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Drill baby drill — a reality check

(Note: Commentaries do not necessarily represent ASPO-USA’s positions; they are personal statements and observations by informed commentators)

Many Americans want to believe that the US still has unlimited oil resources within its boundaries, if only the pesky environmentalists would just get out of the way. Throughout the recent presidential campaign, the “Drill baby drill” mantra was exploited relentlessly by John McCain, his supporters and rightwing media sources.

The oil industry has contributed to the belief that if it is allowed into presently protected offshore areas, the Arctic National Wildlife Refuge (ANWR) and any other place presently under a drilling moratorium, US oil production is sure to surge.

One of the Briefs in the Dec. 15 issue of the ASPO-USA newsletter stated:

A study commissioned by the American Petroleum Institute (API) concluded that developing offshore areas covered by congressional moratoriums until recently, along with resources in the Arctic National Wildlife Refuge and a small portion of currently unavailable land in the Rocky Mountains, could increase US crude oil production by as much as 2 million b/d by 2030, offsetting nearly a fifth of the nation's crude imports. (12/9, #12)

The API recently started a radio campaign to convince the public that if every acre of America is opened for oil exploration and development, the American public will be rewarded with ample supplies of US oil in the future.

How realistic is it to believe that opening all of America to oil exploration and development will cause a surge in production?

It may surprise most Americans, but over the last 15 years, millions of acres of federal lands and waters have been opened to oil exploration and development. Particularly important in that regard are the millions of acres in the deepwater Gulf of Mexico (GOM) and the National Petroleum Reserve-Alaska (NPR-A).

A large number of fields, many quite large, have been brought on-line during the last 15 years including Alpine (Alaska), Northstar (Alaska), satellites of the Prudhoe Bay field (Alaska), satellites of the Kuparak field (Alaska), satellites of the Alpine field (Alaska), Mars (GOM), Auger (GOM), Ursa (GOM), Ram-Powell (GOM), Thunderhorse (GOM), Mad Dog (GOM), Tahiti (GOM), Holstein (GOM), Diana-Hoover (GOM), Atlantis (GOM), Na Kika (GOM), Brutus (GOM), Matterhorn (GOM), Neptune (GOM) and many more.

In spite of all the oil field development in the US over the last 15 years, field production of crude oil + condensate has declined every year during that period with a total decline of about 2.1 million barrels/day (b/d) from 1992 to 2007. Even since 2000, when the pace of new oilfield development in Alaska and the deepwater GOM has increased, US oil production has still declined about 760,000 b/d.

In Alaska, the addition of all the Alaskan fields listed above only caused a plateau in Alaskan production for a few years around 2000. Production has since reverted to the relentless decline that started in 1989.

Several points should be made concerning future oil developments in recently opened areas or areas that are still off limits:

  1. US government agencies that make estimates of recoverable oil reserves have a history of greatly exaggerating reserves. I have previously calculated a government overestimate of ~2.4 times the actual recoverable reserves for the onshore contiguous 48 states. It appears that the ratio of government estimated recoverable oil reserves/actual recoverable oil reserves could be considerably greater than 2.4 for the deepwater GOM and the NPR-A.
  2. Much of the offshore US will have little or no oil. I expect that to be the case for the offshore Atlantic, the Pacific from northern California to the Canadian border and around much of Alaska. The gas-prone eastern Gulf of Mexico will have only a relatively minor volume of recoverable oil.

    Most of the oil that the Minerals Management Service estimates for Alaskan offshore waters is located in the Beaufort and Chuchi seas of northern Alaska. Colin Campbell makes the case that most of the hydrocarbons below Arctic Ocean waters will be natural gas rather than oil; I suspect that will be the case. Even if there were some sizeable fields in the Arctic Ocean, there would be major challenges in developing those fields due to the harsh conditions of the Arctic Ocean. That would limit the amount of recoverable oil and slow the process of recovery.

    My personal view is that the oil industry will be lucky to ultimately recover 7 billion barrels of oil from offshore waters that aren’t presently producing oil. To put that in perspective, the deepwater GOM will ultimately produce around 10 billion barrels of oil.

    In terms of the ANWR, I believe the oil industry would be lucky to ultimately recover 3 to 4 billion barrels of oil there.

  3. Predicting a significant US oil production increase, such as 2 million b/d, in the future has to ignore the fact that producing fields that are presently in decline will continue to decline and those that aren’t presently in decline will go into decline in the not-too-distant future.

    The not-too-distant future decline of presently producing oil fields will be an important aspect for the deepwater GOM. Typically, deepwater GOM fields reach a maximum production rate within 5 years of start-up and decline at rates greater than 10%/year. I’m predicting that deepwater GOM oil production will reach a maximum production rate around 2010 due to the recent start-ups of Thunderhorse, Tahiti, Neptune and Atlantis. Beyond those 4 fields, only two +50,000 b/d projects are scheduled to come on-line through 2012: Shenzi and Perdido. In the meantime, older fields in the deepwater GOM will continue to decline at rates greater than 10%/year.

    Once deepwater GOM production starts declining, I expect the decline rate to be at least 5%/year. It could easily be 10%/year or higher. That will add to the present decline for most of the rest of US oil production.

  4. If 10-11 billion barrels (7 + 3-to-4 mentioned above) of oil from presently non-producing areas are produced over the course of the next 50 years, the average production rate would only be ~550,000-600,000 b/d. Over the next 50 years, the decline from presently producing fields will likely be on the order of 4 million b/d or more.
  5. I hear radio talk show hosts state that since there are hundreds of billions of barrels of oil in oil shale deposits, that millions of barrels per day can be produced if we again get rid of those pesky environmentalists as well as problematic politicians. This illustrates how easy it is to make exaggerated claims.

    It’s questionable whether any significant amount of oil will ever be produced from oil shale. The technical and economic problems associated with oil shale oil production are substantial. I predict that no significant amounts of oil from oil shale will be produced over the next 20 years.

In conclusion, I think there is a high probability that after 2010, the US will not see any yearly US oil production increases even if every last acre of the US is opened for oil development. If there are any increases, they will be minor and of short duration. Exaggerated claims of future US oil production potential prevent us from doing what is necessary to restructure our society to deal with a world that will have substantially less 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.

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