Drilling for...

16 April 2004

An AP story ran today (here's a sample) noting that

Roughly a fourth of oil and gas wells with permits approved by the Bureau of Land Management have not been drilled, despite skyrocketing oil and gas prices that have prompted Republicans in Congress to demand more access by oil companies to public lands.

More than 7,000 oil and gas wells that received permits in the last 10 years have gone untouched, prompting conservationists to question why the Bush administration has been advocating opening new land to drilling and streamlining the permit process.

What concerns me in this is not the untouched permits -- that really is a business decision for the oil companies to make. What’s worrisome to me is the implicit public belief that extracting oil is a simple matter of buying a permit, drilling a hole, and drawing down from a known reservoir. Turning on the spigot, so to speak. If there is a permit, then there must be oil. That’s worrisome because it leads to a perception of accessibility of supply, which in turns leads to policy, development and purchase decisions.

It’s a different view of the reserves problem discussed in an earlier post.

“Dry holes” -- exploratory wells that produce nothing -- are part of the oil business. Leases are taken and then left untouched or abandoned. The most extreme example of this is probably the Mukluk Well in Harrison Bay. BP spent a total of $2 Billion in 1982 pursuing what was to be an extensive find only to drill the most expensive dry hole in history. Oil stains in the rock indicated that the area had indeed once contained oil. At some point in the distant past, the oil escaped. Ooops.

The industry’s exploration and discovery technology has lept ahead incredibly, but exploration is still a risk. Oil reserves are estimates, not ironclad numbers. We need to stop behaving as if that is so.