Drilling Is Up, Prices Are Up

New York Times:

With the advent of $4-a-gallon gasoline has come a bruising debate in Congress over whether to intensify efforts to drill on federal lands, including part of the Arctic National Wildlife Refuge in Alaska. But while those hoping to lower prices at the pump are clamoring for new oil, most of the new onshore drilling of the past seven years has produced natural gas, not oil.

The Bush administration, in its effort to expand energy production, has issued more than three times the number of well-drilling permits on Western lands as in the Clinton administration's last six years. But oil production in that region during the Bush years is 12 percent below average levels from the Clinton era, according to federal data.

Oil production declined over all to an average of 97.9 million barrels annually from 2001 through 2006, compared with average levels of 111.5 million barrels during the Clinton administration.

Read the whole story: New York Times

Comments

[mediamarv]

Here's little quote from flip flopper express, Joe Lieberman, from his Senate office on Feb 28. 01: (Notice the last comment)

Press Release from Lieberman's office on Feb 28, 2001:

Why Drilling in ANWR is Bad Energy Policy, And Even Worse Environmental Policy
THE FACTS ON DRILLING

* Replacement tires for automobiles are less fuel efficient than new ones. Simply equipping our cars with the same quality tires originally sold on the car would save drivers $90 over the lifetime of the tires and would save more than 70 times more oil than what we could hope to extract from the Refuge.

* Increasing vehicle fuel economy a few miles per gallon would save the same amount of oil over the next ten years that will be drilled out of the Refuge.

* One good, innovative idea is to offer tax credits for purchasing hybrid cars, which are already on the market and get 60 to 70 miles per gallon.

* Oil from the Refuge would not affect the price of a barrel of oil. This is a global market and the Refuge's paltry 0.3 percent contribution would not lower prices of gasoline or heating oil for American consumers.

[TrooAmerican]

Easy oil at $15/ barrel to get is declining. The FACT is, hard to get- expensive oil is now on target to be pulled from the ground due to high oil prices. Its now worth it.

The Canadian Tar sand is the biggest contiguous oil field in North america is producing now twice as much as 2 yrs ago with more increases scheduled in the future.

The North Dakota/Montana Shale oil field just completed plans for a pipeline to double production to refineries by next year and is the largest field in the lower 48 states.

The Colorado Oil Shale is targeted for full scale production in 5 yrs as they now have technology that can get it out.

Wyoming is RIGHT NOW under a huge oil boom reported a couple weeks ago on ABC making a New millionaire Per Day as they are finding oil deep under owner's property.

The Los Angeles Valley is adding Oil Rigs everywhere at a rate of 2-3 per week for the past 6 months as they are pulling oil out from under the city and its surroundin areas from wells long ago considered hard to get but with new technology they are easily pulling it out.

Now billions of barrels of oil are worth getting they've known about for decades and left CAPPed due to lower prices.

Anyone that tells you different is either Ignorant, or has an agenda and wants to lie to you.

[mediamarv]

Funny, you didn't mention the downside. But I guess I'm just ignorant for wanting to know.

[Destin]

TrooAmerican, you mention the Canadian Tar and N. Dakota/Montana Shale productions both being double their previous output....

Shouldn't that mean that our gas prices should be half of what they are?? As I've said many, many, many times, there is NO SUPPLY PROBLEM anywhere in the world. Yet gas/oil prices have gone through the roof. Even the Big Oil propaganda experts have stopped using the "supply/demand" excuse, and have now turned to the "open up more drilling" excuse.

If those 2 production places with all that oil, really have doubled, they should have made some form of positive impact on the market. But the didn't even phase the market by 1 penny, because in the same 2 year time period as you mentioned on the Tar, the gas prices have more than doubled from 2 years ago, and oil prices tripled.

We'll patiently await your next message of propaganda. :)

[Destin]

Would like to add a secondary reply about the Los Angeles Valley drilling you talked about. It was never that hard to get at. We taught Saddam some 20+ years ago how to "slant drill" and tap into the Kuwaiti fields from the Iraq side of the border.

In case you don't remember, it was that very accusation by Kuwait against Iraq, that led to the eventual first Gulf War, which was also all about the oil.

