huge oil find in the deep waters of the Gulf of Mexico, and while accurate and complete information on this discovery has not yet been announced, it seems clear that preliminary indications point to an important development for the American oil industry.
Y2K and now oil peak?
America's Significant Oil Find for the Coming Decade
Walid Khadduri Al Hayat - 11/09/06//
On Tuesday of last week, American Chevron reported a huge oil find in the deep waters of the Gulf of Mexico, and while accurate and complete information on this discovery has not yet been announced, it seems clear that preliminary indications point to an important development for the American oil industry.
The available information indicates that Chevron, in partnership with US Devon Energy and Norway's Statoil, discovered great quantities of light sweet crude oil at the Jack oilfield located in the lower area of the third geological epoch at a depth of over 2000m below sea level, making Jack the first major oil find in the US since the Prudhoe Bay field discovery in Alaska in the mid-1960s.
The significance of the Jack oilfield, 430km from New Orleans, standing on a geological block extending 480km through the Gulf of Mexico, where other oil companies, like Brazil's Petrobras, British BP, and Anglo-Dutch Shell, operate, lies in the geological formation of the reservoir. This means that if Chevron's optimistic forecasts were to come true, the probabilities of discovering new reserves in such a geological structure, extending over a large area of the Gulf of Mexico are significant.
While Chevron never accurately specified the size of the discovered reserves, it estimated them to be between 3 and 15 billion barrels. Be it as it may, it is obviously a significant discovery that does not rule out the probability of finding even bigger reserves, considering the size of the geological structure and the number of companies operating there.
How far would this discovery influence the US oil industry?
Figures from the US Department of Energy estimate current consumption rates at around 20.7 million bpd, while production is estimated at 6.8 million bpd, imports at 13.53 million bpd, and reserves at 29.3 million bpd.
At the same time, BP's annual figures show that oil production rates in the US have dropped from 10.17 bpd in 1980 to 6.83 million bpd in 2005, rising demand for the same period from 17, 06 to 20, 66 million bpd. PB figures also indicated that import rates over a 25-year-period increasing from 6.18 to 13.52 million bpd.
These figures clearly point to a decline in US oil production, and a steady increase in consumption and import levels. It also points to the fact that the discovery, despite its significant size, is not expected to lead the US to a self-reliant status, or even noticeably reduce imports, particularly if the economic growth continues to increase at its current rate.
This discovery, depending on the quantities that will be actually found and produced over the coming years, will at best help stop the US' dwindling production levels and limit the huge increase in imports, which occurred over the past few years.
Hence, while not stopping exports, Chevron's new find will put the lid on its excessive increase and ease pressure on light oil that is in great demand due to environmental laws.
Naturally, work to develop the Jack oilfield and other wells will not be completed overnight, but is rather expected to take between three to four years before exploration, the discovery of oil and the development of the oilfields are completed.
This also means that the new oil will not hit the markets before the beginning of the next decade, according to the most conservative estimates, and in turn, the development of this new oil-producing area will drive up prices for marine equipment, ranging from drillers and platforms to tools. The wages of oil workers will also increase, while equipment and workers with the experience of working in deep water environments will fall short of demand.
For example, provided it is available, it costs one million US dollars a day to run a deep water drilling platform similar to the platforms expected to operate in the Jack oilfield and the fields around it.
What about the international scene?
The discovery proves that international and national companies, contrary to current belief, are working earnestly and investing hundreds of billions of dollars each year in search of new oil.
The discovery also indicates that these new wells do exist and are waiting to be found, despite the limited number of large discoveries in the past years; ending with the Kashagan oilfield in Kazakhstan in the last decade. It also indicates that promising areas are abundant; whether in the Middle East, the Caspian Sea, Russia, the East and West coast of the Atlantic, and, of course, the Gulf of Mexico.
Finally, this discovery is doubtlessly a hard lesson learned for advocates of the 'Hubburt Peak' oil theory, who have been calling for years now to an end to the dependency on oil; the only reason is that the approaching end prompts dependence on alternative sources of energy.
* Dr. Walid Khadduri is an energy expert and director of al-Hayat business desk. |
