Monthly Archives: July 2012

Industry faces more governmental red tape to drill on public lands

Not surprisingly, the oil and gas industry and Obama’s Administration find themselves at odds regarding offshore leases and opening up more public lands for drilling. A common complaint since the Deepwater Horizon disaster in April 2010 has been that the Interior Department has been purposefully either blocking domestic oil and gas production through lease rejections or through approving them so slowly to make them not worth pursuing.

Recently the Obama Administration came out with a new claim to deflect the industry’s complaints elsewhere by claiming that U.S. oil and gas producers are sitting on millions of acres of idle government land leases.

Secretary of the Interior Ken Salazar says that if producers really are sincere about wanting to increase energy production domestically, that they would activate millions of acres of public land already lease to them. A report released by the Department of the Interior claims that of the 36 million acres leased offshore for oil and gas production, 72 percent sit idle.

The industry claims the accusations are “absurd and willfully misleading.”

Jack Gerard, American Petroleum Institute CEO says just because a lease doesn’t fit the government’s definition of active doesn’t mean it’s idle. With only 30 to 40 percent success rate in finding oil, many factors could affect why a lease is idle:

– With a low success rate, a producer has to narrow down its leases to find the lease good enough to drill on

– The lease may be currently uneconomic to extract – take the Bakken fields for example – up until 5 years ago most of those leases now producing millions of barrels of oil a day were sitting idle because the technology was invented yet to blast through those fields.

– Governmental red tape and delays could take up 19 years from the time it takes to prospect, drill and wait for government approvals – during which part of that wait the government considers the lease to be idle, says Kathleen Sgamma, vice president of government and public affairs for the Western Energy Alliance. Sgamma also contends the government can move energy projects like the offshore and domestic leases through more aggressively if it wanted to because that is exactly what it has done with wind and solar projects.

“It’s only politics that accounts for the different treatment accorded oil and gas,” Sgmama said.

Erik Milito, API director of upstream and industry operations claims the government is fallacy: ‘We don’t have to open up any more public land to you, because you’re not using the leases you’ve already got’–is the belief “that you just put a pipe in the ground, and you’re ready to go–that there’s always oil there.”

The Interior’s reaction to API’s explanation: “The report speaks for itself. The notion that we have somehow locked up federal lands clearly doesn’t square with the facts. Our goal is to continue expanding safe and responsible development and we will continue to take steps to deliver on that priority.”

You can check out the government’s full report on the idle leases here.

What has your experience been with drilling on public lands? What red tape have you run into?

Source: SherWare Blog

Could Energy Independence be around the corner?

Energy independence for the United States could be just over a decade away – according to energy experts and analysts. While energy independence has been a touting point for Presidents coming into office since Richard Nixon in the 1970s, few have done much to help accomplish it.

Phillip Verleger, a respected and accurate economist, argues that by 2023, the United States will be energy independent in the sense that the country will export more energy than it imports. This change in the energy equation could lead to America having access to energy supplies at a much lower cost than other parts of the world.

Thanks to changes in technology for horizontal drilling and hydraulic fracturing, the United States is estimated to have enough gas to sustain today’s rate of production for more than a century. This translates across the country, in places that were otherwise once considered stagnant, into economic growth, new jobs and rigs popping up across the country in new discoveries in the Bakken fields and Utica shale.

When President Nixon began “Project Independence” in reaction to the OPEC oil embargo in 1973, the goal was to “achieve energy self-sufficiency for the United States by 1980 through a national commitment to energy conservation and a development of alternative sources of energy.”

Today it’s the same scenario and goals, but we’re actually much closer to achieving it. In the 1970s after the 1973 oil crisis, the United States was importing nearly half of its petroleum needs at insanely high prices and it was widely believed that the country was nearly out of natural gas. Fast forward to now. The US Energy Information Administration estimates that by the end of the decade, half of the crude oil America consumes will be produced domestically and 82 percent will come from the U.S. side of the Atlantic.

In a report released earlier this summer by Citigroup analysts, the United States is the world’s fastest-growing oil and natural gas producer. Including the output from Canada and Mexico, North American is the “new Middle East.” Similarly, energy billionaire and no stranger in this industry, T. Boone Pickens, predicts the United States can at least end oil imports from OPEC countries through new drilling and by shifting diesel-consuming vehicles to natural gas. All other oil needs should come from politically stable allies such as Canada, Pickens adds.

Even if the country were to end its imports from OPEC countries, as a country with vested interests in the Middle East still – regarding Israel and keeping nuclear weapons and technology from spreading, it is still susceptible to big influxes in the state of the Middle East. That coupled with the countries growing unease with hydraulic fracturing and the debate of contaminating water supplies seems to be some of the only hurdles yet to cross.

What else do you foresee happening before the country reaches energy independence?

Source: SherWare Blog