[KillTheMessenger]

Let us know when domestic US production is higher than in 1970 and the price of oil is below $80/barrel. Until then hold on to these pipe dreams. They seem to make you feel good.

[research]

Canada's oil tar is so energy intensive, they want to build a nuke to power the process.

Obsessing about the last few drops of oil is not going to solve the energy problem.

Wind solar and plug in hybrids are the "forever" solution.

[thegreatgiginthesky]

Oh look, the nations psychology isn't improving.

[KillTheMessenger]

Energy is not so much about psychology as it is about education. Sadly, the nation's education isn't improving, either.

[darthdarcy]

If there is an uptick in drilling and oil production then OPEC reduces it's production level to match the increase...

When a former none OPEC nation joins OPEC they reduce their production by the output eqaul to their production level..

Those who believe the oil prices are due to peak oil are Bush's and Exxon and the Phil Gramm's greatest allies..

These increases are due to the Futures Trading Market Deregulation and the Loopholes such as the Enron and London and Goldman Sachs Loopholes and trading in the dark markets they have created...

Even the head of OPEC and VP of Exxon have said this is not due to supply and demand..

It's not due to "Peak Oil"..it's due to the Futures Market Manipulation..

Go read and see videos of Prof. Michael Greenberger who are the director of the CFTC..

Simple as that...

[JSquercia]

And what Party refused to try and do something about reregulating the commodities markets . Why that would be the Rethuglicans . Now you could make a case that it would not really change anything if the Enron loophole and others were elminated but what harm could it do to try it and see if it makes an impact .

[leduck]

california oil production is in terminal decline
maybe as much as 1/3 to 1/4 of californian onshore oil is gone
(i'll have to look it up -- latter)
i believe 3/4 of texas tea is gone, they're in terminal decline too
the back side of Hubbert's Bell Curve
Alaska right now is also in terminal decline, that's why drilling is up but production is down
overall..., the lower 48 peaked in 1971
it's been donwhill hill..., down the back side of the bell curve ever since

people keep getting excited about all these small discoveries like "jack" and otherthey get excited about offshore drilling completely forgetting..., oh yeah..., whatever happened to the really big discoveries like gharwar (one field -- around 80 some-odd billion barrels of oil), or the north sea, or..., canterrell?
now we complain that oil companies haven't tapped tiny fileds on leases on land they may not be economic (ignoring flow rates and the like).

ignorance is bliss for now

[KillTheMessenger]

:-)

Wait until gas prices hit $8/gallon. Peak Oil will be all over the news. The "journalists" will claim to have discovered it in 2010, ignoring that the basic predictions are fifty years old.

[MaryanneAZ]

Saudi Arabia is also experiencing a decline in oil production and is using pressurization techniques to fill oil barrels. In fact, there are many experts who suspect that the Saudis know they have a huge decline in available oil and are keeping that information from the world market to keep their standing as an oil leader and to keep profits up. It would be fascinating to learn the facts behind oil supplies in Middle Eastern countries. What are the chances of that information getting out any time soon?

[KillTheMessenger]

Just because almost nobody talks about the 800lbs. gorilla in the room does not mean nobody knows about it. Anybody who wants to know can find all required information about KSA oil reserves on the internet and in the library.

[OlderBudWeiser]

I haven't seen any call for more refineries. One is folly without the other. Obama's right about the desperate need for new technology. Let's see how it's going in another 10 years.

[leduck]

i can't even read what i wrote

i was on my way to the hospital to visit my mom

[arunachala]

this just makes me sick

[KillTheMessenger]

Drilling is up... production is down. Hmmm... maybe peak oil is not so outrages as some rather uninformed people like to paint it, after all? Certainly not in the US where production has peaked in 1970. And that will never change.

:-)

[NL207]

Where did you get the idea oil production is down?

This is a table of oil production per year inclusive of 2007 : http://www.eia.doe.gov/aer/txt/ptb1105.html

Looks to me like oil production flattened for the last three years while demand continued to increase, a formula for a supply crisis if there ever was one.

