Blog Archives
Wrecking a Nation: Oil, Dependency, and Redistribution
Here’s how the economic and political system of a nation is destroyed.
Every price increase of just a dime per gallon of gasoline at the pump extracts approximately $5 billion from the pockets of U.S. consumers over the course of a year.
On top of killing family budgets, with a dollar per gallon jump at the pumps picking our pockets of $50 billion per year, there is on the macro level an inverse relationship between the price of oil and the overall health of the economy — oil price hikes deliver less job growth, less demand for labor, more unemployment, more poverty, more inequality, more inflation, lower real income increases, and smaller advances in the standard of living.
Additionally, higher oil prices directly cause greater amounts of U.S. capital to be exported, both to pay the higher prices and to pay for the growing levels of imported oil.
In 1985, the U.S. imported 25 percent of its oil usage. Today, it’s 61 percent. And still we are placing restrictions on increases in domestic production, both for oil and other sources of energy.
A few days back, President Obama, rather than sticking around a couple hours to explain to the American people or to the U.S. Congress why we were going to war in Libya, flew off to Brazil to hand out a permit to allow deep sea oil drilling in the Gulf of Mexico to Brazil’s state-run oil company, Petrobras. Capitalist companies in America need not apply.
This particular foreign deal was an especially snug and nostalgic fit for Obama. Brazilian president Dilma Rousseff is somewhat of a Latin form of Obama’s old Weather Underground chum Bernardine Dohrn.
In earlier days, Rousseff, a former Marxist guerrilla, was charged with running with a gang of redistributionists who accumulated revolutionary capital by way of kidnapping foreign diplomats for ransom.
A top priority for Rousseff today mirrors the “spread the wealth around” objective that Obama stated to Joe the plumber.
Dohrn, just home from a trip to Cuba in 1969 where she hoped to pick up some pointers on how to impose a “classless” society on the United States, displayed her true psychopathic colors in a speech she made to the Weathermen’s “War Council.” Speaking elatedly of the murders by the Charlie Manson gang of actress Sharon Tate, coffee heiress Abigail Folger, and three other people, Dohrn proclaimed, “First they killed those pigs, then they ate dinner in the same room with them, then they even shoved a fork into the victims’ stomachs! Wild!”
That’s the fully hateful Bernardine on public display, seeing herself as a new George Washington, a revolutionary fighter for a new nation. It’s the same role, except this founding mother was in serious need of a super-sized bottle of antipsychotic drugs and a super-tight straight-jacket.
Of all the places for candidate Obama to kick off his political career in 1995 in his first run for the Illinois State Senate, he picked the living room of Bernardine Dohrn and husband Bill Ayers, co-founder of the Weather Underground and, more recently, the national vice president for curriculum studies at the American Educational Research Association.
I’d have kept up my guard when Bernardine sashayed out of the kitchen and began circulating around with the hor dourves and metal forks.
In any case, it’s no surprise that things are coming apart, especially on energy. “If somebody wants to build a coal-fired plant, they can,” pronounced Obama during the presidential campaign. “It’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.”
What’s the end game? “Suicide Mission Accomplished”?
Ralph R. Reiland is an associate professor of economics at Robert Morris University in Pittsburgh.
Related articles
- Oil Forever! (mb50.wordpress.com)
- The Vetting: Obama, Radical Islam and the Soros Connection, Part I [Video] (johnmalcolm.me)
- New Film “The Unvetted” Exposes Obama’s Communist Cover-up (askmarion.wordpress.com)
- Smoking Gun on Obama’s Association With Karl Marx Himself (moonbattery.com)
- The Most Important Press Conference Ever Held at Any Time in U.S. History: Part I (askmarion.wordpress.com)
- The Vetting: Obama, Radical Islam and the Soros Connection, Part II [Video] (johnmalcolm.me)
- SDS Port Huron 1962 Statement may reveal much of the Obama Agenda (asktheblogster.blogspot.com)
- Judge Napolitano: Nobody Should Be Surprised About Obama’s Redistribution Comments (foxnewsinsider.com)
Gulf index still shows oil permits behind
By Debbie Glover
St. Tammany News
Before oil spill, deep water drilling permits were being issued at a rate of an average of 7 per month. Today, only 4 are being issued on average a month.
