America's untapped oil
KH note: And they are after OPEC to increase production.
Lawmakers lay into big oil for leaving million of acres untouched while at the same time asking to drill in Alaska and off the coasts.
By Steve Hargreaves, CNNMoney.com staff writer
Last Updated: June 29, 2008: 12:07 PM EDT
NEW YORK (CNNMoney.com) -- Oil companies and many lawmakers are pressing to open up more U.S. areas for drilling. But the industry is drilling on just a fraction of areas it already has access to.
Of the 90 million offshore acres the industry has leases to, mostly in the Gulf of Mexico, it is estimated that upwards of 70 million are not producing oil, according to both Democrats and oil-industry sources.
One Democrat staffer said if all these existing areas were being drilled, U.S. oil production could be boosted by nearly 5 million barrels a day, although the oil industry said that number is far too high and one government agency said it was impossible to estimate production.
Recent proposals to open up offshore coastal areas near Florida and California, as well as Alaska's Arctic National Wildlife Refuge, might yield 2 million additional barrels, according to estimates from various government sources that also stressed the difficulty in making forecasts. The United States currently produces 8 million barrels of oil and other petroleum liquids a day and consumes about 21 million.
Oil companies "should finish what's on their plate before they go back in line," said Oppenheimer analyst Fadel Gheit.
Some Democrats also charge that oil companies are deliberately not drilling on the land to limit supply and drive up oil prices.
"Big Oil is more interested in pumping up prices and pumping up their own profits rather than pumping more oil," said Rep. Edward Markey (D-Mass), who has co-sponsored a bill to charge oil companies a fee for land they hold that's not producing oil. "We should not even begin discussing handing over more public land to the oil companies until they first use [the land] they already hold."
But the oil industry says it pays millions of dollars for these leases, and that it would not make sense to purposely leave the areas untapped.
Rather, years of exploration is required before drilling can even begin. In some cases, no oil is found on leases they hold. In others, drilling the wells and building the pipelines takes years. It is especially hard now that a worldwide boom in oil exploration has pushed up the prices - and timelines - for skilled workers and specialized equipment.
"No one is sitting on leases these days," said Rayola Dougher, senior economic advisor for the American Petroleum Institute. "Those making those assertions don't understand the bidding and leasing process."
Gheit agrees that it's unlikely that hoarding is going on.
With prices at $135 dollars a barrel, everyone is trying to pump as much as they can, he said. But fearing oil prices will eventually fall, the industry is leery about making too many investments in the fields it has - many of which are in deepwater areas that can be pricey to develop.
Instead, they're holding out, hoping the government will open areas closer to shore that would be cheaper to work on.
The presumptive Republican candidate John McCain has come out in favor of lifting bans on oil-drilling off most of the East and West coasts of the United States. Added supply, the thinking goes, would ultimately bring down the price of oil. The bans were enacted in the 1970s following several coastal oil spills.
Critics say lifting the bans would do little to ease the nation's energy crisis in part because it would take years to produce meaningful amounts of oil, noting how much is currently going untapped.
Gheit hasn't seen the legislation proposed by Markey and others, but he thinks the government should revise the leasing process to encourage more drilling on existing areas before it puts more acres up for bid.
Big Oil keep balance reserves and prices...with huge Gas Reservoir for LNG in Qatar, Oil in Deep water West Africa being producing, why should Big Oil invest another millions in high risk area?
But they a bit panick when China has won contract with Ghanian government to tap another giant reservoir offshore...and they stop China from buying Unocal last time...
“The fool speaks, the wise man listens”
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oil drilling
Will the US government be able to fortify the strategic reserve?
"The government takes the oil in place of royalty payments energy companies normally make to drill on public land, though some imported crude also goes to the reserve through exchanges to acquire a variety of blends of crude."
The original CNN article posted by KH is almost laughable:
"One Democrat staffer said if all these existing areas were being drilled, U.S. oil production could be boosted by nearly 5 million barrels a day..."
Is the nation going to be led by what "one Democrat staffer" spouts off? I think the author must have needed to meet a story deadline and so pumped this one up with a bunch of air.
Published Dec 6 2004 by New York Times / IHT
Archived Dec 6 2004
A rare look at the U.S. strategic oil reserves
by Simon Romero
FREEPORT, Texas A swamp near here is one of the most secretive places in America. There are no signs, just a 500-acre complex protected at all times by 30 armed guards in combat fatigues patrolling in sport utility vehicles.