Look at the bright side from the Liberal side: Continued government meddling is sure to lead to continued supply woes and continued high prices. With any luck, the prices will get high enough that all of these "green" alternatives will start to become cost competitive with oil. Then Liberals won't have to coerce people into using their preferred energy solutions. Then again, it might get a good chunk of the Pelosi crowd voted out of Congress.

[KillTheMessenger]

DOMESTIC oil production is not up. It's not even flat.

http://tonto.eia.doe.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_a.htm

We shall see if they manage to give it a few years of flat or slightly increasing production by offshore drilling. We lost 40,000 barrels a day in production year over year from 2006 to 2007. By the time we are done drilling offshore (and deep), we'll be down another 200,000 barrels per day or so. So they have to make up for that just to BRING us back to where we are today.

But you are right. World oil production is essentially flat, with OPEC trying to squeeze blood out of a stone. Most important producers have peaked or are close to peaking. And that we have not fallen off the cliff, yet, is mostly because of non-conventional and heavy crude oil.

And demand is up. Although I would expect demand to essentially track supply for the next ten years with ever increasing prices until conservation efforts will have made a real dent.

And none of this depends on liberal or conservative, by the way. Peak oil is a phenomenon as simple as the fact that if you suck lemonade through a straw, after a while the glass is empty. I don't know what mental age one must descend to to deny the empty part. Two? Two and a half?

[UnbiasView]

Is this the new talking point? Drilling is up but I'm sure they won't tell you production is down because they aren't drilling in the most oil rich areas.

[leduck]

yeah right

[KillTheMessenger]

Sure. They are wasting billions of dollars to drill dry holes on purpose. Makes perfect sense. In cuckoo land.

[UnbiasView]

Well the Dems say they are wasting billions of dollars sitting on land . . . without backing up that there is significant oil there. I have head that 68 million acres talking point about 1 million times.

[TxAggie]

Drilling is up, footage drilled is up, bbls per well is down because we are drilling in the same old tired areas we have been drlg in for years hence the need for greater access to more promising areas.

[Tom95134]

Much of the oil that has been recovered from the Alaska fields is being shipped overseas. Natural gas is in somewhat shortage because nearly 100% of domestic production is devoted to the generation of electrical energy. As electrical energy demands rise naturals gas prices rise. It's going to be an expensive winter, ever for those that heat with gas.

[RememberTheAlamo]

Hi Tom,

Isn't there a law that says Alaskan Oil "must be sold domestically" ? When did that change?

As to natural gas and electricity. Natural gas is used in turbines to let utilities peak their energy supply on real hot days . . . gas is more expensive than coal . . .so they only use it when needed.

Natural gas primarily goes to heating homes, factories and as a feedstock for fertilizer production.

But the winter shouldn't be so bad . . . we have global warming on our side . . . so we shouldn't have to heat as much! . . . next summer might be a little expensive though . . .

[MaryanneAZ]

Many States are also using LNG (liquid natural gas) to fuel their transit buses and vehicles. Arizona has been using LNG buses for years, but the buses do suffer a bit under our extreme weather temperatures in the summer. We have also tooled up to have LNG filling stations for transit. It certainly is not new technology for vehicles and is something that should be considered for future use in personal vehicles. Oil companies have tamped down any alternative filling stations and development of alternative fuels for years. That's why they hand out those big campaign donations. That is also why I support Barack Obama who has said no to corporate (oil companies etc.) and PAC contributions to our campaign. Of course, Repubs like to allege that our campaign has accepted $400k from oil companies, when they know full well that individual employees who work for big oil are counted by the FEC as "contributors" from big oil. Individual employees should not be counted based on their employer, but that is the system we have and it is misleading. We obviously need a lot of changes in Washington. Obama '08

[Chiang]

There is no law requiring "Alaskan oil" to be sold domestically. It would not matter anyway. Oil is fungible.

[KillTheMessenger]

Tom, it is easier to have an informed opinion, if you inform yourself first.

[DavidJames]

The number of wells for both oil and for gas have both doubled since 2007. The bottom line is that we have been drilling more for the last seven years. "Drill Here and Drill Now" has been complete failure as a national energy policy.

http://www.eia.doe.gov/aer/txt/ptb0407.html

Oil wells from 7300 in 2000 to 13800 in 2007.

Gas wells from 15,600 in 2000 to 31,000 in 2007

With increased drilling for both gas and oil with record completion rates, gas and oil prices have still continued to increase

[RememberTheAlamo]

Hi David,

Interesting numbers . . . might ought to frame them with reference.

Yes, drilling for gas wells and gas production has increased over the last 6 years. It makes sense. The fuel has a local market, It is relatively clean and it is found just about everywhere.

As to oil wells, we have less than 400 rigs currently drilling for oil. Prior to the windfall profits tax (82), we had over 4,000 rigs drilling, and most were drilling for oil. Texas alone, had over 1,000 rigs drilling.

Historically speaking, this is the first oil boom (indicated by prices) where the number of rigs drilling for oil has fallen . . . but, it makes sense . . . oil companies, oil investors, lease holders and retailers are all under attack . . . with this kind of pressure they are doing just what we want them to do . . . stop drilling.

Interesting aside . . . but most US oil wells are drilled by small independents (>80%) . . . and they are just not as interested to drill, when they are being "beaten up". The large oil companies drill either offshore or in other countries . . . just too difficult to drill for oil onshore US.

As to wells . . . there is a difference between a well and a hole . . . it is a matter of semantics . . . but it would distort your conclusion.

Anyway . . .

[KillTheMessenger]

I think the important conclusion is that oil companies only drill where they suspect oil. And, sadly, there isn't that much left of it in the ground in the US. We have peaked in the 1970s. That was geology telling us that the glass was half empty. And now, 38 years later we are basically running on fumes....

[mjt218]

I would concur with your comment on large oil companies primarily drilling overseas. Small Independents have less overhead and in general can go after a lot of the smaller opportunities on land. "Big Oil" needs a bigger impact when it throws its weight around.

[DavidJames]

Not just gas drilling. Drilling for gas and drilling for oil have both increased over the last 7 years.

Oil wells from 7,300 in 2000 to 13,800 in 2007.

Gas wells from 15,600 in 2000 to 31,000 in 2007

Gas and oil prices are at record highs. These high prices are hardly beating up independent oil producers.

[DavidJames]

Oops, Sorry mistyped, should have been from 2000 to 2007.

The numbers from the doe, do not support the claim that we have 10 times fewer drilling rigs operating today than in the past. Note that the all time peak number of wells drilled was in 1984, 71,000. with a 79% completion rate. In 2007 49,000 gas and oil wells were drilled with a 92% completion rate. This is up from 25,600 gas and oil wells drilled in 2000 with a 89% completion rate. Obviously in 2007 there are plenty of active drilling rigs.

As to the number of good holes, the 2007 record high completion rate speaks for itself, 92%. Only 8% of the wells drilled were dry holes. In 1984, 21% of the wells drilled were dry holes.

[RememberTheAlamo]

Hi David,

Compliments on the research. Rig counts also break down by the type of well being drilled . . . oil, gas, in-fill, extension, wildcat, exploratory (where there is no intention to discover anything since you are drilling off-structure).

While drilling productivity has risen since 1980, particularly with MWD and horizonal techniques . . . the number of rigs operating has fallen dramtically . . . historically the split has been 80% oil wells and 20% gas/other. In the early 80's (pre-WPT) the rig count had reached beyond 4,000 daily active rigs. Today, with prices 4-5 times higher, the total domestic rig count is below 2,000, with just over 300 rigs drilling for oil.

As you noted, while there has been a consistent uptick in drilling rigs, since the late Clinton years, most of the increase has been in gas well drilling . . . and most of that on known producing formations.

Essentially, the willingness to absorb "old fashioned" drilling risk has disappeared. Absent a reward, there is no reason to drill . . . . and it would appear that is what may have happened to the oil patch.

Oil & Gas Journal . . . Of the rigs working, 373 were drilling for oil, down 2 from the previous week. There were 1,539 rigs drilling for natural gas, 9 more than the previous week, and 9 units were unclassified. Horizontal drilling decreased by 9 to 555. Directional drilling increased by 7 to 387.