Many people who are following this debate will already be aware that the the Energy Information Administration (EIA) put out a forecast which claimed that lifting the drilling ban would only add 200,000 barrels a day by 2030. EIA went on to claim that the effect on prices would be negligible. The forecast may be found here.
Many people on the wrong side of this debate are citing this projection in order to justify their obstructionism. For instance both the NRDC and Sierra Club websites, and columnists like Bob Herbert and Paul Krugman, use this projection as the major part of their argument against drilling.
I believe the EIA projection is total garbage and will try to explain why. It is difficult to criticize a projection when it is backed by the prestige of the Energy Department and when there is no explanation of how the number was arrived at. It would be very helpful if the Energy Secretary would order Phyllis Martin, the analyst responsible, to publish a detailed explanation of how the number was calculated.
So why do I think it is wrong?
1/EIA claims that it will take 18 years (2012-2030) for production to reach 200,000 barrels a day. EIA’s forecast doesn’t square with the experience of other countries in developing their offshore resources. For example:
The North Sea
The North Sea is a stormy stretch of water between UK and Northern Europe. Prior to the 1970s, the UK and Norway had never had any oil production of their own and were completely dependent on imports. In the 18 years from the first drilling in 1965 until 1983 North Sea production went from nothing to 3 million barrels a day. (BP Statistical Review, UK and Norway only) This was despite the challenges of harsh conditions and high cost.
Eastern Gulf of Mexico Lease Sale 181
At the end of 2001 the Bush administration leased an area of the Gulf of Mexico which had been closed for many years. Just six years later in 2007, the Independence Hub platform was nearing its capacity of 950 million cubic feet per day of production, which is equivalent to 150,000 barrels a day of oil.
2/There are individual platforms in the Gulf of Mexico which exceed 200,000 bbl/d. For example Thunderhorse.
3/ The EIA analyst states that their forecast is based on the initial development of the Gulf region.
“Exploration and development on the OCS in the Pacific, the Atlantic, and the eastern Gulf are assumed to proceed at rates similar to those seen in the early development of the Gulf region.”
The Gulf of Mexico was the pioneer of offshore oil and gas and they had to develop all the technology needed. Today that technology can be bought off the shelf, so things move much faster. The initial development of the gulf happened in the 40s and 50s when onshore oil was still abundant and prices were far lower than today.
4/Based on the resource assessment, lifting the drilling ban should increase the accessible offshore oil resources by 44%. However, the EIA forecast only projects a 9% increase in offshore oil production. This makes no sense!
5/The 2030 number assumes the drilling ban won’t be lifted before 2012. If Congress lifted the ban next week then EIAs numbers would be brought forward 4 years.
6/The EIA estimate is an (un)educated guess derived from a resource estimate which is also an educated guess. We won’t really find out how much oil the US can produce until we drill.