This is part of the world's largest and most expensive filling station, the U.S. Strategic Petroleum Reserve, where a large portion of the government's nearly 700 million barrels of oil are stored in underground salt shafts that are supposed to be stable for the next thousand years or so.
Security at the complex has improved in the past three years. Visitors are required to be U.S. citizens, a rule waived recently when technicians from Russia and India toured the site as part of studies toward creating their own reserves.
American taxpayers have invested some $20 billion to build and stock this reserve - and three others in hidden locations - since it was created in 1975 in response to the Arab oil embargo. And now, after 29 years, it is finally about to be filled up to the brim for the first time.
"For a while it seemed like no one had heard of us and then, boom, we're on the radar screen," Gregory Magallanez, site operations specialist at the Strategic Petroleum Reserve, said in an interview. Usually the only unannounced visitors here are white egrets or the occasional seagull, Magallanez said. "The attention is a little worrisome sometimes."
After September 11, 2002, President George W. Bush decided to fill up the reserve to its maximum, in hopes of creating an insurance policy in the event of another oil shock.
"Say you wake up one day and there's been an Iranian-style revolution in Riyadh," said David Pursell, an expert on the reserve and a principal with Pickering Energy Partners, an energy investment company in Houston. "You simply wish you had more oil."
The question of ensuring a secure energy supply has taken on added significance in the last year, as terrorist groups have targeted petroleum infrastructure in Iraq and Saudi Arabia, and two other major oil exporters, Nigeria and Venezuela, have been hit by political turmoil.
China's growing appetite for oil has added to the jitters about the global oil supply. So, even though the reserve will soon be filled, there is no sense that it has provided the country with enough of a cushion in the event of a severe disruption in oil supplies. Altogether the reserve would only cover about two months of the country's imported oil needs.
But the notion of building a secret reserve seems to have encouraged other countries to fortify their own energy storehouses. Japan, South Korea, Taiwan and Germany already have theirs. China, which surpassed Japan in the past year as the second-largest importer of oil, and India, which is competing with China for oil supplies in some developing countries, are also moving ahead with plans to build their own strategic oil reserves. Even Russia, the largest oil producer, is considering building one.
Energy experts expect the new reserves to largely be modeled on the American system, which includes three other locations in Texas and Louisiana in addition to the site here southeast of Houston, built on a swampy hill called Bryan Mound. It is the reserve's largest complex with 232 million barrels of crude oil stored almost entirely underground in immense salt domes.
"We should consider increasing the reserve even further after it's full," said Bill Richardson, a former energy secretary in the Clinton administration and now governor of New Mexico. "I also think we should creatively find ways of releasing oil from the reserve while working together with OPEC, in an effort to bring prices down. OPEC's in a box right now and because of our continuing dependence on imported oil, so are we."
Part of the energy bill Congress will be considering next year would increase the reserve in the United States by another 300 million barrels, bringing the entire U.S. reserve system to 1 billion barrels.
Still, criticism has plagued the costly system since it was created three decades ago. Energy industry executives estimate that since then the government has spent more than $20 billion to build the system and keep it stocked.
Only about 100,000 barrels a day go into the United States reserve out of worldwide consumption of 82 million barrels a day. The United States consumes about 20 million barrels of oil a day, or about a quarter of global consumption, so at its current level of about 671 million barrels the reserve would provide the equivalent of just two months of crude imports.
Still, it is impossible to know exactly how a complete withdrawal of the reserve's oil would play out since that has never happened before. Altogether, technicians at the reserve estimate it can release a total of 4.5 million barrels a day, falling substantially short of current domestic consumption. The two largest withdrawals were 17 million barrels during the Gulf War in 1991 and 30 million barrels in 2000, neither of significant size or duration.
Releasing oil from the reserve to ease prices had mixed effects in late 2000, with prices dropping from $37 a barrel to $30 in September 2000 in the days after the first oil flowed out of the reserve but recovering to $36. Oil prices then declined to about $32 a barrel by December 2000.
From time to time the Energy Department also releases small amounts of oil from the reserve to address temporary supply interruptions, as it recently did when delivering oil to refineries in Texas after Hurricane Ivan knocked out production at some offshore platforms in the Gulf of Mexico. The salt domes in Freeport were originally created by Dow Chemical to store magnesium.
The reserve here functions differently than systems in countries such as Japan, where private companies are required to store oil and refined gasoline to complement the government's own inventories. In the United States the reserve consists almost entirely of unrefined oil acquired directly from producers instead of purchases of the oil on the open market.
