Brad Knickerbocker of the underappreciated Christian Science Monitor has written an informative article on the revival of the offshore drilling debate.
The US Interior Department's Minerals Management Service (MMS) has proposed leasing areas offshore Virginia, the Gulf of Mexico, and Alaska for energy development. Oil and gas developers are happy with the proposal - as far as it goes. "It's a step in the right direction," says Mike Linn, chairman of the Independent Petroleum Association of America.
"However, the majority of the Outer Continental Shelf (OCS) remains off- limits," he says, noting that some 90 percent of US waters have drilling bans - an area whose potential resources could replace Persian Gulf oil imports for several decades.
In its recent five-year leasing proposal, MMS estimates undiscovered resources to include 85.9 billion barrels of oil and 419.9 trillion cubic feet of natural gas technically recoverable from all federal offshore areas.
At $70 per barrel that oil is worth $6 trillion dollars or about half of one year of the United States GDP. The oil, if extracted, would generate local jobs and replace imports as well as lower prices. At $7 per 1000 cubic feet (close to current prices but half of the peak price hit several months back) the natural gas would be worth about $3 trillion. So all told perhaps $9 trillion worth of energy is sitting out on the US continental shelf waiting for exploration to find it.
A substantial contingent in Congress including 115 House members favor a moratorium on drilling in areas closer to coast lines. But if we really are entering the "Peak Oil" period and the price of oil continues to rise then I'm betting the opposition to coastal oil drilling will lose their battle. Let gasoline hit $4 a gallon and the demand for more oil exploration is going to get pretty loud. Let gasoline hit $6 a gallon and I expect to see oil rigs going in within site of the expensive coastal houses owned by rich folks - just like the oil rigs off of Santa Barbara (which I think look pretty cool lit up at night).
While the environmentalist opponents to offshore drilling are eventually going to lose I think they've served a few useful purposes. First off, they've forced oil companies to use better safety equipment and methods to reduce the risk of accidents. Second, they've delayed drilling in many areas while safety technologies have advanced. So when drilling finally happens the risk of accidents will be much lower. Thirdly, and perhaps most importantly, by delaying offshore oil and natural gas extraction the environmentalists have kept oil and natural gas in the ground until it becomes much more valuable. When "Peak Oil" hits that offshore oil will cushion the blow of the transition period.
For "Undiscovered, technically recoverable oil in the US" (and since it hasn't been discovered there's a substantial error in this estimate) a chart at the bottom of the article shows Alaska as containing one third of the remaining undiscovered offshore oil and one half of the undiscovered onshore oil in the United States. The Gulf of Mexico comes in a close second. Alaska and the Gulf of Mexico are what we have left.
The United States finds itself in a worsening financial situation due to a large trade deficit whose growth is partially driven by rising oil prices. When the dollar declines as a result of the trade deficit that will effectively lower the cost of oil for countries whose currencies appreciate against the dollar. Therefore their demand for oil will rise and that will drive up the price of oil even higher in dollar terms.
In the first chapters of its semi-annual World Economic Outlook, the IMF said that over the past two years, higher oil prices had accounted for one-half, or about one percentage point of GDP, of the deterioration in the US current account.
Oil prices are now high enough to provide incentives to develop coal for a wider range of uses. Perhaps an accelerated shift toward coal will put a longer run ceiling on the price of oil. But right now the United States would benefit financially from scaling up extraction of offshore oil and natural gas. How about a tax on new offshore fields to fund research on photovoltaics, batteries, nuclear molten salt reactors, and other non-fossil fuel energy sources? A small tax could fund billions of dollars of energy research per year.
| Share | | Randall Parker, 2006 April 13 07:58 PM Energy Policy |
By 2020, the oil reserves of both Russia and Iran are expected to get depleted, and this means higher prices of oil, and a lot more instability in the Middle East. As a corollary, we only have a couple of more years to start a new Bronx Project that will allocate at least $150 billion per year for energy research in all areas. Otherwise the American economy will be devastated. Note that some well educated American families who are mentally and physically fit to find high paying jobs in Europe and Asia, have already started to do so. This means that a brain drain away from the United States, is a danger that will affect National Security. The highest quality DNA is in danger of moving offshore.
