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Big Strike, But Bigger Appetites
September 5, 2006
Chevron announced today the possible discovery of a really big oilfield in a really difficult spot -- four miles beneath the seabed under 7,000 feet of water about 270 miles southwest of New Orleans. The field could total 6 billion barrels when all is said and done.
It's still early, with more exploratory drilling and flow testing to come. Let's say, however, that the initial estimate is about right. If so, it would be the biggest domestic oilfield discovery since the Prudhoe Bay strike in northern Alaska nearly 40 years ago.
Chevron and its partner companies have earned crowing rights about a spectacular technological achievement. Those who cannot imagine an energy economy without oil as its centerpiece are probably feeling giddy. But a little perspective is in order. If the new deepwater field in the Gulf of Mexico can produce a very respectable 500,000 barrels of oil per day, or even a cornucopian 1 million barrels daily, the U.S. will still need to meet a hefty share of its oil appetite from imports, some 12-13 million barrels per day by 2030, in order to keep up with projected increases in demand.
Demand is projected to rise worldwide as well. Between now and 2030, according to the International Energy Agency's most recent World Energy Outlook, the world will have to produce an additional 30 million barrels of oil per day to keep all those new cars in China, India, and elsewhere fueled. Which means that oil producers will have to find the equivalent of 30 to 60 fields like the one announced today -- either by finding virgin fields or coaxing more production from existing fields -- in order to meet projected 2030 demand.
More, actually, because additional production will be needed to offset declining production from older fields.
It won't be easy. Discoveries of new oil are not coming close to replacing consumed oil. More than two decades have elapsed since the world discovered more oil than it consumed. We've been running a consumption-over-discovery deficit ever since.
Nevertheless, the International Energy Agency is confident that enough oil is available to meet demand in 2030 -- as long as the world doesn't mind becoming more dependent on the Middle East, whose share of oil production is projected to rise from 35 percent in 2004 to 44 percent by 2030.
Under this scenario, world carbon dioxide emissions will increase more than 50 percent. From both an energy security and an environmental perspective, projected global energy trends are "not sustainable," in the IEA's view.
Of course, we don't have to helplessly watch the scenario unfold. We can avoid allowing giddiness about today's announcement induce complacency. We can harness our business and technological smarts to rewrite our energy script. Allow me to quote an ad in this month's The Atlantic: "The good news is we've got a huge source of alternative energy all around us. It's called conservation, and it's the lowest cost new source of energy we have in hand. A reduction of just 5 percent of global energy use would save us the equivalent of over 10 million barrels a day. Clearly, saving energy is like finding it."
Who wrote that, some hippie-dippie tree hugger from Berkeley? No, a company headquartered across the Berkeley Hills in nearby San Ramon -- Chevron. We should listen to them.