Things are not much better for shallow water permits. While an average of 7.3 permits are being issued a month, about 14.7 permits per months were issued before the oil spill.
In addition, the number of days it is taking for a plan to be approved is now 115, compared to the historical average of 61 days. All deep-water plans that include any type of drilling activity must now undergo an environmental assessment process; for those plans requiring them in 2011, the average approval time is 235 days, significantly higher than the overall average approval time. Additionally, in 2011, 37 percent of plans submitted to BOEMRE are being approved, or about half of the historical 73.4 percent approval rate. At a St. Tammany West Chamber of Commerce meeting earlier this year, Sam Giberga, senior vice president and general counsel of Hornbeck Offshore Service said the typical cost of a well is $120 million. The success rates of wells is about 15 percent. “You’ve got to drill a lot wells to get oil,” said Giberga.
“Companies are dying every day,” he said. “Each barrel of oil that is used has to be replaced and it is getting harder and more expensive to replace it.” Giberga said that from the first leasing of the territory to a working, producing drilling rig is about five years. Plans must be approved, testing and explorations are done long before the rig is built. Therefore, even though the statistics that are released show a permit has been issued, this does not mean a rig will suddenly appear and produce oil.
In fact, some of those permits that have been given since the moratorium was declared over last October are permits that are being re-issued from last year, not new wells that can drill that day and oil will flow. Since last October, only four drilling plans have been approved. There is a backlog of plans pending approval for both deepwater and shallow water in exploration and development.
With the new regulations that have been issued by the executive branch, new sources of conflict are arising because of environment assessments that are now required for all permits, spurring environmental groups for the first time regarding drilling in the Gulf of Mexico.
There is a lot of confusion over the new regulations. “There exists now a cloud over the industry. Do we need to rebuild existing structure? What kinds of adjustment must be made? Other questions entering the minds of the industry are what’s coming into the future?” asked Giberga. When so much capital is needed prior to realizing any return, companies are asking if it’s worth it.
The lack of drilling is also affecting other industries. “Shutting down rigs has caused a ripple effect,” said Giberga. “There is a web of infrastructure that depends upon this industry, and if the assets leave, they won’t be coming back… There is a direct threat to companies and the country at large.”
Sadly, many states around the country still don’t understand the plight of the industry in the Gulf. For one thing, Giberga confirmed that it is true that other countries are drilling in areas of the Gulf not regulated by the United States. In other words, drills from Mexico, Venezeula and other countries can drill in other parts of the Gulf and could cause a spill due to lack of safety or poor decisions that would still effect the United States’ coastlines, not to mention the economy.
The affects of the new regulations on permits and plans and the long range energy economy will be seen for many years to come. Meanwhile, the permits are being approved—very slowly.
Related articles
- Offshore Vessel Operators Suffer As Gulf Oil Output Sags (mb50.wordpress.com)
- Push for permits in Gulf of Mexico (mb50.wordpress.com)
- Obama’s obligation to free up Gulf oil (mb50.wordpress.com)
- Feds approve Murphy drilling project using Helix emergency equipment (mb50.wordpress.com)
Obama’s obligation to free up Gulf oil
More oil-drilling permits would bolster economy and decrease deficit
By Lori LeBlanc The Washington Times
One year ago last week, President Obama lifted his moratorium on deepwater drilling that five months earlier had halted operations on 33 rigs producing energy in the Gulf of Mexico. Since then, the industry has worked tirelessly to comply with new federal regulations and permitting requirements, while independently developing and implementing operating practices designed to further enhance safety and environmental protection on deepwater rigs. Yet a full year after the moratorium was lifted, federal permitting for drilling in the Gulf continues to greatly lag behind America’s demand – and capacity – for domestic energy development.
Every day, thousands of Americans whose livelihoods depend on a healthy Gulf energy industry feel the impact of the Gulf slowdown through lost wages, delayed jobs and a general sense of unpredictability about the future of an industry they count on to put food on the table. Local, state and federal government budgets also feel the impact through decreased sales tax and royalty revenue. The Gulf energy industry stands ready and waiting to provide jobs to a nation desperately in need of them. It’s high time to put American energy back to work.
