Monday, April 4, 2016

How BIG is BIG? (Data out of context and spinning the message: US Atlantic OCS and other oil reserve estimates in the news)


Two weeks ago, the US Department of Interior announced that the US Atlantic Outer Continental Shelf (OCS) was removed from the 2017-2022 offshore lease sale (http://www.cnn.com/2016/03/15/politics/obama-drilling-atlantic-coast/index.html;
http://washpost.bloomberg.com/Story?docId=1376-O42VSQ6JTSEX01-2P7U5E8RTS87GP3EKFMV10Q903). The January 2015 Draft Proposed Program for the OCS 2017-2022 lease sale originally included parts of the Mid-Atlantic and South Atlantic planning areas from Virginia south to Georgia; the portion of the Mid-Atlantic planning area offshore of Delaware and Maryland, and the North Atlantic planning area (offshore New Jersey north to Maine) were not in the Draft Proposal (see Figure 1). On March 15, 2016, however, the Proposed Program (http://www.boem.gov/2017-2022-Proposed-Program-Decision/) was published and now excludes the entire US Atlantic OCS. This decision was welcomed by environmental groups, various members of the US Congress from Atlantic coastal states (http://www.menendez.senate.gov/news-and-events/press/east-coast-senators-introduce-bill-to-prevent-atlantic-offshore-drilling-say-killthedrill), NASA and the US Navy (https://www.washingtonpost.com/news/energy-environment/wp/2016/03/14/the-governments-atlantic-drilling-plan-takes-friendly-fire-from-the-pentagon/), and some coastal communities. However, industry (http://www.oilandgasinvestor.com/feds-nix-atlantic-five-year-offshore-lease-plan-842361), plus governors of southern states who were hoping offshore fossil fuel production would bring income to the states, were disappointed, to say the least. (It is important to note, that although there is federal revenue sharing from offshore lease royalties to some Gulf Coast states, there is no revenue sharing plan in place for Atlantic states.)

The news articles above mention the 2011 assessed mean amount of potential fossil fuel resources for the entire Atlantic OCS, which includes the North, Mid- and South Atlantic planning areas: 3.3 billion barrels of oil (Bbo) and 31.3 trillion cubic feet (Tcfg) of natural gas (http://www.boem.gov/uploadedFiles/2011_National_Assessment_Factsheet.pdf). The revised 2014 assessment adjusts those mean numbers upwards to 4.72 Bbo and 37.51 Tcfg. These numbers are for the "Undiscovered Technically Recoverable"* resources on the Atlantic continental shelf within the US Exclusive Economic Zone (EEZ) that extends 200 miles from the US coastline. The lease blocks, however, would start no closer than 50 miles offshore (contrary to Senator Menendez' tweeted anti-drilling but Photoshopped picture of an oil rig within sight of beachgoers**). The assessments are based on wells drilled, mostly dry or uneconomic, and seismic data collected before the early 1990’s moratorium on Atlantic OCS oil and gas resource development, and on study of "analogs" which are known hydrocarbon plays in similar geologic settings in other parts of the world. The assessment, besides reporting the mean estimated amount, also provides other probabilities of occurrence: for the entire Atlantic OCS, there is a 5% chance (2014 revised assessment) of 9.23 Bbo and 67.7 Tcfg, but a large (95%) chance there is only 1.32 Bbo and 11.8 Tcfg.

But is this estimated resource amount BIG? Is loss of access to the Atlantic OCS a major blow to the Nation's energy independence and security, as some articles suggest? Although industry and industry media outlets would understand the relevance of the assessed numbers in relation to oil reserves around the world, the general public does not. A BILLION sounds immense, so readers may think we are missing out on a large national resource by blocking development. Without context, that is, without comparisons to other data, the numbers may be misleading. From the map below (Figure 2), however, one can see that Atlantic mean assessed amounts are minor compared to the Gulf of Mexico, and less than offshore California where there is proven production. According to an article in Eos, March 17, 2016,
“The removal of that lease sale would lower the projection of future U.S. oil production by about 0.1% and would lower the U.S. natural gas production projection by 0.06%, according to the Interior Department’s Bureau of Ocean Energy Management (BOEM). ‘Thus, the energy security of the United States will remain strong without offshore leasing in the Atlantic during the 2017–2022 program,’ BOEM states in the new OCS proposal.”

