| By Joe Eagleton - Jun 4th, 2009 at 5:31 pm EDT |
| Also listed in: Front Page Posters |
You may remember that last week, I wrote about legislative leaders' quest to open up Florida's Gulf Coast to drilling. Well now, the battle over whether or not to allow oil drilling off our coastline may be coming to a ballot box near you.
According to The News Service of Florida, "at least one group is attempting to craft and promote a constitutional amendment to not only allow but require the state to push for the discovery and recovery of oil in the Gulf of Mexico up to 125 miles from shore."
And although it's a long road to climb in order to get a proposed amendment on the ballot, this just goes to show that the question of whether or not to drill is alive and well in Florida's political circles.
I won't reiterate the point I made a week ago about why this is a terrible idea, but I can't help but wonder what impact this campaign will have on the legislature's push to open the Gulf's waters. As one commenter last week noted, proponents of offshore drilling do a great job of brainwashing the public, and if the spin machine starts early this election cycle, we all better be prepared to fight back before it's too late.
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These are excerpts from an investment newsletter I receive.
According to the EIA (2007 data rounded to billions), total US "proven reserves" of conventional oil are about 21 billion barrels, of which 4 billion are proved offshore reserves. US demand is currently about 6.7 billion barrels per year, so if we relied solely upon our proven reserves and were able to produce it as quickly as we like, we'd only have about a three-year supply.
The EIA estimates that "technically recoverable undiscovered" offshore oil in the US is in the range of 59 billion barrels--nearly three times as much as our remaining "proved reserves." Most of it, about 45 billion barrels, is expected to lie in the Gulf of Mexico. The remaining 31% is what was unavailable under the Congressional moratorium, but according to a testimony before the House last month by acting EIA administrator Dr. Howard Gruenspecht, only about 20% of the total technically recoverable oil in the OCS (outer continental shelf) has been under moratoria. The "Drill Baby Drill" crowd claims that if only we'd drill the OCS everywhere, we could achieve "energy independence." But if only 20-31% of the OCS has been off-limits, why hasn't the rest been drilled yet?
One part of the answer is that there simply isn't any oil in some of those areas. Last July, John Hoffmeister, former CEO and president of Shell Oil's US operations, told CNBC "The industry is pursuing the leases it has, but to be blunt, the prospective nature of many of those leases is very low. And you don't go drill oil where you know it doesn't exist."
The second part of the answer is also simple: poor economics. Morgan Stanley recently reported that enough deepwater projects have been scrapped in the global economic downturn to reduce future crude supplies by as much as 2.4 million barrels per day (mbpd) by 2011, a substantial chunk of anticipated supply. Since August 2008, the company reported that no new lease contracts had been awarded, but 11 orders were canceled and 46 more were delayed.
Finally, we must also address the flow rate of any new domestic oil. True "energy independence" would mean producing 18 to 20 mbpd, not the roughly 5.5 mbpd we are producing today. Could we do that? Through drilling alone, the answer is "NOT EVEN CLOSE". In total, its estimated that if all limits on drilling were removed, including the OCS and ANWR, we could only increase US oil production by a maximum of 2-3 mbpd. That new production would come online slowly, and the additional flow would be hardly noticeable as it compensated for the loss in conventional oil production due to sheer depletion.
Did I hear someone say ethanol, biofuels, electric cars?