In December,
U.S. oil exports hit a record of 3.6 million barrels per day, thanks in part to
soaring domestic petroleum production.
Last year,
domestic natural gas production averaged 69 billion cubic feet per day, a
record, and a 33% increase over the levels achieved back in 2005. That year,
Lee Raymond, the famously combative former CEO of ExxonMobil, declared that
"gas production has peaked in North America."
Why has the U.S.
oil and gas sector recovered? How is it that last year, U.S. oil production rose
by 790,000 barrels per day, the biggest annual increase since U.S. oil
production began in 1859? How could Raymond, the leader of one of the world's
most sophisticated companies, be so wrong?
The answer:
innovation. Over the past century or so, oil and gas drilling has been
transformed from an industry dominated by hunches and wildcatters to one that
is more akin to the precision manufacturing that dominates aerospace and
automobiles.
The convergence
of a myriad of technologies — ranging from better drill rigs and drill bits to
robotic rigs and nanotechnology — is allowing the oil and gas sector to produce
staggering quantities of energy from locations that were once thought to be
inaccessible or bereft of hydrocarbons.
Advocates of
renewable energy like to point out that in 2012, some $270 billion was spent
globally on "clean energy." But spending on oil and gas exploration
dwarfs what is spent on renewables. Last year alone, global drilling expenditures
totaled $1.2 trillion, nearly 4.5 times the amount spent on alternative energy.
Trillions more were spent transporting, refining, and delivering oil and gas to
consumers.
The results of
all that spending can be seen in the numbers: Between 1949 and 2010, oil and
gas companies drilled more than 2.6 million wells in the U.S.
Over that same
period, they reduced their dry holes drilled from 34% to 11%. And the
percentage of dry holes being drilled continues to fall.
Today's
hydrocarbon hunters are so precise that they can drill wells that are two miles
deep, turn their drill bit 90 degrees, drill another two miles horizontally,
and arrive within a few inches of the targeted pay zone. The technical prowess
of the drilling sector has been proved twice this month with announcements of
major discoveries in the Gulf of Mexico.
Anadarko
Petroleum and its partners found a huge field in what's known as the Lower
Tertiary trend, containing as much as 3.7 billion barrels of oil equivalent.
A few days
later, Chevron announced a similar find in the Lower Tertiary with a well that
was drilled to about the same total depth.
In the wake of
the Deepwater Horizon disaster, the offshore oil and gas sector has repeatedly
been demonized. Never mind that the industry is conducting the marine
equivalent of the space program.
A bit of
history: In 1947, the oil industry drilled its first offshore oil well out of
the sight of land. The Kermac 16 well, located off the Louisiana coast, was
drilled in 20 feet of water.
Back in 1947,
the billions of barrels of oil in the Lower Tertiary may as well have been
located on the dark side of the moon. The industry simply did not have the
technical ability to tap all that energy.
Today, companies
like Anadarko, Chevron, Petrobras, and yes, BP, are routinely drilling in water
depths of 6,000 feet or more.
They are leasing
drill ships costing $600,000 or more per day because the global economy demands
the super-high-density transport fuels that can be refined from crude and the
super-clean heating and electricity that can be derived from natural gas.
In 1929, the
economic historian Abbott Payson Usher wrote that "The limitations of
resources are relative to the position of our knowledge and of our
technique."
The limits of
available resources "recede as we advance," he added, "at rates
that are proportionate to the advance in our knowledge."
The advances in
knowledge that are occurring in the oil and gas sector are allowing us to keep
energy cheap and abundant.
And that's very
good news. We won't hit peak oil until we hit peak imagination.
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