Another factor is the confluence of carbon sequestration and enhanced oil recovery. Oxygen-blown IGCC plants yield much (at least 1/4, and much more if desired) of their carbon as CO2 in the fuel gas at the scrubbers; this CO2 can be co-captured with H2S and co-sequestered. And a large fraction of US electricity consumption is in or near regions of historical oil production (Pennsylvania, E. Texas).
When carbon sequestration yields more revenue from oil production than it costs, on-shore production could help us over the peak.
E-P,
Any idea on the costs of CO2 sequestration as compared to what the CO2 would need to cost to get oil out of the ground? I watch for those sorts of numbers but never see them.
I don't know, but if they are making it pay at Weyburn already it can only get better if we pick the sites of new IGCC powerplants according to where CO2 is most productive.
There are other techniques for making relatively pure CO2 from a powerplant, including chemical looping combustion and direct carbon fuel cells. Neither requires an air separation plant, as oxygen-blown IGCC would.
It is pretty hard to argue against Parker’s thesis that higher oil prices means higher interest in offshore drilling. It is very reasonable to point out, as well, that the environmental impact of coastal residential development by the loudest critics of offshore drilling is much greater than the impact of the drilling itself. Environmental studies of the impact of the huge oil spills on the US East Coast produced by German U-boat attacks on Allied tankers in the early days of WWII found no detectable effects decades later. If the drilling safety and environmental protection regulations are actually enforced, offshore drilling can be done safely and with acceptable environmental risk under normal circumstances. However, if global climate change continues to accelerate and generate increasingly powerful tropical storms as research strongly suggests, there may be no way to safely drill for offshore petroleum. The 05 hurricane season produced massive oil spills which were overshadowed by the unprecedented coastal damage of the storm itself. The costs of damage to offshore petroleum infrastructure directly resulting from the storms could bring drilling to a halt if 05 turns out not to be a fluke, since robust infrastructure construction and insurance costs could increase much faster than the price of oil. Thus, ironically, the environmental effects of hydrocarbon consumption could indirectly lead to the impracticality of expanding offshore drilling.
In any case, we cannot drill our way out of declining petroleum production in the US, which peaked in 1970 and has been declining ever since. Our national security demands that we aggressively pursue alternate sources of transportation fuels and increased transportation efficiency, since virtually all of the increase in oil imports can be attributed to the transport sector, lead by hugely inefficient SUVs. Gas-to-liquid, coal-to-liquid and new biofuels technology combined with rational fuel efficiency standards can reduce imports much faster than any increase in drilling.
I know DCFC's aren't out of the lab yet (though I'd love them to be in widespread use - they'd let us run the country on bio-charcoal) and CLC seems to be just a concept at this point. Unfortunately, we need to start building powerplants yesterday and oxygen-blown IGCC is the only option we have that we can build at that scale today.
DCFC seems like nonsense speculation toys right now until we can get some idea on cost. Then they will have to either be compact enough to serve transportation needs, or they will have to be cheap enough to compete with nuclear for baseload electricity generation, or they will have to be flexible enough to compete with natural gas for peaking power.
I suspect by the time we've got there we'll allready be putting a premium on coal as a feedstock for synthetic liquid hydrocarbons.
DCFC is closer than many of these lab technologies, because it is essentially a molten carbonate fuel cell (MCFC) with a novel fueling system.
It deserves a lot of attention. Imagine our navy running on silent fuel cells which get as much energy out of a cubic foot of charcoal as current engines do from a cubic foot of fuel oil.
I'm imagining how much easier it is to pump fuel oil and how much cheaper a diesel block is.
But maybe someday years away.
how much cheaper a diesel block is.
Is a diesel block really cheaper? A DCFC needn't contain any expensive materials. No noble metal electrocatalysts, for example.