In the wake of the Gulf spill, industry and government have collaborated in an unprecedented effort to rethink and re-engineer safety and response procedures and capabilities in the Gulf of Mexico. Workers are ready to get back to work fueling this nation. The rest lies in the hands of the Department of the Interior, whose regulators verify compliance and issue permits for exploration and drilling operations. Unfortunately, this permitting process continues to move at a pace that does not reflect an industry’s capability to invest and create good-paying jobs.
Permits are essential to the industry’s viability. Since the deepwater moratorium was lifted, only 14 permits have been issued for unique new wells allowing operators to drill to full depth for the purpose of production. For such a capital-intensive industry, where each new deepwater drill ship costs about $1 billion and employs hundreds of workers, those 14 permits over an entire year are simply insufficient to meet production demand or even to keep rigs in the Gulf. Of the original 33 rigs affected by the moratorium, 10 have left the Gulf in favor of markets where permitting is more predictable and transparent. Given the time and expense required to move these floating factories, it’s unlikely they’ll return anytime soon.
The most glaring loss, however, is the significant job opportunities forsaken each and every day as the permitting slowdown lingers. A recent study by IHS CERA concluded that a more-efficient and timely permitting process could create more than 200,000 new jobs in the United States, one-third of which would be generated outside the Gulf region in states like California, Florida, Illinois, Pennsylvania and New York. In today’s world, that amounts to a stimulus package in itself – and one that doesn’t require American taxpayers to foot the bill.
In fact, a healthy Gulf industry puts money back into the pockets of American taxpayers via revenue flows to the U.S. Treasury. The offshore industry paid $8.3 billion in royalties and $9.4 billion in new lease bids in 2008. In 2010, those numbers shrank to $4 billion in royalties and $979 million in lease bids. While the numbers for 2011 aren’t in yet, they’re likely on track with 2010 figures. Yet, according to the IHS CERA study, an industry operating under an improved permitting process could generate $12 billion in tax and royalty revenues by 2012.
The last ripple effect of the permitting slowdown may not pinch Americans today, but it has the potential to hit our pocketbooks in the months and years to come. By allowing rigs to depart the Gulf and discouraging the large-scale investment necessary to meet our future energy needs, our government’s lack of urgency to restoring Gulf energy puts us all in a precarious position. If and when we decide to harness the true potential of the Gulf, we may find that the investment and equipment simply isn’t there. This translates to greater reliance on foreign suppliers, less control of our own energy supplies, and living in the hope that unforeseen political developments somewhere overseas don’t push prices at the pump even higher.
The Gulf has a lot to offer Americans: jobs, revenue and a valuable domestic energy supply. A multitude of American workers are motivated to get back to work today. Virtually every American stands to gain by encouraging investment in domestic energy production. It’s time for our government to clear the permitting bottlenecks for Gulf drilling activity and get this nation back to work with American energy.
Lori LeBlanc is the executive director of the Gulf Economic Survival Team.
Related articles
- Obama’s Interior Chokehold on America (mb50.wordpress.com)
- Is Mexican Gulf Energy Production Recovering? (mb50.wordpress.com)
- Family firm still struggling, 18 months after Gulf oil spill (mb50.wordpress.com)
- Collateral Damage: Lost Gulf Rigs from Obama Obstructionism (10 down, more to go?) (mb50.wordpress.com)
- USA: Chevron Strikes Oil in Deepwater Gulf of Mexico (mb50.wordpress.com)
- Push for permits in Gulf of Mexico (mb50.wordpress.com)
- By Blocking Gulf Drilling, Obama Costs Jobs and Raises Gas Prices (usnews.com)
- Obama Doesn’t Care About Creating Jobs (mb50.wordpress.com)
- Rigged For Failure (mb50.wordpress.com)
Breaking Precedent: Oil Firms Face Liability Protection Challenges
HOUSTON —The U.S. government broke precedent by issuing citations to contractors Halliburton Co. and Transocean Ltd. in the Deepwater Horizon oil spill, along with rig operator BP PLC.
While now facing greater scrutiny from regulators, contractors in the oil-service industry have considerable liability protection to fight the citations and any subsequent fines, legal experts say. They also have enough market muscle to strengthen liability protection in their contracts with oil companies.
