Until BP’s Deepwater Horizon explosion in April and continuing oil spill crisis in the Gulf of Mexico, many in the news media covered deepwater oil exploration with a sort of awe. The practice, after all, is relatively new — most projects date back to just the 1990s, and a Gulf boom is only a decade old — and only a few companies know how to drill a mile or more below the ocean surface.
|Cutler J. Cleveland|
Deepwater drilling as a practice and its future clearly deserve more critical attention now, according to Cutler J. Cleveland, a professor at Boston University who directs its Center for Energy & Environmental Studies. Cleveland is editor-in-chief of the Encyclopedia of Energy, and he has been blogging daily with historical perspective to help people understand the Deepwater Horizon spill.
Wowed by Technological Feats, Underestimating Risks
“We tend to be wowed by the technological feats we are increasingly able to perform without thinking about the possible ramifications,” he said. “We tend to historically underestimate the risk. We tend to downplay the assessment of risk. The problem with that is the potential risk becomes larger and larger.”
So far, deepwater drilling has been receiving much media attention for how it affects local economies in Gulf Coast states, and also on the localized environmental disaster unfolding in the Gulf: gushing oil and the traveling oil slick killing birds, fish, and much ocean life. The media rightly see these as huge, and hugely important, stories.
But beyond the tragedy and chaos of the spill, what hasn’t received much attention is its chilling reminder that, at its best, deepwater oil and natural gas drilling is essentially a stopgap in the United States’ finite domestic oil production, and one that does nothing to further goals of moving toward a low-carbon economy. It’s also expensive and energy intensive, of course, to develop deep wells.
The U.S. produces only 8 percent of the oil it uses, and it uses 25 percent of the world’s oil. The U.S. was the world’s fastest growing oil producer in 2009 (according to BP’s Statistical Review of World Energy) and the U.S. waters of the Gulf accounted for almost 30 percent of the country’s total. But even the most optimistic moments in deepwater drilling’s infant history illustrate that the best hopes for deepwater drilling in the Gulf are that it will stabilize declining oil production.
Forecasts for deepwater drilling in the Gulf by Cambridge Energy Research Associates a few years ago predicted that these new sources deep below the sea would produce 800,000 barrels of oil a day by 2013, or about 11 percent of U.S. oil production. Recent statistics from the U.S. Energy Information Administration report that offshore federal waters in the Gulf produce 1.28 million barrels a day, or about 25 percent of the declining U.S. production total. Prudhoe Bay in Alaska produced 1.5 million barrels a day at its peak, and this, too, served only to slow down the decline of oil production in the U.S. that began in the early 1970s.
Global Deepwater Project Locations
The two most important areas for deepwater drilling are the Gulf of Mexico and the North Sea, Cleveland said. “The capability they have demonstrated in the Gulf of Mexico is what you’ll find in other areas of the world,” he said. “The difference is in the North Sea it’s difficult to drill because the weather is so volatile.” Conditions in the Gulf are much better for exploring and drilling.
“Certainly when we talk about water depth in the thousands of feet, it’s really only been in the last 10 or 15 years, and really in the last decade, where they have been able to operate in those kinds of depths,” Cleveland said. “So it’s a fairly recent phenomenon, and the technology has moved forward very rapidly.”
The Gulf of Mexico: In U.S. waters of the Gulf, the Minerals Management Service has licensed hundreds of oil and natural gas deepwater exploration projects, with hundreds more pending approval.
The North Sea: The United Kingdom, Norway, the Netherlands, Denmark, and Germany all have private and government interests in deepwater projects.
West Coast of Africa: Exxon Mobil, BP, the Nigerian National Petroleum Corporation, and others are drilling and searching for new sites off the coast of Nigeria, Equatorial Guinea and Angola. South Africa is drilling off its coasts.
Offshore Brazil: Exxon Mobil reports in its latest annual report that it holds the largest amount of deepwater acreage of the multinational oil companies. It has been exploring these areas for 11 years.
Legacy of BP’s Gulf Spill on Future Projects
In all the noise of the Gulf disaster, it is easy to overlook the urgency most western governments have expressed to reduce carbon dioxide emissions dramatically in the next 40 years. While every indication from economists and energy experts is that deepwater drilling will survive the political damages resulting from this spill, it’s also true that the oil industry will recover only so much oil even from these sites, and that the industry has been looking for ways to move beyond petroleum.
At the World National Oil Companies Congress in London on June 22, BP’s Group Chief of Staff, Steve Westwell, addressed this issue in a speech for the absent BP CEO Tony Hayward. “The risk of climate change means we need to use energy more efficiently and diversify the energy mix with more low-carbon options,” he said. “But as the IEA (International Energy Agency) and other experts have shown, fossil fuels will still be the dominant source of energy in 2030, even in a scenario where major carbon emissions are tightly constrained.” (For the speech, go here.)
“The Gulf of Mexico incident has raised major questions about the risks that are faced at the industry’s frontiers, and specifically in deepwater,” Westwell added. “Restoring confidence won’t be easy. But let’s not forget how much is at stake.”
Agreeing on that point, Boston University’s Cleveland said, “First of all, we are going to continue to do deepwater drilling. We have to get the MMS reorganized,” referring to the Department of the Interior’s Minerals Management Service, now renamed the Bureau of Ocean Energy Management, Regulation, and Enforcement.
The ‘Third Rail’ — Americans’ Demands for Oil
But, he continued, the threat to the deepwater exploration and drilling industries suggests, once more, that Americans must look hard at their oil demands.
“The third rail of U.S. energy policy is the demand side,” he said. “We are always focused on the supply side: how do we drill a better rig, fuel cell cars, and so on. But since President (Jimmy) Carter tried to engage the American public in a debate on how they use energy, no one has been able to do it.”
Carter’s chats by the fireplace wearing a sweater generated public jeers. Three decades later, former Vice President Dick Cheney said that conservation might be a personal virtue but isn’t the basis of a sound energy policy.
“It was a brazen statement but it was an honest acknowledgement of how people actually feel,” Cleveland said of the Cheney line. “If you really want to get serious about oil, we have to use less oil. There is no way around it.”
Examples of how the press covered the most recent big oil discovery, by Chevron, in the Gulf in 2006: