Offshore Drilling: How big of a role will it play?

Because most of the “light” crude oil that has been discovered in the United States has already been drilled and refined, other options must be explored for domestic production.  Offshore drilling has emerged as another option, and it looks like it may play a bigger role than ever.

In a recent press conference, President Obama unveiled plans to open up more of the U.S. coast to offshore drilling, mostly on the Virginia coastline and possibly in the Gulf of Mexico [1].  So let’s look at a few of the most important aspects of offshore drilling:

Technical Info

The basic process of offshore drilling is very similar to onshore.  A drill bit drills into the ground, and at a certain depth, steel pipe casing seals off the well to ensure the integrity of the hole.  The well continues deeper into the ground, using a smaller diameter hole in each section.  Horizontal drilling is also an option to reach more area under the surface.  However, offshore drilling must account for completing this process in the middle of the ocean and at depths of hundreds of feet, which requires equipment such as the BOP (blow-out preventer), gate valve, and stack structure at the surface of the ocean floor [2].

Offshore drilling animation.  Subsea equipment necessary for drilling is shown at the end of the animation sequence [3]. **Video disabled embedding, sorry!

Positives

  1. It creates jobs.  “Virginians will benefit from the thousands of jobs that will be created and the economic activity and development that will accompany this vital industry’s arrival in the state,” said Virginia’s governor Bob McDonnell [1].  Louisiana receives about $1.5 billion annually for drilling off its coast [4].
  2. It is readily available.  New deepwater resources have recently been discovered in the past month by Shell in the Gulf of Mexico Mississippi Canyon, and more exploration will most likely lead to more discoveries [5].

Negatives

  1. It has large environmental impacts.  Not only are offshore oil spills a threat to marine animals, “the biggest environmental impact has been the estimated 10,000 miles of canals dug by the oil and gas companies to transport oil and lay pipelines” [4].
  2. It is very expensive.  Much more resources must go into offshore drilling than onshore drilling since the equipment must reach the ocean floor before it can drill.  Also, offshore platforms are required to reach the oil reserve.  These platforms are like small communities that require food and living accommodations around the clock, as well as transportation to and from the platforms and meteorology stations.

Offshore drilling platform in the Gulf of Mexico [6].

Whether people support it or not, policy makers look like they plan on making offshore drilling a bigger part of America’s domestic production.  What are your thoughts on this trend?

Sources:

[1]http://www.cnn.com/2010/POLITICS/03/31/obama.energy/index.html?hpt=T2

[2]http://www.ccop.or.th/projects/PPM/Case_Study_Indonesia_files/Expert_visit/2_Deepwater_Tech/PRESENTATIONS/Carita_5.pdf

[3]http://www.youtube.com/watch?v=WPOi1WYTf2c&feature=fvw

[4]http://www.usatoday.com/money/industries/energy/2008-07-13-offshore-drilling_N.htm

[5]http://www.offshore-mag.com/index/article-display/3507506700/articles/offshore/drilling-completion/us-gulf-of-mexico/shell-hits_oil_in.html

[6] http://www.learner.org/courses/envsci/visual/img_med/drilling_platform.jpg

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3 Comments

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3 responses to “Offshore Drilling: How big of a role will it play?

  1. wgarwood

    As subsea gets more technical and expensive the question of evaluating each opportunity based on Energy Return on Investment (EROI) or Net Energy may provide a more valuable picture of the viability of the project versus a typical economic NPV analysis.

    A great discussion thread on EROI has been started on the Oil Drum blog and is moderated by Professor Charles Hall of SUNY college (http://www.theoildrum.com/node/3786)

    While Hall’s report has many conlcusions his most important are 1) Biophysical or EROI analysis should be used in addition to traditional eonomic analysis in evaluating potential energy projects. Economic (market based pricing) analysis alone can be distorted by subsidies and can result in net negative EROI projects that are “economically” profitable. 2) In regards to Oil and Gas, traditionaly the highest return EROI projects, the net energy return on these projects has been dropping significantly over the past 30 years as technical sub sea drilling and deeper well depths are fast approaching the point of negative net energy return (see chart at Hall’s Oil an Gas analysis http://www.theoildrum.com/node/3810).

  2. bimalamin

    I think this is a great post, it is really important to consider how our oil supply is changing and the impacts this has both on our environment and the economy. The post makes a good point that this can lead to many new jobs for the area where offshore oil drilling will begin, but also have significant environmental impacts.

    One thing that the post does not talk about is the importance of offshore drilling globally. Since the US imports a large portion of its oil we are obviously impacted by any new fields regardless of where they may be. New find could lead to an increase in supply and jobs for major US oil and oil services companies. Just like in the US, as the majority of land based oil has been discovered, countries are turning their attention to new offshore discoveries which, at one point, were considered technologically impossible to drill.

    Total recently announced that it has discovered two important oil finds in the deep offshore waters off Angola. (http://www.total.com/en/about-total/news/news-940500.html&idActu=2352) Another major find was announced by Brazil’s Prtrobras a few years ago, the Tupi field in Brazil which lies under thousands of feet of water. While this one is primarily being developed by Petrobras, many us oil service companies will be involved in assisting the company to develop the field over many years.

  3. byronboyle

    No doubt that offshore and unconventional sources of oil and gas will play a much larger role on the world market in the near future, but unfortunately, for domestic oil producers, they now have to deal with their worst PR disaster in several decades. The explosion, sinking and now environmental disaster that was once the mighty Deepwater Horizon rig off the coast of Louisiana, only weeks after President Obama announced his support of more offshore drilling. With oil leaking from the damaged underwater riser at about 1,000 barrels a day and a surface oil sheen of over 20 square miles (http://www.nytimes.com/2010/04/25/us/25rig.html), this will be a scene that will be replayed over and over as Virginia and other states whose waters border federal waters will have to grapple with as they consider more offshore drilling. Additional offshore development will happen, but the tragic events of last week will more than likely hinder the quick development of any additional offshore areas.

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