Previously, U.S. regulators have held the rig operator responsible for whatever happens under its watch. The operator hired contractors, who perform drilling, seismic or cementing operations and whose contracts protected them from any liability.
That was upended by the Deepwater Horizon mishap in April 2010, which resulted in 11 deaths, the biggest accidental marine oil spill in history, and tens of billions of dollars in costs. BP said blame also falls on Halliburton, which was in charge of cementing the failed well shut, and Transocean, the drilling contractor that owned the Deepwater Horizon rig. U.S. investigations have widely cast the blame among all three companies.
The citations, issued Wednesday, set a precedent for holding contractors at least partially responsible for such accidents, and may increase the contractors’ exposure to civil suits from anyone claiming damages from the spill, analysts said.
The contractors have pledged to fight the accusations. Halliburton said that it is fully protected against penalties and losses from the Deepwater Horizon incident by its contract with BP. Transocean also said it intends to appeal.
However, if the courts determine that the government has the right to issue a citation to oil-service contractors, there is no contract that will protect them from the fine, according to Larry Nettles, an environmental attorney with Vinson & Elkins, a Houston law firm. “In most jurisdictions the courts do not allow indemnification for fines and penalties, because it defeats the purpose,” which is to punish bad behavior, Mr. Nettles said.
Still the industry is expected to bulk up its contracts even more in the wake of the regulators’ action, legal experts say, to get as much liability protection as possible. The contractors currently have considerable bargaining power to win such new concessions from rig operators on contract protection. Relatively high oil prices have led to a shortage of drilling crews and have put oilfield services at a premium, giving the contractors the upper hand in negotiations.
“When oil prices are high and there’s lots of activity, service contractors can drive a very hard bargain,” said Owen Anderson, a professor of law specializing in energy at the University of Oklahoma.
(c) 2011 Dow Jones & Company, Inc.
Related Posts:
- New Federal Report Spreads Blame in Gulf Blowout, Spill
- BP Contractors Could Face Fines Over Gulf Oil Spill
- BOEMRE Looking to Expand Oversight to Drilling Contractors
Related articles
- Oil Firms Face Liability Protection Issues (online.wsj.com)
- BP Contractors Could Face Fines Over Gulf Oil Spill (gcaptain.com)
- BP Contractors Could Face Deepwater Fines (online.wsj.com)
- Serious New Regulatory Risks Arise for Oil Contractors (BP, RIG, HAL, CAM, SLB, BHI, NOV) (247wallst.com)
U.S. Legislators Want Repsol to Leave Cuba
Thirty-four U.S. lawmakers on Wednesday asked the Spanish oil company Repsol to keep out of Cuban waters, saying the firm’s pending offshore drilling plans would support the Castro regime and “bankroll the apparatus that violently crushes dissent.”
“The decaying Cuban regime is desperately reaching out for an economic lifeline, and it appears to have found a willing partner in Repsol to come to its rescue,” said the author of a letter to the company, Rep. Ileana Ros-Lehtinen, R-Fla.
The company says it could begin exploratory drilling as soon as December, a prospect that has the Florida and federal governments scrambling to develop contingency plans for a spill even as many Floridians have fresh memories of last year’s BP spill in the Gulf of Mexico.
“We are working on spill response and we’re working with the federal, state and local agencies – very closely,” said U.S. Coast Guard spokeswoman Marilyn Fajardo.
The possibility of exploratory drilling also has federal agencies grappling with the international and political implications on the U.S. embargo with Cuba.
Ros-Lehtinen, the chairwoman of the House Foreign Affairs Committee, warned Repsol in the letter that any drilling operations it conducts in Cuban waters could provide direct financial benefit to the Castro dictatorship. The company’s partnership with the Cuban regime also could violate U.S. law and may run afoul of pending legislation in Congress, she said.
Recently, representatives from several industry and environmental groups traveled to Cuba to check in on the country’s offshore plans. They included Lee Hunt, the chief executive of the International Association of Drilling Contractors, and William Reilly, a former EPA administrator and co-chairman of the White House task force that investigated last year’s BP oil spill.
The group also included Richard Sears, the former vice president of deepwater drilling for Shell, and Dan Whittle, an attorney for the Environmental Defense Fund.
