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Posts Tagged ‘energy justice’

DC Judge rules in favor of higher oil and gas prices

Posted in climate, energy policy, Gulf of Mexico, Offshore Energy - General, tagged , , , , , on January 31, 2022| Leave a Comment »

The very disappointing 68 page ruling on Lease Sale 257 boils down to the following:

  1. BOEM had correctly determined that, from a GHG standpoint, US offshore production was preferable to more carbon intensive foreign production.
  2. The plaintiffs, who are seemingly intent on stopping all oil and gas production regardless of the economic consequences, argued that BOEM failed to consider the “positive” effect that higher prices (the logical result of lower production) would have on reducing demand.
  3. In particular, the plaintiffs asserted that BOEM failed to consider the effect that reduced production (and higher prices) would have on foreign consumption and the associated GHG emissions.
  4. The judge not only decided in favor of the plaintiffs, but ruled that BOEM’s omission was so serious that the lease sale had to be vacated.
  5. The judge reached this decision even though (1) the five year leasing plan expires in June leaving the timing of any future sale very much in doubt and (2) all of the sale 257 bids are now public information compromising the integrity of the leasing process at the next sale (if and when that occurs).

So, if BOEM has to consider the environmental benefits of higher oil and gas prices, shouldn’t they also have to consider the negative economic and environmental effects from the resulting price inflation and energy poverty? Are higher prices, which are most detrimental to the poor and to developing nations, “energy justice?”

If your only objective is the destruction of the US offshore oil and gas program, this was a great decision. For everyone else, this is yet another reason to be concerned about our energy future.

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Intermediate term BOE forecast: higher oil prices and increased OPEC+ market dominance

Posted in energy policy, Gulf of Mexico, Offshore Energy - General, Uncategorized, tagged , , , , , on January 4, 2022| 2 Comments »

Declines in drilling activity and discoveries suggest that higher real oil prices are on the horizon. We may be fortunate enough to escape significant price hikes and supply disruptions over the next couple of years, but they are coming.

Rystad’s not-so-cheery pre-Christmas press release reported that, on a volume basis, 2021 oil and gas discoveries had sunk to the lowest level in 75 years.

20211220 OG global discoveries PR chart.png
Rystad Energy

US offshore trends are even more troubling. Per BOEM’s database, no deepwater fields were discovered in 2021 and there were only 2 discoveries in the past 3 years (see chart below). HartEnergy reports 5 announced discoveries in 2021, none of which has been determined by BOEM to be commercially producible. Regardless of the status of those 2021 determinations, recent discoveries have not been sufficient to reach and sustain GoM production volumes at the 2019 peak (August) of 2.044 million BOPD. 2019 was the first year since 1982 without a confirmed deepwater discovery and the trend (below) is not encouraging. Schlumberger data through 2016 indicated GoM depletion rates greater than 20%, and the subsequent low discovery rates do not bode well for future production trends.

from BOEM data

You can’t make discoveries without drilling and only 9 companies drilled deepwater GoM exploratory wells in 2021 (34 wells total). With the Pacific in decommissioning mode, the Atlantic and Eastern GoM off-limits, limited options offshore Alaska, and the decline of the GoM shelf, the deepwater GoM is the only important US offshore production option. The exploration numbers below are therefore concerning.

The shale revolution made the US a net oil exporter, but skepticism about shale production forecasts suggests the need for other supply sources. Given the shale uncertainty and the unrealistic expectations regarding the energy transition, greater US dependence on imported oil is on the horizon. This bodes well for OPEC, but not so well for US and international consumers.

Meanwhile, the US Dept. of Energy shows no evidence of concern about oil and gas production. Although oil and gas account for about 70% of our energy consumption, there has been no mention of either on the DOE homepage for months. DOE does express a strong interest in “energy justice.” Perhaps they can explain how increased imports and higher energy prices benefit the poor. They should also explain how oil imports are environmentally and economically superior to domestic oil and gas production, when the reality is exactly the opposite.

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