Editorial comment

	Vol. 231 No.5
PRAMOD KULKARNI, EDITOR

More is less, but less can be more

On March 31, US President Barack Obama announced plans to open 157 million acres for oil and gas leasing on the East Coast, in the eastern Gulf of Mexico and in northern waters offshore Alaska (see the article, Poised for seismic activity in the Atlantic). The new acreage comes with innumerable “ifs” and “buts”—a case of how more is less. The new areas will be available for 2012–2017 lease sales only after environmental impact assessments and public hearings. The US Congress may yet renew its expired annual ban on exploration on the East Coast. In the eastern Gulf of Mexico, drilling must take place 125 mi beyond the Florida shoreline. There is little or no oil and gas infrastructure in these regions, and new seismic surveys will be needed to better understand the resource potential, which will take decades to explore and develop (see figure).

Meanwhile, the US coastal areas that we know have significant potential hydrocarbon resources near infrastructure remain off limits. Former President George W. Bush had approved the leasing of Bristol Bay acreage on Alaska’s southern coast during the 2007–2012 period, but the plan was withdrawn after environmental groups sued to block the sale. Now President Obama has made Bristol Bay a newly protected area. New lease sales in the Chukchi and Beaufort Seas will have to wait for a US Geological Survey resource assessment, environmental impact studies and public hearings.

President Bush had also proposed three lease sales off the coast of California. On April 16, ExxonMobil announced the completion of the world’s longest well from the Heritage platform in federal waters west of Santa Barbara, California. Output from the well in Santa Inez Field will be equivalent to 5.8 million bbl. Under the Obama administration, the Pacific Coast and the North Atlantic are untouchable due to “lack of local support or low resource potential,” according to the Interior Department. If US oil and gas exploration was possible purely on the technical analysis of resources with due attention to environmental concerns, would the country still be importing 69% of its oil and 17% of its gas?

US offshore areas are being opened up for exploration, but areas with significant potential remain off limits.

Disaster in Venezuela. While some US government actions handicap efficient resource development, government policies in other parts of the world have had devastating effects on the local oil and gas industry. Consider the situation in Venezuela, which has nearly 100 billion bbl of proven oil reserves. The country had achieved average production of 3.2 million bpd when President Hugo Chavez and his populist movement came to power in 1998. By 2008, oil production had declined to 2.5 million bpd, whereas the country could have experienced steady growth under responsible political leadership.

Growth in Norway and India. Supportive government policies can have a positive impact on oil and gas development. When the majors started cutting back activities offshore Norway in the early 2000s, the Ministry of Petroleum and Energy reduced the tax on new exploration to 22% from 78% and conducted road shows for its licensing rounds to recruit new entrants such as Talisman, Marathon and GDF-Suez. These steps helped achieve an exploration resurgence on the Norwegian shelf.

In India, the government introduced its New Economic Licensing Program (NELP) in 1999. The NELP licensing rounds have contributed to the discovery of a major deepwater gas field on India’s east coast by Reliance Industries and onshore oil discoveries by Scottish independent Cairn Energy.

Less is more. Despite the politics of leasing public lands, several US government agencies have had a significant positive impact on oil and gas production. For example, the US Geological Survey (USGS) does an excellent job of resource assessment. The Minerals Management Service (MMS) manages well its regulatory and leasing functions. Early research supported by the National Energy Technology Laboratory (NETL) has contributed to advances in horizontal drilling and fracturing that have helped to crack open the shale formations for gas production. As such, a small R&D investment has helped trigger massive resource development. The adage “less is more” certainly applies here. Here’s wishing for more of this type of “less.” 

Postscript. This column was written in Stavanger over the April 17–18 weekend while waiting for the air travel ban to be lifted due to the Icelandic volcanic ash drifting over Europe. The volcano eruption is a reminder of the environmental damage the Earth inflicts upon itself. The oil and gas industry in Norway operates under a carbon tax of $65 per ton and is implementing several schemes for carbon capture and storage (CCS). Humankind can implement CCS, but how will we install scrubbers on volcanoes for ash capture and storage (ACS)?