Exploring Realities Of Offshore Oil Drilling In a time of ever-increasing energy prices, this week President Bush overturned a long-standing executive order banning offshore oil exploration in certain parts of the country. The move is largely symbolic at this point, as additional congressional action would be needed to fully open up offshore oil drilling.
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Exploring Realities Of Offshore Oil Drilling

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Exploring Realities Of Offshore Oil Drilling

Exploring Realities Of Offshore Oil Drilling

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IRA FLATOW, host:

You're listening to Talk of the Nation: Science Friday. I'm Ira Flatow. And for the next few minutes, we're going to talk about drilling for oil. In response to spiraling gasoline prices, President Bush this week lifted a decades-old executive ban on offshore oil drilling. And there is talk about opening up more acreage in Alaska to oil wells, too.

But how much oil is really below the ocean floors, anyway, down there for us to use and get it out in time to solve this gasoline crisis? And what's going on in Alaska? Is there enough there? Would we ever see it? I mean, we have a pipeline that runs out of Alaska? Do we have to build another pipeline to get it out of there, too? Here to answer, hopefully many or all of these questions is Robert Kaufmann. He is director of the Center for Energy and Environmental Studies at Boston University. He joins us by phone from there today. Welcome to the program.

Dr. ROBERT KAUFMANN (Director, Center for Energy and Environmental Science, Boston University): Thanks for having me, Ira.

FLATOW: We've heard a lot of figures thrown out around the last week or two about how much oil there is, let's say, in the Gulf or offshore. How much oil is down there? Do we know?

Dr. KAUFMANN: Well, you can never know for sure until you actually drill wells. But what we think we know, or at least what the government thinks it knows, is that in areas that are available to drilling now, the government thinks we could recover about 41 billion barrels in areas that are currently off limits. There may be another about 19 billion barrels.

FLATOW: And how much of that would sol - would be salve to our oil addiction? How long would that last?

Dr. KAUFMANN: Well, you can't really think of it that way, because you're never going to produce all this oil at once. So, what happens is, it gets spread out over time. And the government actually ran a little scenario, it said, well, what happens if we open up all the restricted areas to oil production and assume the market goes forward? And what they found was that it's really not going to make much of a difference. Really, we wouldn't see any kind difference until about 2017, if they - if we let the moratorium expire in 2012, we wouldn't see any difference until 2017. And then we're really talking very small percentage differences on the order of U.S. production being about one to four percent higher.

FLATOW: Mm. By then all gasoline could be 12 dollars a gallon.

Dr. KAUFMANN: I certainly hope not.

FLATOW: Yeah.

(Soundbite of laughter)

FLATOW: I mean, so it's not going to solve immediate - the immediate crisis.

Dr. KAUFMANN: I don't even think it's going to solve the long-term problem.

FLATOW: Yeah.

Dr. KAUFMANN: I really think it's kind of this distraction, kind of telling people or giving them this illusion that if we do this, we can really solve the problem. Whereas at best, it's kind of like postponing the prom for a couple of minutes.

FLATOW: Well, let's play along for a minute and let's talk about Alaska.

Dr. KAUFMANN: OK.

FLATOW: How much oil is in Alaska?

Dr. KAUFMANN: Well, again, nobody knows. Well, actually, some people know. There has been one test drill - well drilled into the Arctic National Wildlife Refuge. And as you might guess, the companies are not letting that out. But the U.S. Geological Survey has an idea about how much oil's out there, and they've run some scenarios as well. And if we start drilling today, we won't see more than, let's say, a million barrels per day for another decade.

So, just to put that number in context, million barrels per day sounds like a lot, except when you realize the U.S. now uses between 20 and 21 million barrels per day. And the world as a whole uses about 85 or 86 million barrels per day. So, again, we're talking about really, really small incremental changes. And the other thing to remember is that one point, let's say, that extra million barrels per day, that would be on top of ongoing declines in the U.S. It's not like we can assume that U.S. production will stay in current levels. U.S. production has been declining since the early 1970s, despite higher prices, despite technological change, despite all the subsidies that government can throw at it.

FLATOW: Mm-hm. And how would we get that oil out of Alaska?

Dr. KAUFMANN: Well, that's a great question, because one of the things that frustrates me about the discussion about Alaskan oil is it's really beside - the discussion's missing the big point, that is, there's no way that oil is really going to make a significant effect on prices, or even U.S. dependence on oil.

But really what's going on is there is one of the largest fields ever discovered in the United States, the Alaskan North Slope Field known as Prudhoe Bay, and because that field is so far north, the producers had to build this very long pipeline across Alaska down to Valdez, which is now infamous for that big oil tanker spill about 15 years ago, or a long time ago. And the people who built that pipeline had a specific lifetime in mind, based upon the size of that field, and they've amortized the cost of that pipeline.

