Drilling is destiny

Last summer, Shell Oil demonstrated new oil-drilling technologies at its Houston headquarters. It was an awesome performance. In a darkened "virtual reality" room, geophysicist Mark Stockwell showed how seismic data from the Gulf of Mexico are being used to create three-dimensional images of the rock crust beneath the ocean surface.
Petroleum engineers, geologists, and drillers use polarized glasses to view a huge display screen that allows them to conduct a "virtual exploration" of complex underground formations. "Bringing our field people into the VR centre for a single three-day session saves $ 20 mm in unsuccessful drilling," says Stockwell.
Indeed, drilling technology improves almost monthly. The industry has developed huge "floating-production storage and offloading facilities," billion-dollars behemoths larger than battleships. Instead of having to be connected physically to concrete platforms on the ocean floor, these gigantic barges float over the drill site, maintaining their position through global-positioning satellites; this makes it easier to drill on the deep ocean floor.

Every few days a tanker comes and drains the storage reservoir, eliminating the need for pipelines as well. Oil rigs also now use "multilateral drilling," a technique that minimizes environmental impact. In the old days, drill bits attached to five-inch steel pipes went straight into the ground in search of pockets of gas and oil. Missing an oil pocket meant building another rig and punching another hole in the ground. Now coiled titanium tubing -- with pipes just one inch in diameter -- spreads out from the rig at angles of up to 90 degrees, reaching pockets as far as five miles away.
Multilateral drilling is designed for drilling in pristine areas such as the Rocky Mountains, where about 5 bn barrels of oil are believed to lie, and the Arctic National Wildlife Refuge, which may contain 10.4 bn barrels -- the equivalent of more than half of our current reserves. (The Persian Gulf, by way of comparison, has reserves of 600 bn barrels, of which 260 bn are in Saudi Arabia.)

Although ANWR is larger than West Virginia, encompassing 19 mm acres, drilling would take place only on the 1.5-mm-acre coastal plain -- a flat, featureless terrain 1,300 miles from the North Pole. Oil would be sought only beneath 2,000 acres and -- thanks to multilateral drilling -- the actual rigs would occupy only five or six acres. "There's a lot of oil still out there," says John Felmy, chief economist at the American Petroleum Institute. "The only question is whether we're going to be allowed to drill it."
Unfortunately, even if we do overcome these self-imposed limitations, America remains -- as Felmy puts it -- "a declining oil province." Despite all the new finds and improved technology, both American oil production and reserve capacity have steadily declined since peaking in 1970. In that year, we consumed 5.4 bn barrels of oil while producing 3.6 bn; our reserves were 39 bn.
In 2001, we consumed 7.1 bn and produced only 3.2 bn, while reserves sank to 22 bn. Increasing imports, of course, has made up the difference. President Nixon became concerned when foreign oil suddenly jumped from 29 % to 35 % of domestic consumption between 1972 and 1973, just before OPEC dropped the hammer; in 2001, we imported 59.2 % of our oil, the highest in our history. The figure continues to rise almost every year.

Efforts at conservation and the development of new reserves have helped us keep abreast, but have not diminished our dependence on the Persian Gulf In 1977, 33.6 % of our oil came from OPEC countries, and 13.3 % from the Persian Gulf alone. In the first eleven months of 2001, 27.9 % of our oil came from OPEC, and 13.9 % from the Gulf, including 3.7 % from -- gulp! -- Iraq.
The only trend has been the slightly diminishing importance of non-Persian Gulf OPEC countries (Venezuela, source of 8 % of our oil; Nigeria, source of 4.5 %) coupled with an increasing reliance on non-OPEC nations (Canada, source of 9 %; Mexico,7 %; Norway, 1.8 %; the U.K., 1.5 %; and -- gulp again! -- Andres Pastrana's Colombia, 1.4 %). We could start boycotting Saudi Arabian oil tomorrow (8.6 % of our consumption) and easily make up the difference, but the way international markets work, the Saudis would hardly notice. The gesture would be purely political.

Loosening our ties to world oil markets remains a chimera. So what, if anything, should we do about it? The truth is, barring some completely unanticipated development, we will continue to import more than 50 % of our oil into the foreseeable future. "We're not addicted to oil, as some people claim," says John Lichtblau of the Petroleum Industry Research Foundation.
"People complain we consume 25 % of the world's oil, but we also produce 25 % of the world's GNP Our consumption has increased only one and a half % per year while GNP has risen about 3 %." Currently we use 68 % of our oil for transportation, 24 % for industrial purposes, 6 % for home and commercial heating, and 2 % to generate electricity.
The 24 % for industry isn't likely to be reduced. In the home-heating category, a slight move has occurred from heating oil to natural gas, but natural gas has run up against its own supply problems. And there's little left to cut from the electricity-generation category: Over the past 25 years, coal has supplanted oil and now generates about half our electricity. Now natural gas is replacing coal, and nuclear energy provides a solid 20 %.

This leaves transportation as the most attractive target for reductions -- but here, significant reforms will not be easy. Of the oil in the transportation category, 56 % is used in cars and SUVs, 16 % in commercial trucks, and 11 % for jet fuel, with the remainder divided among trains, the military, and other small users. Despite a few high-profile experiments, natural gas isn't practical for powering cars. The fuel must be stored under high pressure and cuts performance.
Environmentalists have long promoted electric cars or vehicles run onfuel cells powered by hydrogen, without ever acknowledging that electricity and hydrogen are not energy sources but energy carriers; the electricity must first be generated -- from coal, nuclear, gas, hydro, or some other natural resource. Raw hydrogen is not sitting around waiting to be mined, but must be produced from natural gas or generated by the electrolysis of water. This leads us back to electricity. Nuclear power is the obvious solution to all these problems, but environmentalists have stonewalled it -- though nuclear offers a long-term, pollution-free source of energy.

Perhaps the one promising strategy for reducing oil consumption is the new "hybrid cars," which mate electric motors and gas-powered engines to produce greater fuel efficiency. Honda's new Insight has a three-cylinder, 67-horsepower gasoline engine that gets a boost from an electric motor while accelerating or climbing hills.
Toyota's Prius accelerates to 15 mph with its electric motor, then adds the force of its 1.5-liter, 70-horsepower gas engine. Both electric motors recharge from an on-board generator, eliminating the need for lengthy "refuelling" stops.
Other manufacturers are jumping on the bandwagon, and hybrid cars may soon make some impact on gas consumption -- but drivers may eliminate these savings by using their cars more. In either case, loosening our ties to world oil markets remains a chimera.
"The real effort should be toward diversifying supply and preparing to deal with sudden interruptions," says Lichtblau. "That's why we have the Strategic Petroleum Reserve. We may whittle down the growth in consumption and stem the decline in domestic supplies, but we're never going to achieve energy independence. That dream died with the Carter administration."