Oil-rich America set to ‘drill-baby-drill’

| October 26, 2011 | 0 Comments
The Gulf of Mexico oil spill last year demonstrated to the oil industry the need to protect its bottom line by upgrading safety.

The Gulf of Mexico oil spill last year demonstrated to the oil industry the need to protect its bottom line by upgrading safety.

Richard Nixon was the first U.S. president to vow and fail to wean the United States off its dependency on Middle Eastern oil. Barack Obama will be the last. The United States today has the wherewithal to become independent in energy. Once Obama goes, it will also have the will.
Obama and previous presidents failed by ignoring economics in favour of environmental prescriptions of the day— they lowered highway speed limits, imposed mileage standards, turned down thermostats, subsidized electric and hydrogen-fuelled vehicles, and subsidized just about every kind of alternative energy imaginable, from synfuels to nuclear to solar to ethanol to wind.
Just about the only thing they didn’t do — and the one thing that just about any successor to Obama will do in spades — is aggressively deregulate oil and gas development, both on and offshore. Today’s Republican dream of “Drill, baby, drill” will be tomorrow’s universal standard.
A Rasmussen poll in June shows why. A striking 75 percent of American voters want more oil and gas drilling in the United States, and the percentage is higher still among Republicans and independents, those to whom a Republican president would be beholden. More significantly, most Americans oppose Obama’s ban on offshore drilling in parts of the Gulf of Mexico and off the East Coast: 67 percent of American voters favour offshore drilling and 59 percent favour deep-water drilling. And the number of Americans who blame humans for global warming has dropped to one-third as the credibility of environmentalists decline. Little wonder that the drumbeat for removing restrictions on fossil fuel development steadily grows stronger.
How feasible is it for the United States to achieve energy security when oil imports have doubled since Nixon’s promise to eliminate them? The United States can have energy security whenever it wants it.
Of the 9.2 million barrels of oil per day that the United States today imports, 6 million come from the OPEC cartel. About half of those OPEC imports, or 3 million barrels per day, could be wiped out in the next decade through the oil industry’s existing plans if governments don’t intervene.
“This is very big and it’s coming on very fast,” stated Daniel Yergin, chairman of the global intelligence company IHS CERA, and one of world’s most respected authorities on oil, in an interview last month with The New York Times. “This is like adding another Venezuela or Kuwait by 2020, he said, “except these tight oil fields are in the United States.”
Mr. Yergin is referring to a revolution well underway — despite government foot-dragging — in new technologies that are obtaining oil from shale and other so-called “tight rock” formations. The Eagle Ford field in south Texas, entirely unknown until recently, is already producing 100,000 barrels a day. One independent company, Chesapeake Energy, expects to hit 500,000 barrels a day by 2020 from the 3,000 wells it’s planning to drill. Other companies that have flocked to this giant field in south Texas, including Chinese, European and Canadian oil multinationals, are investing billions of dollars to drill wells by the thousands in Eagle Ford.
But Eagle Ford is only one of 20 hot new shale oil fields, and not even the largest. The larger Bakken oil field in North Dakota, long known but considered uneconomic until a few years ago, already produces 400,000 barrels a day and is expected to reach one million barrels a day by 2020. And the Green River formation, located within Colorado, Wyoming and Utah, contains some 6 trillion barrels of oil, of which (according to the U.S. Department of Energy), approximately 1.38 trillion barrels — or five Saudi Arabias — are potentially recoverable.
All told, the United States has more oil recoverable from shale than any other country in the world. Remarkably, the new technologies now in use allow many of these wells to become profitable in a mere eight months, compared to a typical two years for conventional oil operations, helping to explain the new oil rush.
Not that the United States even needs shale and tight rock oil to blow off OPEC. According to the U.S. government’s Congressional Research Service, America’s federal lands contain an estimated 163 billion barrels of technically recoverable conventional oil, enough to replace all Persian Gulf imports while maintaining America’s current rates of production. Most of those conventional barrels are today beyond reach, either because the cost of pulling them out of the ground is too high with today’s technology or because government policies either discourage or ban their exploration on environmental grounds. The ban is especially sweeping for offshore oil, where some 85 percent of the 1.76 billion acres of American coastal waters is off limits to new drilling.
Those bans would largely be swept aside should any Republican become president in 2012, or under any president, Democrat or Republican, in 2016. One large reason, ironically, is the aftermath of the horror that was the BP Gulf oil spill last year. That seemingly never-ending, worst-case blowout demonstrated to the oil industry the need to protect its bottom line by upgrading safety. It demonstrated to government regulators the dangers in their laxity. And it demonstrated to the public at large the resiliency of Mother Nature: One year after the blowout, the damage is seen to be much smaller than once feared and most consider the cleanup to be all but complete, thanks less to human efforts than to nature’s awesome recuperative capacities.
America’s will to wean itself off foreign oil dependency will come less from the declining credibility of environmentalists, however, than from economic imperatives — the need of the federal government and many states to avoid a default on their debts and to avert bankruptcy. The United States spends US$1 billion a day on imported oil, making it the chief contributor to America’s balance of payments deficit. A drill-baby-drill policy would represent America’s single biggest boost to the economy and the single biggest spur to new jobs, providing hundreds of billions in royalties and taxes a year to governments as people and companies get back to work. Most important, it would put a lie to the sinking sense that so many Americans have, that America’s best days are behind it.

 

In the new energy order, Israel is becoming a major player. The Meged oil field, pictured, is one of the biggest on-shore fields in the country.

