the span of a year and a half. Those 5 projects have a summed peak production rate of ~750,000 b/d. I think it’s safe to say that bringing on 5 comparably sized projects in the span of 1.5 years will never happen again.
One point to be made about increasing the U.S. oil production rate is that it probably takes at least 250,000 b/d of new production each year, and maybe more, just to prevent the U.S. oil production rate from declining. That is due to the fact that the majority of U.S. oil fields are in decline.
In terms of the federal waters off the east coast, I consider that region to be among the least geologically favorable regions in the U.S. for oil generation and trapping. No state on the east coast from Delaware south has produced any oil except for Florida, and Florida has never been more than a minor oil producing state. I see nothing in the geology to suggest that the Atlantic offshore waters will be significantly more favorable than the on-shore has been.
News reports I’ve heard and read state that the federal waters from Delaware south have on the order of 2 billion barrels of oil. How realistic is that number? That number comes from the Minerals Management Service and it represents a technically recoverable amount of oil. My experience is that technically recoverable volumes from the U.S. Geological Survey (on-shore) and Minerals Management Service (off-shore) are highly exaggerated relative to actual producible oil volumes.
My impression is that those government agencies take the most optimistic possible scenario for projecting oil generation and trapping to estimate the technically recoverable volumes. Taking the most optimistic possibility plays well with politicians, the media and the general public but it doesn’t represent what will ultimately be produced.
The National Petroleum Reserve-Alaska (NPR-A) is an illustration of an exaggerated assessment. The Clinton administration opened 4.6 million acres of the NPR-A in the 1990s and exploration started in 1999. The Bush administration opened another 9 million acres in 2003. The original 4.6 million acres should be the most geologically favorable portion of the reserve but to-date, I’ve only heard of a bit over 400 million barrels of oil discovered in the NPR-A.
The USGS estimated the average technically recoverable amount of oil in the NPR-A at 9.3 billion barrels. After 11 years of exploration, less than 5% of the estimated 9.3 billion barrels have been discovered. Production started at some of the fields in the original 4.6 million acres several years ago. The surge in production wasn’t even sufficient to stop the decline of Alaskan oil production.
The eastern GOM is slightly more favorable for oil compared to federal waters off the east coast but not a whole lot more favorable. According to the government, that region has 4 billion barrels of technically recoverable oil. With luck, it may produce a billion barrels of oil.
A billion barrels sounds like a lot of oil, but if it is produced over the course of 30 years, the average production rate is only a bit over 90,000 b/d. In a country that presently consumes around 19 mb/d of liquid hydrocarbons, 90,000 b/d is less than 0.5%.
The eastern GOM may have considerable gas but it’s not going to be a significant oil producing region.
Several oil fields have been discovered off the northern Alaska coast and one field, Northstar, is producing oil. The petroleum geologist Colin Campbell makes a strong case that the waters in the Arctic Ocean north of Alaska will be gas prone rather than oil prone. I personally expect an ultimate oil recovery from the Arctic Ocean of less than 5 billion barrels, and probably a lot less, with development slowed due to brutal conditions and exceptionally high expenses.
Another issue to consider is that offshore oil development, particularly far offshore, can be very expensive. Oil companies probably aren’t going to consider developing fields off the Atlantic coast or in the eastern GOM unless a field is at least 25 million barrels in size. In the Arctic Ocean, it may require a field 100 million barrels or more in size if the field is far offshore. Oil that is in many small and widely distributed fields may never be developed.
I personally don’t care if these offshore areas are opened to oil and gas development or not. I’m sure we will do our best to suck the last drop of oil from U.S. territory and we might as well do it as quickly as possible so future generations don’t get any of it. On the positive side, the sooner we open all areas to oil development, the sooner we might accept the limits of our oil resources. On the negative side, there could be some environmental consequences, particularly in the Arctic Ocean. But it’s time for us to discard naive optimism and recognize that opening these areas will not be a panacea for our dependence on foreign oil.
Roger Blanchard teaches chemistry at Lake Superior State University and authored the book The Future of Global Oil Production: Facts, Figures, Trends and Projections by Region, McFarland & Company (2005). He also grows fruit trees and hay on acreage outside Sault Ste. Marie (MI).
(Note: Commentaries do not necessarily represent the Peak Oil Review’s position; they are personal statements and observations by informed commentators.)