 Figure 2: Figure 5-6 from http://www.boem.gov/2017-2022-DPP/ (p. 101 of pdf): Assessment of UTRR of the OCS, 2011 (Atlantic OCS Updated 2014)

Another example of numbers out of context is also related to oil reserves. In the early-2000’s, whether or not to open the Alaska National Wildlife Refuge (ANWR) 1002 Area to drilling was a contentious and controversial topic. Many against drilling said there was only several months of oil there, based on data in a US Geological Survey (USGS) report (https://www.nwf.org/News-and-Magazines/National-Wildlife/Animals/Archives/2010/Arctic-Refuge-Turns-Fifty.aspx). WHAT? This argument was used as a reason not to drill. The USGS 1998 petroleum assessment of the 1002 Area (http://pubs.usgs.gov/fs/fs-0028-01/fs-0028-01.pdf) states that the mean Technically Recoverable oil in the 1002 Area (not including Native Lands or offshore waters) is 7.7 Bbo.  According to the Congressional Record-Senate (April 18, 2002, p. 5027), Senator John Corzine (D-NJ) said ". . . Based on estimates from the U.S. Geological Survey, it is likely to have little more than 6 months' worth of capacity relative to 1 year of U.S. demand. The oil wouldn't even begin to be available for at least 10 years. And it wouldn't reach peak production for 20 years."

Corzine's statement does include the phase "relative to 1 year of U. S. demand" which is key to understanding what is meant by "6 months' worth of capacity". In 2002, US crude oil consumption was 19.761 million barrels of oil PER DAY. If you divide that daily consumption (million barrels per day) into the mean recoverable 1998 estimate for the entire 1002 area (7.7Bbo, undeformed plus smaller geologically deformed region), you get the equivalent of 388 days or, using 1 month=30 days, 12.9 months, of US oil usage. Using instead the 95%-probability estimate of 3.4 Bbo (in just the undeformed part of 1002), the result is 170 days or 5.7 months of US oil consumption. But, could the 1002 Area, if ever in production, produce 20 million barrels a day? Could it be the Nation’s sole source of petroleum? NO. The estimated 1002 Area peak production daily rate ranges from 600,000 - 1.9 million barrels/day from multiple wells over a total 50-60 year life of the field (http://dog.dnr.alaska.gov/Publications/Documents/OtherReports/Oil_Gas_in_ANWR_Review_2003-02.pdf, p.6; http://www.eia.gov/pub/oil_gas/petroleum/analysis_publications/arctic_national_wildlife_refuge/pdf/anwr101.pdf). For comparison, current daily production from the world's largest conventional oil field, Saudi Arabia's megagiant Ghawar field, is ~5 million barrels/day. For the 1002 Area, saying there is only 6 months of oil, without detailing how that number was calculated, without saying that it is supposed to be some sort of useful analogy, is deceptive.

Although here in the USA, we are in the height of "spin" season with the coming Presidential election, sound bites or media reports with partial information or numbers out of context happen at any time in any field, not just the earth sciences. A piece of data or information, no matter how accurate can, without revelation of how it was derived or if isolated from larger trends or data sets, lead to an incorrect assumption on the part of the listener or reader. This can occur by design, to twist or “spin” a meaning, or inadvertently, but for greatest transparency, educated discussion and informed decision making, complete data and background derivations must be available.

* Technically Recoverable means we have the drilling and production technology to access and produce the resource. Sometimes assessment estimates are given as "Economically Recoverable" which means what can be produced with a profit at a particular market price of oil/gas: if the price is too low, as we have seen in the last year, production of some resources, such as unconventional shale gas and shale oil, may not be cost effective.




oil rig original photo: http://www.shutterstock.com/s/offshore+rig/search.html?page=3&thumb_size=mosaic&inline=214057231)

KEYWORDS AND TERMS: "Atlantic Outer Continental Shelf", OCS, "offshore lease sale"
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