Industry keeping fingers crossed on offshore drilling

The responses filtering in from the oil and gas industry on Obama’s announcement today on offshore drilling are rather curious.

The American Petroleum Institute, the industry association, is unusually positive.

From API President and chief executive Jack Gerard:

The announcement by President Obama and Secretary Salazar is a positive development. We look forward to reviewing the details of the proposal, and we stand ready to work with them to make this a reality. We appreciate the administration’s recognition of the importance of developing our nation’s oil and natural gas resources to create jobs, generate revenues and fuel our nation’s economy. Exploring for and developing our nation’s offshore resources could help generate more than a trillion dollars in revenues and create thousands of jobs to add to the already 9.2 million jobs supported by today’s oil and natural gas industry.

He tempered the usual stance of calling for more drilling areas with this:

As we move forward, we hope that consideration can be given to other resource-rich regions, such as the Destin Dome area of the Eastern Gulf and areas off the Pacific Coast and Alaska. We also need to ensure that the permitting processes are handled in an expeditious way. The oil and natural gas industry has a proven track record of safe oil and natural gas development and the majority of the American people recognize this by supporting greater offshore development for the benefit of their communities, their states and their nation.

And, from Bobby Ryan, vice president, Global Exploration, for Chevron, are comments Chevron has made earlier but the company is sending out in response to today’s news:

Do we produce a lot of oil and natural gas in the outer continental shelf? Well, we sure do in the areas where we’re allowed to explore and produce. The energy industry produces some 27 percent of the nation’s oil and 15 percent of the natural gas in those areas, which is basically the western and central Gulf of Mexico. As for the rest of the OCS, we don’t really know, and until we apply modern exploration technologies and techniques, we won’t have a good understanding of what the true potential is. It’s been decades since we’ve been allowed to explore the majority of the outer continental shelf area, due to government restrictions. The irony of it all, though, is that we’re the largest energy user in the world and we know the least about the energy potential of our offshore areas.

R Skip Horvath, president and chief executive of the Natural Gas Supply Association, continued with that theme:

According to US Minerals Management Service estimates, areas of the Atlantic Ocean and Gulf of Mexico that the Administration has made available to drilling could contain 62 trillion cubic feet of natural gas – enough to heat all of the U.S. households that heat with natural gas for more than 13 years. The Alaskan area that has been made available is estimated to hold far more. These estimates are based on seismic data that is, in some cases, more than 30 years old. In general, estimates usually experience significant increases as technology improves and exploration activities occur.

So, really, the importance of the decision has yet to be known because nobody is exactly sure what is under these areas. The current data is based on old technology and new technology has opened up more resources than the industry ever dreamed in recent years.

For ConocoPhillips, however, the news for now seems good. In Alaska, it is most interested in exploration in the Chukchi Sea. The company stated:

ConocoPhillips’ priority for exploration in Alaska is the Chukchi Sea. ConocoPhillips invested $506 million in February 2008 for the right to explore on leases in the Chukchi Sea. We have been awaiting today’s clarification from the Department of Interior on the status of those leases in light of the April 2009 DC Court of Appeals decision in the Center for Biological Diversity v. Dept of Interior case requiring a new analysis of the environmental sensitivity of the different OCS areas. Our understanding is that today’s announcement means exploration and development of existing Chukchi and Beaufort leases can proceed.

ConocoPhillips along with other Chukchi Sea leaseholders has also invested tens of millions of dollars on pre-drill and environmental studies, working with universities, research institutions and local stake holders on a multi-year program collecting biological, oceanographic and air quality data in the Chukchi Sea. We are taking a measured and responsible approach to prepare for our initial exploration well in the Chukchi Sea, which is now planned for summer of 2012.

Everyone has their own take…

Related links:

Offshore drilling plans could be a risky play for climate bill (FT Energy Source)
Obama’s move on drilling unlikely to appease industry, Republicans (FT Energy Source)

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