Repsol spokesman Kristian Rix said the company had no comment on the letter from Congress.
The company, which has U.S. operations that include leases in the Arctic waters off the northern Alaska coastline, is in the process of bringing a drilling rig to Cuba.
Repsol in January 2010 signed a lease contract with the Italian energy company Saipem for drilling equipment. Repsol on its website describes the equipment as complying “with all the technical requirements and all the limitations established by the U.S. administration for drilling operations in Cuba.”
The Republican-led House Natural Resources Committee had scheduled a hearing on drilling in Cuban waters for last week, but it was postponed after Obama administration officials said they weren’t yet prepared to outline their overall response to offshore drilling in Cuba.
Some Republican members of the committee have complained in the past about Cuba’s ability to drill so close to the U.S. coastline even as a 125-mile buffer zone remains in place in U.S. waters off of most of Florida’s coast.
The congressional letter drew bipartisan support, with Florida Republican Reps. Mario Diaz-Balart, David Rivera, Tom Rooney, Vern Buchanan, Dennis Ross and Sandy Adams signing onto it; they were joined by Democrats Ted Deutch, Frederica Wilson and Debbie Wasserman Schultz.
Also signing the letter were: Rep. Dan Burton, R-Ind.; Rep. Steve Austria, R-Ohio; Rep. Joe Baca, D-Calif.; Rep. Paul Broun, R-Ga.; Rep. John Carter, R-Texas; Rep. John Barrow, D-Ga.; Rep. Robert Andrews, D-N.J.; Rep. Kurt Schrader, D-Ore.; Rep. Tim Murphy, R-Pa.; Rep. Jaime Herrera Beutler, R-Wash.; Rep. Cathy McMorris Rodgers, R-Wash.; Rep. Daniel Lipinski, D-Ill.; Rep. Heath Shuler, D-N.C.; Rep. Candice Miller, R-Mich.; Del. Pedro Pierluisi, D-Puerto Rico; Rep. Frank Pallone, D-N.J.; Rep. Jean Schmidt, R-Ohio; Rep. Brian Higgins, D-N.Y.; Rep. Thaddeus McCotter, R-Mich.; Rep. Steven Rothman, D-N.J.; Rep. Michael Grimm, R-N.Y.; Rep. Jason Altmire, D-Pa.; and Rep. Edward Royce, R-Calif.
By Erika Bolstad (Miami Herald)
Related articles
- Don’t talk oil with Cuba, lawmaker warns (mb50.wordpress.com)
- Chinese-built oil rig setting sail for Cuban waters (mb50.wordpress.com)
- At the Wellhead: once again, an effort to try to fix Mexico’s oil industry (mb50.wordpress.com)
- Cuba drilling next hurdle for U.S. (politico.com)
- US experts eye Cuba oil plans after BP spill (mb50.wordpress.com)
- Drill, Bebé, Drill (mb50.wordpress.com)
Obama’s Interior Chokehold on America
By Jim Adams
How could a bureaucratic bottleneck in the Gulf of Mexico cost the U.S. economy nearly $20 billion and wipe out hundreds of thousands of jobs as far away as Ohio, Pennsylvania and California? Unfortunately, with this White House administration, anything is possible.
President Obama recently announced yet another jobs initiative — knowing all the while that one very simple action on his part would indeed create new jobs, infuse federal and state budgets with billions of dollars, and make us less reliant on imports. But that didn’t happen.
On Oct. 12, 2010, Interior Secretary Ken Salazar said, “We’re open for business,” signaling that drilling for new oil in the Gulf of Mexico would resume. But, Mr. Salazar has an odd interpretation of the words “open for business.”
Eleven months after the Secretary’s announcement, drilling in the Gulf remains near a standstill. The government has used every stall tactic imaginable to delay permits and other administrative approvals that would help our economy and put hundreds of thousands back to work.
The Gulf Economic Survival Team (GEST) commissioned IHS Global Insight and IHS CERA Inc. to quantify the economic impacts of the government’s slow pace of permitting since lifting the moratorium. Their study revealed that the number of exploration plans and permit applications are on par with levels in 2009 through early 2010, clearly signaling the industry’s intent to return to full operations. Industry also has invested billions of dollars in well containment technology to stop a Macondo-size spill if it ever became necessary. So safety can no longer be blamed for permitting delays.
