Share this story
Close X
Switch to Desktop Site

Oil firms have cash to explore, but they need places to spend it

"Can a farmer farm without land?" An executive with a major US energy company asks this rhetorical question to illustrate what he and many others in the industry now see as the key issue determining whether Americans have enough oil and natural gas over the next 10 to 15 years. While money and technology will be important, he says, the central question will be "will energy firms have enough acreage to explore?"

Flush with 18 months of spectacular profits and continually rising energy prices, the nation's oil companies have plenty of cash for exploration. What they want is more places to spend it.

About these ads

Energy companies want the US government to open up more public lands onshore for oil and gas exploration and lease offshore tracts at a more rapid rate than that called for in the new five-year leasing schedule recently approved by the US Department of Interior. Energy industry specialists estimate that undiscovered US oil and gas reserves may be twice the known reserves.

"The amount of acreage available is the most important variable factor to future US energy supplies," asserts Ted Eck, chief economist with Standard Oil Company of Indiana.

However, environmental interests are competing for the land. The current Senate debate over the Alaska Lands Act, including how much Alaskan wilderness should be protected from energy exploration, underscores the continuing concern over the impact of oil and gas drilling on the environment and wildlife.

Also, the Department of Interior has withheld some offshore tracts in deep waters from exploration out of concern that the oil industry does not yet have the technology to explore those areas safely.

Heather Ross, deputy assistant secretary at the Department of Interior, contends that a more rapid offshore leasing program would not have allowed enough time for environmental impact studies and in the end would have resulted in greater delays from lawsuits.

"We face a challenging task just making this five-year schedule a reality," she said.

Indeed, of all the federal offshore leases in "frontier" areas over the past five years, only one sale has been free from litigation.

About these ads

The industry push for opening more public lands to energy exploration is partly the result of concern over the nation's continuing decline in oil and gas reserves despite increased drilling. Exploration over the past five years in new offshore areas, including the Gulf of Alaska, the Atlantic Coast, southern California, and the Gulf of Mexico, have yielded virtually no new production. And while the number of oil and gas wells drilled in the United States last year was the highest since 1959, proved reserves of oil and gas continued to decline.

So even with gains in energy conservation, energy industry officials are skeptical about reducing oil imports in the next decades without sizable new discoveries.

"We must make big discoveries to reduce imports," reasons Mr. Eck. "The resource basis is there and if the acreage is available the discoveries will be made," he predicted.

Shell Oil Company estimates that two-thirds of the oil and gas yet to be founded in the US lies under federal lands.

Probably the most promising oil and gas region in the US, in the view of most energy company officials, in offshore Alaska. Although there already have been some federal lease sales in the Gulf of Alaska and the Cook Inlet, there have been no major discoveries.

But there remains great optimism for the Beaufort Sea, where drilling is expected to begin in late 1981, and for the Bering Sea, which is scheduled will be opened to exploration in 1982.

Yet, Shell executive vice-president Charles L. Blackburn says that even under the most optimistic scenario, no new oil from offshore Alaska can be expected until the late 1980s at the earliest because it usually takes 6 to 10 years to produce oil from a new well. And given the track record of most offshore leases and their legal delays, he warns, production could be held up for several years beyond that.

The new federal timetable, calling for 10 sales over the next five years in offshore Alaska, will yield only about 1 million barrels a day of new oil by 1995, according to Shell Oil. By contrast, a leasing schedule calling for 26 offshore sales could add 4 million barrels a day of oil by then, the company claims.

Besides offshore, where the US Geological Survey estimates there are 12.5 billion to 38 billion barrels of undiscovered but re coveager to explore more onshore.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.