Wednesday, June 18, 2008

The US Lower 48 OCS: The Undiscovered Pipedream

There is a growing amount of hand-wringing and political pandering about the fact that a big chunk of potential US offshore oil and gas resources is off limits for exploration and extraction due to limitations imposed decades ago. If you would believe the hype, the US could take a bite out of imports simply by removing restrictions on drilling the Outer Continental Shelf (OCS), including areas offshore California, the eastern Gulf of Mexico, and the Atlantic Seaboard.

More like "No Clue Zone". The reality is quite different, as revealed in a report prepared by the EIA in 2007. Shown in the table below are estimates of how much oil and gas is out there just waiting to be discovered in inaccessible areas in comparison to whatis available currently:

Shown below is the impact on US offshore production if restrictions are lifted, according to the EIA:

The bottom line, in the words of the EIA:

The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030. Leasing would begin no sooner than 2012, and production would not be expected to start before 2017. Total domestic production of crude oil from 2012 through 2030 in the OCS access case is projected to be 1.6 percent higher than in the reference case, and 3 percent higher in 2030 alone, at 5.6 million barrels per day. For the lower 48 OCS, annual crude oil production in 2030 is projected to be 7 percent higher—2.4 million barrels per day in the OCS access case compared with 2.2 million barrels per day in the reference case (Figure above). Because oil prices are determined on the international market, however, any impact on average wellhead prices is expected to be insignificant.

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