That leaves the Department of the Interior. The IHS study points to a backlog of project approvals. Despite their earnest efforts to process the growing stack of applications, regulators on the front line don’t appear to understand the new regulations that Washington D.C. has foisted upon them. The blame for this falls squarely on the shoulders of this Administration’s politically appointed bureaucrats, who know nothing of the complexities involved in safe and environmentally sound deepwater drilling. Naturally, they don’t let expertise or experience get in the way, they just pile on more regulations.
This politically minded bureaucracy comes at tremendous cost.
The number of people who depend on a thriving oil and gas industry is staggering. Another research study, by Quest Offshore Resources, found that energy production in the Gulf of Mexico employed 240,000 Americans in 2010. And not all of them worked directly for the oil and natural gas industry, as oil rigs need everything from steel pipes to IT support.
What’s more, the effects of the government’s continued foot-dragging isn’t limited to the Gulf. The study’s authors found that for every industry job tied to operations in the Gulf, three non-industry jobs are reliant in sectors such as manufacturing, construction and real estate. And for every three Gulf Coast workers, there’s one American employed elsewhere — in New York, Michigan, California, Oklahoma, Colorado, Pennsylvania, Ohio, Illinois and nearly every other state.
The Quest study also came to a distressing conclusion: Had the Administration truly lifted the moratorium last October, the industry would have created nearly 190,000 more jobs in the U.S. over a three-year period. That would have meant 8,500 additional jobs in California, where unemployment currently flirts with 12 percent; 10,000 more jobs in Pennsylvania and Ohio, manufacturing-dependent states; and in the President’s home state of Illinois, a total of 3,000 jobs.
Keeping Americans out of work. Denying struggling state and local governments billions of dollars in additional revenue. Making us more dependent on energy imports. Is this the change Mr. Obama says we can believe in?
Or can we only believe in shovel-ready jobs if they’re created by the alternative energy industry? Would we even be having this yearlong debate if solar energy producers contributed more than $12 billion a year in tax and royalty revenues to state and federal treasuries? What if hydro energy producers accounted for $44 billion of GDP? The only thing separating 190,000 Americans from a paycheck and states from more than $7 billion in local taxes is obvious: Political will.
President Obama talks about job growth, stimulating the economy and investing in innovation that will lead the way forward, but turns a blind eye to an obvious, if not practical, solution. Mr President: Lift your de facto moratorium on energy exploration in the Gulf of Mexico; business will safely do the rest.
Jim Adams is president and CEO of Offshore Marine Service Association, which represents the owners and operators of U.S. flag offshore service vessels and the shipyards and other businesses that support that industry.
Related articles
- Collateral Damage: Lost Gulf Rigs from Obama Obstructionism (10 down, more to go?) (mb50.wordpress.com)
- Is Mexican Gulf Energy Production Recovering? (mb50.wordpress.com)
- Bernard L. Weinstein: US energy resources worth the investment (mb50.wordpress.com)
- Shell Perdido: The first full field subsea separation and pumping system in the Gulf of Mexico. (video) (mb50.wordpress.com)
- USA: Chevron Strikes Oil in Deepwater Gulf of Mexico (mb50.wordpress.com)
- Louisiana Remains on the Receiving End of Washington D.C.’s Worst Regulations (mb50.wordpress.com)
- Family firm still struggling, 18 months after Gulf oil spill (mb50.wordpress.com)
- Obama Doesn’t Care About Creating Jobs (mb50.wordpress.com)
- Rigged For Failure (mb50.wordpress.com)
- Push for permits in Gulf of Mexico (mb50.wordpress.com)
New Oil Finds Around the Globe: Will the U.S. Capitalize on Its Oil Resources?
In a recent trip to Brazil, President Obama praised the Brazilians for their forward-thinking energy policy and said he wants America to be one of their “best customers.” Why, then, is he keeping American energy resources off limits?