If we start producing oil from the Arctic National Wildlife Refuge, what the companies will do is build a short spur pipeline to the trans-Alaskan pipeline system, and then ship the oil down. And what that will allow them to do is to make huge amounts of money from operating that pipeline longer than they thought, because that pipeline's basically paid for. And again, there's nothing wrong with making money, but that's what the argument should be about. It shouldn't be about lowering oil prices or reducing U.S. dependence on imported oil.

FLATOW: Because the amount of oil is a very small percentage.

Dr. KAUFMANN: Yeah. It - you - people really need to think, whenever they hear a potential solution, you need to think of the world oil market as one big pool of oil. And whatever happens on one side of the pool literally goes across the entire pool. So, when people talk about reducing prices, you've got to be able to make the argument that this is going to have a big effect on the global supply/demand balance. And for better or for worse, there's really nothing we can do in the United States on the supply side to move that balance in a significant way.

FLATOW: Do the oil companies have sites on land that they haven't even drilled in yet?

Dr. KAUFMANN: Yeah, that's absolutely correct. There are lots of sites. As I mentioned earlier, there are lots of sites on the outer continental shelf that are open for drilling. And as the government itself reported, in the sites that currently open to drilling, there's about 40 billion barrels of oil, we think, there. It's another 18 that we think is off-limits.

FLATOW: Mm-hm. And how would they refine - or if they got more oil, haven't they closed down hundreds of refineries?

Dr. KAUFMANN: Well, they have, but crude oil can get shipped all around the world. And so, crude oil that's produced here can just be simply put on a tanker and shipped somewhere else and refined and either consumed there or shipped back to us. So, the U.S. imports not a lot, but some of its motor gasoline.

FLATOW: 1-800-989-8255. Mark in New Britain, Connecticut, welcome to Science Friday.

MARK (Caller): Hi. Thank you for taking my call. Just following up on what you were just discussing about the federal lands that the oil companies already have under lease and are not working those lands, are there added costs involved? Is the oil on these already-leased lands difficult to get? Why are they so hot and bothered over the OCS and Alaska when they've already got these reserves under lease?

Dr. KAUFMANN: Well, the outer continental shelf is not really a great place to drill. So, I don't know if you remember, a few years back, there was this flurry of excitement about a well known as Jack 2. It was supposedly going to be the next savior of the U.S. oil balance because it did contain a lot of oil, but let's think about where that oil is. First of all, it's - the sea, at that point, is 7,000 feet deep...

FLATOW: Give us a little geography lesson here.

Dr. KAUFMANN: OK. So, this is in the Gulf of Mexico, the outer continental shelf of Gulf of Mexico. So, we're about 175 miles off the coast of Louisiana, at least the Jack 2 well is. And we're sitting in 7,000 feet of water, and then the oil is another 20,000 feet below the seabed. So, that's 28,000 feet, and as I tell my students, I can't do math at the board, but that's many miles below the surface of the ocean.

And so, that creates all kinds of complexities. There's a shortage of ship that are able to kind of drill these very deep, offshore wells. Furthermore, it's very hard to bring that oil to the surface. So, a lot of fields - everybody's seen those great movies where you punch a hole in the ground and oil comes exploding to the surface. And that's great, because we don't have to invest any energy to get the oil from below the ground to the surface.

But think about it. This oil, 28,000 feet below the surface, only about five to 10 percent of it would come to the surface, in and of itself. We would have to invest a lot of energy to kind of bring that oil to the surface. And you could think about that, you know, think about what it takes to lift a gallon of water up several - many, many, many tens of Empire State Buildings, and that's what it would take to bring this oil to the surface. So, just to put it in dollar terms, it costs about 100 to 150 million dollars to drill a single well in this type of environment.

FLATOW: So, that's a major investment.

Dr. KAUFMANN: Oh, yeah. And...

FLATOW: And that's why they're not drilling there.

Dr. KAUFMANN: Yeah. You know, well, they are drilling Jack 2, but if you go back to the previous kind of price, like, one of the most expensive dry holes ever drilled was this Mukluk field off the coast of Alaska, which, at that time, cost about 100 million dollars, and I'm not sure what that would rise to in current dollars, but it would certainly be much higher.

FLATOW: If you're making 50 billion dollars in profit, that doesn't sound like a lot of money to drill.

Dr. KAUFMANN: It doesn't, but you know, oil companies are just like any other company. and You've got to remember this, and I remember this - writing this for my dissertation, oil companies produce profits, not oil, and they will only produce oil so long as the profits from producing is greater than their other possible investments.

FLATOW: They could be sinking the money in other places.

Dr. KAUFMANN: That's right. Maybe even alternative fuels.

FLATOW: And that's what some of them were doing. We're talking about the drilling for oil this hour in Talk of the Nation: Science Friday from NPR News.