In the new energy order, Israel is becoming a major player. The Meged oil field, pictured, is one of the biggest on-shore fields in the country.

Israel’s Shfela Basin holds vast oil supply

The old energy order in the Middle East is crumbling, with Iran and Syria having left the Western fold and others, including Saudi Arabia, the largest of them all, in danger of doing so.
Simultaneously, a new energy order is emerging to give the West some spine. In this new order, Israel is a major player.
The new energy order is founded on rock — the shale that traps vast stores of energy in deposits around the world. One of the largest deposits — 250 billion barrels of oil in Israel’s Shfela basin, comparable to Saudi Arabia’s entire reserves of 260 billion barrels of oil — has until now been unexploited, partly because the technology required has been expensive, mostly because the multinational oil companies that have the technology fear offending Muslims.
“None of the major oil companies are willing to do business in Israel because they don’t want to be cut off from the Mideast supply of oil,” explains Howard Jonas, CEO of IDT, the U.S. company that owns the Shfela concession through its subsidiary, Israeli Energy Initiatives. Jonas, an ardent Zionist, considers the Shfela deposit merely a beginning: “We believe that under Israel is more oil than under Saudi Arabia. There may be as much as half a trillion barrels.”
Because the oil multinationals have feared to develop Shfela, one of the world’s largest oil developments is being undertaken by an unlikely troop. Jonas’s IDT is a consumer-oriented telecom and media company that is a relative newcomer to the heavy industry world of energy development. Joining IDT in this latter-day Zionist Project is Lord Jacob Rothschild, a septuagenarian banker and philanthropist whose forefathers helped finance Zionist settlements in Palestine from the mid-1800s; Michael Steinhardt, a septuagenarian hedge-fund investor and Zionist philanthropist; and Rupert Murdoch, the octogenarian chairman of News Corp. who uncompromisingly opposes, in his words, the “ongoing war against the Jews” by Muslim terrorists, by the Western left in general, and by Europe’s “most elite politicians” in particular.
Where others would have long ago retired, these businessmen-philanthropists have joined the battle on Israel’s side. While they’re in it for the money, they are also determined to free the world of Arab oil dependence by providing Israel with an oil weapon of its own. The company’s oil shale technology “could transform the future prospects of Israel, the Middle East and our allies around the world,” Lord Rothschild says.
To win this war, Israeli Energy Initiatives has enlisted some of the energy industry’s savviest old soldiers — here a former president of Mobil Oil (Eugene Renna), there a former president of Occidental Oil Shale Inc. (Allan Sass), over there a former president of Halliburton (Dick Cheney). But the field commander for the operation, and the person who in their mind will lead them to ultimate victory, is Harold Vinegar, a veteran pulled out of retirement and sent into the fray. Vinegar, a legend in the field, had been Shell Oil’s chief scientist and, with some 240 patents to his name during his 32 years at Shell, revolutionized the shale oil industry.
Before oil met Vinegar, this was dirty business, a sprawling open mine operation that crushed and heated rock to yield a heavy tar amid mountains of spent shale. The low-value tar then needed to be processed and refined. The bottom line: low economic return, high environmental cost.
Vinegar boosted the bottom line by dropping the environmental damage. No open-pit mining, no spent shale, no heavy tar to manage. In his pioneering approach, heated rods are inserted underground into the shale, releasing from it natural gas and light liquids. The natural gas provides the project’s need for heat; the light liquids are easily refined into high-value jet fuel, diesel and naphtha. The new bottom line: oil at a highly profitable cost of about $35-$40 a barrel and an exceedingly low environmental footprint. Vinegar’s process produces greenhouse gas emissions less than half that from conventional oil wells and, unlike open-pit mining, does not consume water. The land area from which he will extract oil equivalent to that in Saudi Arabia? About 25 square kilometres.
Although the Israeli shale project is still at an early stage, its massive potential and Vinegar’s reputation have already begun to change attitudes toward Israel. “We have been approached by all the majors,” Vinegar recently told the press, and for good reason. “Israel is very well positioned for oil exporting” to both European and Asian markets. The majors have other reasons, too, for casting their eyes afresh at Israel. Through its natural gas finds in the Mediterranean’s Levant Basin, and with no help from the oil majors, Israel is becoming a major natural gas exporter to Europe. According to the U.S. Geological Survey, the Levant Basin has vast natural gas supplies, most of it within Israel’s jurisdiction.
Attitudes to Israel in some European capitals — those in line to receive Israeli gas — have already warmed and the shift to Israel may in time become tectonic, in Europe and elsewhere, when oil is at stake. (Many of the 38 countries which have an estimated 4.8-trillion barrels of shale oil would benefit from the shale oil technology now being pioneered in Israel.) Speeding that shift could be the Arab Spring, which many fear will flip pro-Western Arab states into hostile camps. Long-time U.S. ally Saudi Arabia is reportedly so distrustful of the U.S. following its abandonment of long-time Egyptian ally, President Hosni Mubarak, that it has pulled back its relationship with the West in favour of China.
But freed of the threat of Arab punishment, and in a new world energy order, Western countries may turn again, to their benefit. Rupert Murdoch expresses well the highest hopes of his partners: “If [our] effort to develop shale oil is successful, as I believe it will be, then the news we’ll report in the coming decades will reflect a more prosperous, more democratic and more secure world.”

Lawrence Solomon is executive director of Energy Probe. LawrenceSolomon@nextcity.com

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