On the Utter Stupidity of "Drill It or Lose It"

By Vladimir Posted in | | | | Comments (10) / Email this page » / Leave a comment »

I'd almost rather believe that House Natural Resources Committee Chairman Nick Rahall (D-WV) is lying. It's hard to believe that a man in his position, from a producing state no less, could be so hopelessly uninformed on such a critical issue.

It's major-league stupid, even by the standard of House Democrats. Awe-inspiring in its multi-faceted stupidity.

Democrats Say Oil Companies Should Lose Leases They Don't Use

"Simply put, we are telling Big Oil to use it, or lose it," Rahall said in the Democratic Party's weekly radio address. "They would either have to produce from these lands, show they are being diligent in their development, or give up the right to control even more federal energy resources."

The Major Oil Companies must find very large fields in order to keep their reserves growing. That's why they have in large measure abandoned domestic exploration in favor of international areas that are less heavily drilled. And that's precisely why it makes sense to open the currently-closed OCS areas to exploration.

Offshore leases are competitively bid. Some of them are worth more than others because of an indicated presence of a large geologic structure (an underground "hill" or trap that is a likely hydrocarbon accumulation).

There is a lot of coverage by modern seismic data; consequently, virtually all of the really big structures on the "Shelf" (less than 600 ft of water) were found 20 years ago or more. The Shelf has been called the Dead Sea by some; Chevron is the only major company that has not abandoned the Shelf for the much larger potential offered by deepwater exploration. It is an understatement to say that it is very mature. Most of the wells drilled these days, even with high prices, depend on the existence of nearby infrastructure.

Offshore leases aren't perpetual. They are for 5 year terms (10 years in deepwater). If an operator fails to establish production in the "primary term", the lease goes back to the Feds.

Only productive leases are held past the primary term. The Feds get 18.75% of production from new leases (historically 16.67%).

The minimum bid is $25/acre, a total of $125,000 for a typical offshore LA block. It's just like real estate; the average may be high (thanks to the occasional $50- to $100,000,000 block), but the median price of a block is probably $250,000.

Trust me, a $50,000,000 block gets drilled right away. And, for the record, my company owns a couple of undrilled leases that we would be more than happy to sell back to the Feds for no more money than we have spent to date.

Chairman Rahall may think he knows what he's talking about if he's making a blanket comparison with his home state of West Virginia. West Virginia is covered with wells, especially natural gas wells. You could poke a hole in just about any part of WV and make some kind of gas well. There are wells there that are 100 years old and still producing. A really good gas well in WV might make 250 million cubic feet in 20 years.

But the Gulf of Mexico is not in West Virginia. The geologic setting is completely different. You can't just poke a hole in the GOM and make a well; you have to have the proper geologic setting. But a really good gas well in the GOM might make 250 million cubic feet in 30 days or less. But you gotta have the structure.

It's just not that complicated, and it's hard for me to believe that Chairman Rahall is so badly informed.

This is what the Democrats count on. That they can blow smoke and the newsmedia will do nothing to blow away the clouds.


"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777

I'm glad we have Vlad to keep us informed on the realities of how the oil industry works.



Now also found at The Minority Report

drill ships necessary to explore deep sea for oil? I'm thinking that ship builders would be pressed to supply more drill ships if liberal CongressCritters™ would open up the off-limits OCS for exploration drilling.


Extreme taxation, excessive controls, oppressive government competition with business … frustrated minorities and forgotten Americans are not the products of free enterprise.Ronald Reagan

actually there is really only one ship in the group the other option is a semi-submersible structure. Certainly there is supply issue -- but just think about all the people who could be employed building these things when the OCS is opened for drilling. Just like all of the people who would be employed connecting ANWR to the Alaska pipeline. Heck I bet even the guys hanging out at the 7-11 would be willing to go work in ANWR given the proper clothing.

M Penny

They need a yob too.

"Nothing works like freedom, Nothing succeeds like liberty"
Kyle

na na na na na naaaaaaaaaaaaa!

I didn't even know that Democrats were still thinking about drilling for oil??
I thought they were still consumed with this useless ethanol mandate and tariff on sugarcane ethanol that they've got going on.

Check out this: http://www.greenfaucet.com/hanlons-pub/obama-clueless-on-corn

People need to realize what obama represents and how uninformed he is. At least McCain can do the math and see that what we're doing isn't working.

Okay -- I worked in the oil bidness for a number of years (those who have worked in the oil bidness know that I used the correct terminology). I find that the trouble is most people have absolutely no clue as to what is involved in oil and gas exploration or production. Most think that oil fields are like corn or cotton fields. My stupid joke with my geologist brother working in the West Texas oil patch was that I saw a lot of cotton fields on my drive out to see him but not one oil field. Oh heck, most people don't even know what a corn or cotton field looks like except from watching Field of Dreams or Places in the Heart.

Most people -- and by this I mean about 99.9999999999999% --- don't have a clue about how to get a drop of oil out of the ground. The reason why environmentalists are so against drilling in the OCS or ANWR is that they too have seen too many movies and think whenever you drill a well you end up with a gusher.

They just want to pull into the gas station in fill up and go into the store and buy all of those items made with a petroleum base. Heck 99.99999999999% of the people don't even understand the vast number of products that have a petroleum base.

Heck -- most people are just plain stupid.

M Penny

"Nothing works like freedom, Nothing succeeds like liberty"
Kyle

"Nothing works like freedom, Nothing succeeds like liberty"
Kyle

 
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