Breaking the policy logjam with global demand on the rise

There can be no question that demand is on the rise, both in the US and globally. At current projections of world GDP growth, this global demand for energy may increase by over 50% by 2025, while the US’ demand could increase over 30% over the same time period, according to the Energy Information Administration. Developing nations will likewise require increasing amounts of energy as their economies modernize and raise the quality of life for their populations.

The strategic question, therefore, is: Where will this energy come from?

Some will come from renewable sources and we should continue to push for rapid research and development on this front. But widespread use of sources such as wind, solar, and biomass is still far off, and will likely only serve to replace a small percentage of demand over the next two decades. Hydropower in the US will probably continue to account for about 5% of power generation, but lacks opportunities for major expansion. Nuclear power, which currently supplies approximately 20% of US power generation capacity, is a potential source of new energy supplies, but negative public perceptions could impede sufficient expansion.

It is vital to note that oil and gas supply will become more and more challenged due to increasing decline rates. Energy companies are finding smaller reserves than in the past – the last field capable of producing in excess of 1 million b/d of oil was discovered back in 1976 – and current major fields will inexorably decline.

At the same time, production is hampered by increasing political and fiscal barriers. The current quasi-nationalization of oil fields in Venezuela is but one example. There are similar political barriers limiting production at home, as well, and here is where we must focus our attention.

In the face of such troubling challenges, political leaders at the national, state and local levels frequently attempt to outdo one another in blaming oil and natural gas companies for the inadequacies of the nation’s energy policy. At the same time, they stridently proclaim their aversion to developing any more of the nation’s domestic energy resources. Evidently, it is more environmentally desirable to outsource the nation’s energy production to developing countries.

Clearly, politics as usual will not usher the country out of this predicament. Energy development and environmental quality are not mutually exclusive, particularly in the US where the most advanced technology, an educated workforce, and an enlightened regulatory regime combine to foster the world’s cleanest energy production. This polarized political debate has left the country with an “all-or-nothing” environmental ethic that has little room for stewardship and resource management. Instead of working collaboratively to determine the most appropriate regions for energy development, we have chosen a national policy that restricts, or totally removes, US access to our own energy supplies.

One clear example of these barriers is the current system of moratoria on the US Outer Continental Shelf (OCS). While demand continues to rise and consumers are pummeled by rising prices, more than 80% of the OCS remains off-limits to E&P. Some of these regions are surely compatible with energy development, others perhaps less so. In any case, there is simply no room for any debate on the topic in today’s zero-sum game political climate — despite glaringly obvious reasons for the nation to be concerned about future energy supplies.

OCS access is vital

Stripping away the rhetoric and the inaccuracies about where we get our energy leaves us with some clear direction. The resource potential of the OCS is of vital importance to our ability to close the gap between rising demand and current levels of energy production. As a nation, we can no longer afford to ignore the significant oil and gas resources found beneath the waters off our nation’s coasts. We can no longer afford to keep 85% of the OCS off-limits to exploration, particularly when the biggest misconception about our industry relates to the environment. The fact is that the technology employed by the offshore industry is already environmentally safe, a point which cannot be reiterated enough.

Over the past 25 years, the industry has built an enviable record of safe, clean operations, as noted in theOil in the Sea III study performed by the National Academy of Sciences. Less than 2% of the oil in US waters comes from drilling and production. Transporting oil by tanker is four times more likely to cause a spill, and 30 times more oil comes from land-based sources.

In fact, between 1985 and 2000, 6.3 Bbbl of oil were produced in federal offshore waters. In that time, according to the US Coast Guard, less than 0.001% spilled – a 99.999% record for clean operations.

That safety extends to hurricane conditions as well. During the 2005 hurricanes, fewer than 100 out of 4,000 total platforms in the Gulf of Mexico were destroyed. There were no injuries offshore, the Coast Guard reported that there were no significant spills of oil from offshore storm damage, and as noted by then-Secretary of the Interior Gale Norton, “not one drop of oil reached the shore.”

The way forward

Whether within the federal agencies, among state leaders, or in current or future Congressional sessions, industry and energy-consumer coalitions must continue to vigorously make the case for expanded offshore access. The resources are there, the need is great, and the offshore energy industry has the technology and experience to bring it safely to market.

In the accompanying article, NOIA President Tom Fry spells out some of the ways in which NOIA is working to move us past the policy logjams that keep us stuck. Only by working on all fronts, with all possible allies, will it be possible to meet the growing demand for the safe and sustainable energy that the nation, indeed that the globe, requires.

Fifty years ago, the notion of offshore oil and natural gas was a novelty. Twenty years ago, they called the Gulf of Mexico the “Dead Sea.” Ten years ago, the notion of drilling in 10,000 ft of water depth was the stuff of science fiction. In each and every case, we have overcome expectations and limitations to reach new levels of achievement. Today is no different, and I have every confidence we can meet the challenge.