Reality Check: Domestic Oil Production

 

(by Roger Blanchard)

 

"Pete gives the impression that by opening the Arctic National Wildlife Refuge (ANWR) and other federal lands and waters that are presently closed to oil development, the U.S. can significantly increase domestic oil production and reduce dependence on foreign sources of oil.  Although that may seem reasonable, those goals won't be achieved due to declining production in the mature oil producing regions of the U.S. and the limits of presently undeveloped regions to supply oil.  The results of oil production from the North Slope of Alaska illustrate the problem that the U.S. has in terms of oil production.  Oil production from the North Slope of Alaska started in 1977.  In 1976, U.S. crude oil production was 7.8 million barrels/day (mb/d).  Today, in spite of North Slope oil production, U.S. crude oil production is approximately 5.85 mb/d.  Not only has U.S. crude oil production declined by ~2 mb/d since 1976 but U.S. crude oil imports have increased ~3 mb/d.  The U.S. now imports ~62% of the crude oil that it consumes (crude oil imports were ~9.5 mb/d during March-April 2001).  Whatever the amount of economically recoverable oil in ANWR ultimately proves to be, it will be considerably less than the ultimate recovery from presently active North Slope fields.  Consequently production from ANWR would have a lesser impact on U.S. crude oil production in the future than the original North Slope development did in the past. "

"U.S. crude oil production peaked in 1970 at 9.6 million barrels/day (mb/d).  About 9.4 mb/d of the 9.6 mb/d came from the lower 48 states.  Since that time, crude oil production from the lower 48 states has declined about 4.6 mb/d and is now about 4.8 mb/d  (see graph 1).  All oil producing states in the lower 48 states have long ago entered their production decline phase (see graphs 2 and 3).  In the case of Texas, oil production peaked in 1972 at 3.57 mb/d.  This year Texas will produce approximately 1.4 mb/d (average decline rate = 3.55%/year  from 1972 to 1998).  The last big bonanza in the lower 48 states is presently taking place in the deepwater Gulf of Mexico (GOM) and has caused a dramatic production increase from that region in recent years (see graph 4).  In the not so distant future, production from the deepwater GOM will peak and then decline.  There are lesser amounts of oil in federal waters off south and central California and fairly minor amounts in the eastern GOM and federal lands in the Rocky Mountain states.  It is unrealistic to think that production from those regions could counteract declining production from the rest of the lower 48 states.  It appears that the Bush administration will open the eastern GOM for oil and gas development and possibly most of the federal land in the Rocky Mountain states outside of national parks.  He will have a more difficult time opening federal offshore waters that are under an oil and gas development moratorium because of significant political opposition. "

"As I stated previously, oil production from the North Slope of Alaska came on-line in 1977.  That brought in the Prudhoe Bay field (second largest field in North America and 19^th largest in the world).  The Prudhoe Bay field has an estimated ultimate recovery (EUR) of 12-13 billion barrels oil (bbo).   Oil production from the Prudhoe Bay field was 1.5-1.6 mb/d through much of the 1980s but started declining in the late 1980s.  This year it will produce around 530,000 b/d.  As they say in Alaska, "As Prudhoe Bay goes, so goes Alaska."  Alaskan oil production peaked in 1988 at 2.02 mb/d.  This year Alaskan oil production will be ~1 mb/d (the decline rate was 5.85%/year from 1988 through 1999).  Note that it took 11 years to reach peak production after production started on the North Slope and then production declined rapidly thereafter.  Late last year the Alpine field, EUR ~430 million barrels and plateau production of ~85,000 b/d , was brought on-line but even with that addition, Alaskan oil production will probably decline 2-3% this year (through April 25^th Alaskan production is down 2.51% from 2000 and the Alpine field is now producing ~85,000 b/d)."

"In the last 10 years there has been substantial areas opened to oil exploration and development in the U.S.  Several years ago, approximately 4 million acres of the National Petroleum Reserve (northern Alaska) was opened.  The Minerals Management Service (MMS) has conducted two lease sale offerings in the Beaufort Sea (north of Alaska) since 1995.   Sale 144,  held in 1996, offered about 7.2 million acres for lease.  Sale 170, held in 1998, offered about 0.92 million acres for lease.  Prior to those sales, Sale 124, held in 1991, offered about 18.5 million acres for lease.  Because of the 1994 Royalty Relief Act and recent advances in deepwater production technology there has been intense oil exploration and development in the deepwater Gulf of Mexico (GOM) since 1994.  In 2000-2001 the following fields are expected to come on-line in the deepwater GOM: Diana/Hoover (100 kb/d plateau), Europa (40 kb/d plateau), Petronius (40 kb/d plateau), Marlin (40 kb/d plateau), Brutus (100 kb/d plateau), Typhoon (40 kb/d plateau) and Mica (35 kb/d plateau).  In spite of this intense development, U.S. crude oil production has declined every year since 1994.  If all federal lands and offshore waters were opened to oil development today, there would be a short-term small increase in U.S. production followed by decline.  I would expect U.S. crude oil production in 2020 to be 1-1.5 mb/d less than it is today.  With full development of all federal lands and waters, the U.S. may be able to keep crude oil imports at 70-75% in 2020 rather than 75-80%.  If there is a serious desire in the U.S. to decrease dependence on foreign sources of oil, the U.S. will have to significantly reduce consumption of oil.    That is the harsh reality."