By November 23, a team of 12 Congressmen and Senators will determine if they can agree on a way to cut at least $1.2 trillion dollars from the federal deficit. If they fail to agree, predetermined cuts will automatically occur, half of which will be to the Department of Defense budget.[i] One way to get revenues without taxation and spending is to allow the U.S. oil industry to do what countries around the globe are doing: drilling for oil, onshore, offshore, in the Arctic and elsewhere. A recent study by the American Petroleum Institute (API) finds that fewer restrictions on oil drilling could increase government revenues by $800 billion, increase U.S. liquids production by 50 percent, and generate 1.4 million new jobs by 2030.[ii] And, the United States can do that just by allowing the oil industry to develop oil resources here in the United States as other countries are doing in their countries: Canada, Norway, Cuba, Brazil, Russia, Israel, to name just a few.
Oil Finds and Development around the Globe
Brazil. Brazil has some 15 billion barrels of proved oil reserves in its sub-salt offshore fields. They lie in a 2 kilometer deep salt layer under the seabed that is estimated to hold up to 50 billion barrels of oil.[iii] These ultra-deep deposits are drilled at up to three times the normal pressure for offshore oil. By 2020, Petrobras, the country’s government-controlled oil company, is expected to produce 4 million barrels per day, double its volume today.[iv] Other estimates have production as much as 5 million barrels a day and 6.42 million barrel a day by 2020.[v] The sub-salt’s share of total domestic oil production is expected to increase from 2 percent in 2011 to 40.5 percent in 2020.[vi]
While the United States has oil offshore in the Gulf of Mexico and in the Atlantic and Pacific Oceans, the Obama Administration either has that oil off limits to exploration or is slow at approving leases since it lifted the drilling moratorium it put in place after BP’s accident in the Gulf. In Alaska, which has over 50 percent of the entire coastline of the United States[vii], fewer than 100 exploratory wells[viii] have been drilled in federal waters, while over 35,000 wells have been drilled in the Gulf of Mexico[ix]. Alaska has tremendous unknown potential for energy discoveries, but currently, final permits have not been issued to allow exploratory wells. But, during President Obama’s visit to Brazil earlier this year, he pledged that the United States will be a major customer for Brazilian oil.
Canada. Canada is rich in oil sands with 170 billion barrels in reserves. Environmentalists are against oil sands because their production emits more greenhouse gas emissions than the production of conventional oil. Studies have shown that the difference in emissions from well to wheel is only about 15 percent. Further, a new technology, developed by N-Solv, an Alberta Consortium, can extract twice the amount of oil as current methods and reduce greenhouse gas emissions from the process by up to 85 percent.[xi] But none the less, the dispute over the Keystone XL pipeline bringing Canadian oil into the United States is due mainly to the oil sands production issue.
Needless to say, whether the United States buys Canadian oil sands or not, someone will and that someone is most likely China, who has already bought into Canadian oil fields. In July, China’s largest offshore oil producer, Cnooc Ltd. agreed to buy OPTI Canada Inc. for about $2.1 billion a deal that has to be approved by both governments.[xii] Also, whether the United States allows Canada to build the Keystone XL pipeline or not, the United States will be importing Canadian oil sands, moving it by barge, rail, or truck, as we do now. An Ensys Energy & Systems Report, Inc. commissioned by the State Department estimated that rail alone could haul 1.25 million barrels of Canadian crude daily by 2030, nearly twice the amount of the proposed pipeline.[xiii]
Cuba. Cuba has 5 billion to 20 billion barrels of oil off its coast, just 70 miles off the Florida Keys. Soon, Cuban workers on a Chinese-built rig owned by Spain will be drilling in mile deep-waters. China has signed contracts with oil companies from Brazil, India, Italy, Russia and Spain and is in talks with China over lease deals. This oil find could make Cuba independent of Venezuelan crude, from which Cuba gets 60 percent of its oil. Due to our 49-year embargo with Cuba, U.S. oil companies cannot drill in Cuban waters, supply equipment there, or help in the event of an oil spill.[xiv]
Israel. Israel has an estimated 250 billion barrels of recoverable oil shale, second only to that of the United States, which has almost a trillion recoverable barrels. The 250 billion barrels compares favorably to the proven reserves of Saudi Arabia whose reserves total 260 billion barrels. It is estimated that the oil can be recovered at $35 to $40 a barrel using a new technique that does not use water. Israel Energy Initiatives indicates that the process is cleaner than that currently used to produce shale oil because the oil will be separated from the shale rock up to 300 meters beneath the ground, releasing water as a by-product. The extraction process involves heating the rock underground to approximately 325C, the level at which the carbon bonds in the rock start to “crack”. Production on a commercial basis is expected by the end of the decade with production levels beginning at 50,000 barrels per day, which will provide almost 20 percent of Israel’s oil consumption. [xv]
In contrast, the U.S. oil shale resources are mostly on federal lands in Colorado, Utah, and Wyoming, and the U.S. federal government is withholding those lease sales.
Norway. Norway had been seeing oil production declines since 2000 when its oil production peaked due to maturing oil wells. But that trend may be reversed due to two new finds in the North Sea. Statoil ASA has made two offshore finds totaling between 500 million and 1.2 billion barrels, which is among Norway’s top ten discoveries. The new well is less than ten feet from a dry well drilled in 1971.[xvi]
“This shows Norway still has the capacity to deliver world-class discoveries,” Tim Dodson, Statoil’s exploration chief, said. “It’s probably the largest offshore oil discovery anywhere in the world this year. It has given the entire oil industry renewed optimism.”[xvii]
Russia. Russia has opened a portion of its offshore area in the Arctic Ocean to drilling and ExxonMobil has obtained the rights to drill there, but the deal may need to be reviewed by the U.S. government. The United States Geological Survey estimates that the Arctic holds one-fifth of the world’s undiscovered, recoverable oil and natural gas. Russia’s economy is dependent on petroleum for about 60 percent of its export revenue. While Russia currently produces more oil than Saudi Arabia, its Siberian onshore oil fields are in decline, so the country needs to develop new areas.
This contrasts with the U. S. stance regarding drilling offshore Alaska where environmental restrictions and lawsuits by conservation organizations have held off exploration.[xviii]
The API Study
What could the oil industry achieve if restrictions on oil drilling in the United States were lessened? The American Petroleum Industry commissioned a study that assumed oil drilling would be allowed off the currently prohibited areas of the East and West Coasts, in waters off Florida’s Gulf Coast, in Alaska’s Arctic National Wildlife Refuge, and on most federal public land that is not a national park. It also assumed that it would get approval to build pipelines to accommodate a doubling of Canadian oil sands production and the continuation of the tax policies currently in place for the oil industry.[xix]
The API commissioned the study from energy consultants Wood Mackenzie, who found that domestic production of petroleum liquids would increase from 7.8 million barrels per day in 2010 to 9 million barrels per day in 2030 under current policies due to increased production from shale oil and deepwater drilling. However, if the industry could meet the assumptions of the study, domestic liquids production could reach 15.4 million barrels per day close to the 19 million barrels a day that we currently consume. That would create 1 million new jobs over the next seven years and 1.4 million by 2030. The industry already supports more than 9 million jobs throughout the economy. The study indicates that the United States can come close to producing enough new oil and natural gas to displace all non-North American imports within 15 years. More than $800 billion in cumulative new government revenue could be generated by 2030 and $127 billion by 2020 – equal to about two and a half years’ worth of current federal spending on roads. Most importantly, no new taxes or increased government spending is needed to accomplish the results of the study.
Conclusion
Around the globe, countries are drilling for oil onshore, offshore, and in oil shale deposits. But the United States is hampered by government rules and restrictions to developing its vast resources. Without increasing taxes and without increasing government spending, the oil industry in the United States could make us independent of non-North American oil imports. And in doing so, they could create jobs and add billions of dollars to government revenues. Why don’t we take the challenge?
Related articles
- USA: Chevron Strikes Oil in Deepwater Gulf of Mexico (mb50.wordpress.com)
- The Americas, Not the Middle East, Will Be the World Capital of Energy (mb50.wordpress.com)
- USA: BP Confirms Significant Resource Extension for Mad Dog Complex (mb50.wordpress.com)
- Bernard L. Weinstein: US energy resources worth the investment (mb50.wordpress.com)
- Drill, Bebé, Drill (mb50.wordpress.com)
- Chinese-built oil rig setting sail for Cuban waters (mb50.wordpress.com)
- Exxonmobil Battles U.s. Over Gulf Oil Discovery (mb50.wordpress.com)
Continents of the World
