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The offshore drilling mirage

Spurred on by Senator McCain’s July 28 promise that offshore oil “could be exploited in a matter of months”, the clamor to start poking more expensive holes in the ocean floor has reached a crescendo. In the U.S. Senate, the bipartisan “Gang of 10” is leading the drive for more drilling as the solution to high oil prices and our dependence on foreign oil. Even Senator Obama is succumbing to the myth that drilling offshore is something new for the U.S. which will quickly make us awash in oil.

There is a reason that oil production companies are called E&Ps, exploration and production, with the exploration part listed first. A very small fraction of the earth’s surface has a useful oil reservoir beneath it. If you randomly set several hundred drilling rigs to work, either on land or sea, few, if any, would find one decent oil reservoir. That’s why extensive analysis of subsurface geologic structure, with techniques like 3-D seismic, precedes drilling in the ocean floor with one of those $450,000/day drill ships.

For the most part, we don’t have good analysis of the strata off our Atlantic, Pacific, and Alaska coasts. We have better data in the very active Gulf of Mexico which was the subject of Minerals Management Service (MMS) sale #205 in October, 2007. Eighty four oil companies submitted $2.9 billion in high bids on 1723 tracts totaling 3,729,000 acres. MMS continued its aggressive leasing in 2008 with sales #206 and #224 in the Gulf and #193 in Alaska’s Chukchi Sea.

Those sales produced high bids of $4.3 billion for 1,139 blocks by 85 companies. Two more sales are planned in 2008, one in Alaska and one in the Gulf. Most of these leases will be banked, along with others awarded before 2008, because there aren’t seismic and drilling resources to work them. In July of 2008, 1922 drilling rigs were at work in the U.S., on and offshore, the highest total in years.

The Energy Information Administration (EIA) uses the term “technically recoverable undiscovered oil” to refer to oil which might be recovered even at very high cost. The EIA currently estimates 59 billion barrels of such undiscovered oil in the lower 48 Outer Continental Shelf. Of this, two-thirds, 40.92 billion barrels, are available for leasing and development. The EIA further indicates that additional “access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil production or prices before 2030.”

As to the Arctic, the five countries which border the Arctic Ocean have been actively exploring for oil and gas. Two recent studies, one by two leading geoscience firms and one by the USGS, have reviewed the results so far. Both studies note that three-fourths of the successful discoveries are mostly natural gas. There are no pipelines to bring down this stranded gas, and there won’t be one for at least ten years.

The Alaska National Wildlife Refuge(ANWR) is situated between the oil of Prudhoe Bay, and Canada’s Mackenzie Delta with its large natural gas deposits.

There is no good data on whether ANWR will produce oil, natural gas, or
nothing like Mukluk, the world’s costliest dry hole just 30 miles northwest of the Prudhoe Bay discovery. In any case, the short winter season at ANWR for seismic and test well drilling, plus the short summer season for ship transport of heavy equipment, validates EIA’s estimate that it will be at least ten years before we see any oil or gas from ANWR. The ice roads used by oil equipment trucks in Alaska used to last for 200 days during the 1970s. Today it is closer to 100 days as the region warms. ANWR can be developed without harming the caribou; the real problem is that ANWR may not have much oil.

The EIA is forecasting that offshore production from existing and future new leases will approximately cover the decline in our mature oil fields to 2030. A reduction in oil prices and our dependence on foreign oil will not be found on our Outer Continental Shelf.

That reduction will require innovative new sources of energy, conservation, and significant adjustments in the way we use energy for transportation.

Rolf E. Westgard St Paul
(The writer is professional member of the Geological Society of America and a member of the American Association of Petroleum Geologists)

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