Talking about drilling for oil with Robert Kaufmann, director of the Center for Energy and Environmental Studies at Boston University. And I guess if you're getting 140 dollars for a barrel of oil, why spend the money on getting new oil if you're getting a lot for the old oil?

Dr. KAUFMANN: Well, you always have to be looking out for your future, because oil companies know better than anybody else that oil in a field is going to run out. So, they're always kind of looking for that next barrel, most companies trying to maintain current levels of production.

FLATOW: But if you want to spend a few hundred million dollars instead of in one spot, you know, you could invest in wind and solar and get a much bigger return on your buck.

Dr. KAUFMANN: Yeah. And eventually, in theory, an economist would tell you that's what the market may have hopefully signaled to these oil companies, and entrepreneurs in general, that hey, there's oil out there, but really, you can get a better return elsewhere. And indeed, the major oil companies, like ExxonMobil, they want - shareholders want about an 18-percent rate of return.

FLATOW: Right.

Dr. KAUFMANN: And there are relatively few opportunities outside of OPEC countries where you can earn that kind of rate of return on oil-production opportunities.

FLATOW: You know, T. Boone Pickens are certainly no dummy.

Dr. KAUFMANN: Yeah, well...

FLATOW: And he has made his fortune in that business and he's now - he's going to, you know, light up the Texas Panhandle with wind power.

Dr. KAUFMANN: Yeah. You know, you really have to - never mind the academic on the phone, but you have to sit up and listen when a guy made a billion dollars drilling oil says we can't drill our way out of this one.

FLATOW: Yeah. So, now, you think really anybody who objectively looks at this idea has to come away thinking it's more politics talking than real business sense, real economics.

Dr. KAUFMANN: Yeah. I just don't see an argument for kind of the need to open up these areas of the Gulf, or anywhere offshore.

FLATOW: Well, shouldn't people be able to see that for themselves?

Dr. KAUFMANN: Well, you know, one of the things to think about is it just doesn't sound like a bad idea. Somebody says, is more oil better than less oil? You're always going to say, well, more oil's better, or at least, if you're not thinking of environmental consequences, you're always saying more oil's better. The questions is, what are your alternatives? And so, it doesn't sound wrong, and that's the genius of political spin, what people say doesn't sound wrong.

FLATOW: And if it doesn't sound right this time, maybe in a couple of weeks, you'll spin it a different way.

Dr. KAUFMANN: Yeah.

FLATOW: And make people think that this was your idea all the time.

Dr. KAUFMANN: That's right.

FLATOW: To begin with. So, where do you think this is all going to end up? Do you think this will die away as a political issue sooner or later? Or it's going to hang on for the rest of the (unintelligible)?

Dr. KAUFMANN: I think it's going to die away. I just think, between the economy and other opportunities and the issues that are going to rise, this idea of pushing for oil on the outer continental shelf is just not going to have this big political draw that a lot of politicians think it's going to have.

FLATOW: And certainly, in this age where a lot of people are getting their news from the Internet and other sources...

Dr. KAUFMANN: Yeah. If I could put in a shameless plug...

FLATOW: Sure.

Dr. KAUFMANN: One of the things that I do is I give talks to journalists on how to report oil stories. And we talk about a lot of urban myths in the oil market, and they've actually recorded one of my talks along with a PowerPoint slide. So, if you want to check it out, it's at www.facsnet.org, and it's F-A-C-S-N-E-T-dot-org, and they're the Foundation for American Communications, a small nonprofit organization.

FLATOW: Because we journalists need more education in this than, you know...

Dr. KAUFMANN: Well, you know, it's very hard when journalists come to my office, oftentimes, I have to tell them, without sounding too arrogant, which, as you can tell over the phone, is kind of hard, that they're asking the wrong question, because they've been guided by the political dialogue rather than what's really happening in the market.

FLATOW: They have to learn to think for themselves.

Dr. KAUFMANN: Yeah, well, it's hard. You know, I empathize with reporters. I can't imagine asking intelligent questions from my colleagues here at BU in areas that I'm not terribly familiar with.

FLATOW: And that's a good way to end our discussion, Doctor. Thank you very much for taking time to be with us.

Dr. KAUFMANN: Well, thank you for having me.

FLATOW: Robert Kaufmann is the director of the Center for Energy and Environmental Studies at Boston University.

(Soundbite of music)

FLATOW: That's all the time we have for today. Greg Smith composed our theme music. We had help today from NPR librarian, Kee Malesky. We gave out a lot of URLs, a lot of website tags. If you missed any of them, and you want to see the film of the racing boat going through Panama Canal, go to our website at sciencefriday.com. We've got all those links there for you. Also, we're blogging and podcasting and looking for some of the videos you may have for us. So, you can also send us email there and give us any of your ideas that you'd like to see in the future. Have a great weekend. I'm Ira Flatow in New York.

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