Drilling Is Destiny: This won't hurt a bit. Really

National Review, March 25, 2002 by William Tucker

Last summer, Shell Oil entertained reporters at its Houston headquarters to demonstrate new oil-drilling technologies. It was an awesome performance.

In a darkened "virtual reality" room, geophysicist Mark Stockwell showed how seismic data from the Gulf of Mexico are being used to create three- dimensional images of the rock crust beneath the ocean surface. Petroleum engineers, geologists, and drillers use polarized glasses to view a huge display screen that allows them to conduct a "virtual exploration" of complex underground formations. "Bringing our field people into the VR center for a single three-day session saves us $20 million in unsuccessful drilling," says Stockwell.

Indeed, drilling technology improves almost monthly. The industry has developed huge "floating-production storage and offloading facilities," billion-dollar behemoths larger than battleships. Instead of having to be connected physically to concrete platforms on the ocean floor, these gigantic barges float over the drill site, maintaining their position through global- positioning satellites; this makes it easier to drill on the deep ocean floor. Every few days a tanker comes and drains the storage reservoir, eliminating the need for pipelines as well.

Oil rigs also now use "multilateral drilling," a technique that minimizes environmental impact. In the old days, drill bits attached to five-inch steel pipes went straight into the ground in search of pockets of gas and oil. Missing an oil pocket meant building another rig and punching another hole in the ground. Now coiled titanium tubing -- with pipes just one inch in diameter -- spreads out from the rig at angles of up to 90 degrees, reaching pockets as far as five miles away.

Multilateral drilling is designed for drilling in pristine areas such as the Rocky Mountains, where about 5 billion barrels of oil are believed to lie, and the Arctic National Wildlife Refuge, which may contain 10.4 billion barrels -- the equivalent of more than half of our current reserves. (The Persian Gulf, by way of comparison, has reserves of 600 billion barrels, of which 260 billion are in Saudi Arabia.)

Although ANWR is larger than West Virginia, encompassing 19 million acres, drilling would take place only on the 1.5-million-acre coastal plain, a flat, featureless terrain 1,300 miles from the North Pole. Oil would be sought only beneath 2,000 acres and -- thanks to multilateral drilling -- the actual rigs would occupy only five or six acres. "There's a lot of oil still out there," says John Felmy, chief economist at the American Petroleum Institute. "The only question is whether we're going to be allowed to drill it."

Unfortunately, even if we do overcome these self-imposed limitations, America remains -- as Felmy puts it -- "a declining oil province." Despite all the new finds and improved technology, both American oil production and reserve capacity have steadily declined since peaking in 1970. In that year, we consumed 5.4 billion barrels of oil while producing 3.6 billion; our reserves were 39 billion. In 2001, we consumed 7.1 billion and produced only 3.2 billion, while reserves sank to 22 billion. Increasing imports, of course, has made up the difference. President Nixon became concerned when foreign oil suddenly jumped from 29 percent to 35 percent of domestic consumption between 1972 and 1973, just before OPEC dropped the hammer; in 2001, we imported 59.2 percent of our oil, the highest in our history. The figure continues to rise almost every year.

Efforts at conservation and the development of new reserves have helped us keep abreast, but have not diminished our dependence on the Persian Gulf. In 1977, 33.6 percent of our oil came from OPEC countries, and 13.3 percent from the Persian Gulf alone. In the first eleven months of 2001, 27.9 percent of our oil came from OPEC, and 13.9 percent from the Gulf, including 3.7 percent from -- gulp! -- Iraq. The only trend has been the slightly diminishing importance of non-Persian Gulf OPEC countries (Venezuela, source of 8 percent of our oil; Nigeria, source of 4.5 percent) coupled with an increasing reliance on non-OPEC nations (Canada, source of 9 percent; Mexico, 7 percent; Norway, 1.8 percent; the U.K., 1.5 percent; and -- gulp again! -- Andres Pastrana's Colombia, 1.4 percent). We could start boycotting Saudi Arabian oil tomorrow (8.6 percent of our consumption) and easily make up the difference, but the way international markets work, the Saudis would hardly notice. The gesture would be purely political.

So what, if anything, should we do about it? The truth is, barring some completely unanticipated development, we will continue to import more than 50 percent of our oil into the foreseeable future. "We're not addicted to oil, as some people claim," says John Lichtblau of the Petroleum Industry Research Foundation. "People complain we consume 25 percent of the world's oil, but we also produce 25 percent of the world's GNP. Our consumption has increased only one and a half percent per year while GNP has risen about three percent."