The government takes the oil in place of royalty payments energy companies normally make to drill on public land, though some imported crude also goes to the reserve through exchanges to acquire a variety of blends of crude.
IHT Copyright © 2004 The International Herald Tribune
JMT...You are right about the "strategic oil reserve" it is in case of emergencies like hurricanes, war with Iran..etc. It's there to provide a buffer in the event of a national emergency and the regular oil shipments don't come in. Even if they tapped into it, it wouldn't lower gas prices at all. It is a temporary thing, not meant to last 2 years, there's not enough oil in it for that.
I just read an article about how North Dakota suddenly has a bunch of millionares, because with oil so high, companies are drilling where they can get the leases. States like North Dakota let the land owner sell the lease directly to the oil companies. States like Alaska have state owned leases, and the State currently taxes the living daylights out of the producers at this point. The governor has been likened to Chavez.
Just a side note, I thought the "strategic oil reserve" wasn't necessarily to help economically (i.e. reduce prices), but more in the case of severe supply shortage, like after Hurricane Katrina.
Some samples of what it going on with regard to China and their quest for oil. . .
Big Shift in China's Oil Policy
With Iraq Deal Dissolved by War, Beijing Looks Elsewhere
By Peter S. Goodman
Washington Post Foreign Service
Wednesday, July 13, 2005; D01
http://www.washingtonpost.com/wp-dyn/content/article/2005/07/12/AR2005071201546_pf.html
Tahe discovery a win for Sinopec
By Wang Yu (China Daily)
Updated: 2007-09-07 06:31
It is a land of cantaloupes, but this year's most exciting harvest in Xinjiang Uygur, China's western-most autonomous region, could be reaped by Sinopec.
Sinopec, or the China Petroleum & Chemical Corp, is Asia's largest refiner and one of China's two largest oil and gas companies.
With the company's new finds of natural reserves, its crude oil output from Xinjiang is expected to increase from last year's 4.7 million tons, or 10 percent of the company's 2006 total, to more than 5.3 million tons this year.
Some of the added output will come from the desert of Tarim, where Sinopec confirmed a new discovery of as much as 200 million tons of oil and gas reserves last month.
It could be just what the company needs as it faces an increasing challenge from rival PetroChina, which for the last few weeks has been touting its new oil and gas discoveries, believed to be the largest in many years.
http://www.chinadaily.com.cn/china/2007-09/07/content_6088602.htm
Americans are deliberately not acting to stem the rise in oil prices.. This is because the countries hurting the most are the developing juggernauts of India and China who both depend on oil imports to support their growing economies. high oil prices will severely dent thir short to medium term growth and earnings.
America also has what the call "Strategic oil Reserves", which theoretically can last for two years. So why don't they tap into those.
Just a general comment. Politicians' personal interests and under the table deals are everywhere in the world. To hide their "mistakes" or "non-sense decisions", they indicate that the problem and its solution is somewhere else, OR create a new problem/issue to hide the old one.
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California hiding behind tiny smelt, not facing reality
http://westernfarmpress.com/environment/070407-smelt-water/
Politicians have made it nearly impossible for oil companies to drill in the states now. Yes, China is drilling off the coast of Cuba. Can you imagine the mess that could end up being. Do you really think Cuba is going to impose strict enviromental procedures on China? I think not and that is what - 90 miles from the coast of Florida. Yet, US companies cannot drill off the coast of Florida???
Yet, they drill off the coast of Louisiana and we get practically nothing from these leases. The Federal Government gets it all. Louisiana gets a measely 12%. When our representatives tried to fight to get us a higher percentage it was stopped by who? Senators and representatives from the Northeast!! These are the same people who will not allow Windmills off the coast of Massachusetts because it will ruin the view....please!!! They are all a bunch of hypocrites!!
My blood pressure is going up now so I will stop. LOL
It's funny that democrats blame 'big oil' for not drilling when it was democrats that shut them down 20 years ago. I'm all for drilling in CA, FL, AK and any other U.S state that can turn a profit on their ventures. As a matter of fact, my father used to be a oil rigger off the coast of Los Angeles in the early 1980s. Maybe we can put 'Tehrangelas' back on the map ;)
About 30
Here are some links:
http://www.mees.com/Energy_Tables/crude-oil.htm
http://tonto.eia.doe.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm
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does OPEC produce? I think this article is on to something but it needs more investigation.
I heard Cuba is allowing China to explore in the Gulf of Mexico. . .