Mail Bag April 27, 2010

MarEx Reader Shares POV On "Offshore Drilling OP-ED Dear Tony, I would like to comment on our op-ed regarding offshore oil drilling on the Atlantic coast and Alaska. You are correct in that no seismic work has been performed on the east coast since the ‘80’s and when they poked holes from NC to NY they found gas resources but not a lot of oil resources. At the time natural gas was not the up and coming energy resource that it is today. We have plenty of it onshore so why spend lots of money recovering it offshore. Matter of fact the oil majors would burn the stuff off when producing the black gold because they didn’t want to deal with it. In the 1980’s drilling records were set off of New Jersey using the most sophisticated drilling vessels of the time in water depths >6,000 feet. The vessel that broke the depth record was the Discoverer Seven Seas owned by Sonat Corp and now owned by Transocean I believe. Drilling for oil in that water depth wouldn’t take place for another 15 years in the Gulf of Mexico. We were ahead of the curve in looking for oil off of the east coast and the consensus was there were no economically recoverable reserves of oil located on our Atlantic coast OCS. So now you state that with the new seismic imaging technologies we can return to the Atlantic OCS and suddenly discover vast amounts of oil that wasn’t there before? For starters the oil majors or seismic survey companies who own the data can take the existing data and re-process it to see if there is something there they didn’t see before. Coupled with the fact that if anyone in the oil business believed there was a vast recoverable amount of oil off the Atlantic coast they would be out there already doing the necessary survey work to determine if it is worthwhile going to the government to convince them to open it up for exploration. This is exactly what they have been doing off the coast of Alaska in the Chukchi Sea for the past few years. Just because you can’t drill there doesn’t mean you can’t survey there. Word on the street is there is a vast pool of recoverable oil in the Chukchi Sea. But there are these pesky native Alaskans who don’t want anything to do with it. They don’t need a casino above the Arctic Circle so I guess the oil majors have to play ball and give them a piece of the pie. They already have one partner being the state of Alaska so now they may have to take on a new partner that likes to hunt whales and seals and polar bears. Forget ANWR, the Chukchi Sea is the place you ought to be. But it is covered with ice for 4 months of the year and a very challenging place to work. And you may want to fold into this story the fact that the industry is building ice class seismic vessels. And yet with all of these environmental challenges to exploring for oil in the Arctic the oil majors still want to drill there. What you don’t see are efforts to explore for vast amounts of hydrocarbons off New Jersey & Virginia & North Carolina & New York. Why? Because obviously the oil companies see no value in pursuing an east coast exploration agenda. So don’t be disingenuous to your readers by stating that the government is dragging it’s feet on studies and feedback before making a decision on “to drill or not to drill”. And I would like to know what percent of the MMS estimated reserves are actually in the areas that the Obama administration wants to open up. I think you will find the percent of estimated reserves are highest where the oil companies want to drill. And right now that place to drill is not the Atlantic coast OCS at the present time. To your point about the stranglehold of oil by dictators and unfriendly governments, oh well. It doesn’t appear to lessen our appetite or the supply of the black stuff. The oil embargo was all about control. And the countries that have most of the oil took control of what’s under their sovereign soil. We could just send in our military to take back control, but we didn’t. We did send them in to look for WMD’s. It just so happens that the place we sent them has one of the highest percentages of “easy to get” oil in the world. Coincidence or win-win? Certainly it was for moral reasons to displace a dictator who threatened us with terroristic intent. That’s the story and we’re sticking to it. And energy security is a national security issue for our country so making sure it’s available and for sale, is crucial. Higher fuel standards for cars. Greater energy efficiency in homes and businesses. Mass transit. Nuclear power. These are some solutions. But what do we do? We pump money into making lanes on highways that only cars with more than one person can use. Does that really solve the problem? Unfortunately when a solution that involves government intervention by means of regulation or law, the freedom & liberty cards get used. Government get out of my business. The oil companies are in the energy business. The more energy you use the more they like it. What you suggest in your article requires more than just looking for oil & gas. It requires reducing dependency, increasing efficiency and new technologies in energy. How do you do that? That requires a lifestyle change for the country. My solution would be to put a mini-windmill and solar panel in every pot. That will at least reduce the residential demand for power. Go local with alternatives. You don’t need to distribute power if it’s made at the end user. But we’d rather spend billions on nuclear plants and wind farms and keep paying >$4k per year per household for energy. Forget climate warming. I firmly believe you can’t control the weather or the earth’s rotation no matter what you do. But increasing efficiency in the use of our resources makes sure there’s enough around for a very long time or at least until we come up with the next “big thing”. Best Regards, Tim Axelsson MarEx Responds: Mr. Axelsson’s strategic points in the first two paragraphs is that oil companies are already privy to the fact there is more recoverable oil in the Chukchi Sea than there will ever be in the Atlantic OCS. So, why kick the ball around the block when it’s evident the end game is Alaska. But, while he may be point on, today's seismic technologies blow away what was available during the 1980s. Reservoir geosciences now have the benefit of advanced computerized seismic resolution and data processing methodology. So, if the Obama government provides the permits prior to the EIS being finished, I say we give it the old college try and do the analysis and see what’s along the Atlantic coastline. Axelsson’s comments in the third paragraph couldn’t be more accurate. I think we’ll all agree that the 73’ Oil Embargo was about power and the Arab Nations’ ability to impact Western economies with oil. In the world of politics and government, it’s a known fact that Nixon and Kissinger had devised a plan to invade the Saudi peninsula and forcibly take the oil the US so desperately needed to run the wheels of commerce. How many wars should this nation fight? Since, I’ve grown up in the 60s the US has been in one conflict or another, personally I’ve had enough! On the Politics and Government bookshelf in any book store you can find the doomsday dissertations on ‘resource wars,’ whether it be on water, food, or oil. The US has lots of water, a plentiful agricultural infrastructure and lots of oil and gas; I don’t think we need to go to war. And, frankly, a lot of US folks are tired of being the planet’s police force too. Finally, well, we know his comments about a mini-windmill and solar panel in every pot is a great idea, but I had a fence installed at my home last month, and, sir, can you imagine local government in your world for such critical and essential necessities? While, he jests so do I. But, we all understand the realities of the world and we’ll never get off oil. Not in my lifetime and most likely not in the next 50 years. So, we can play the ‘I wish game’ or deal with the realities of our economy, we need oil and we’re not getting off it soon. Let’s find the oil in the OCS and not be held captive by dictators and hostile governments every again. I mean really, why is Iran still developing nukes? Well, it’s because China and Russia won’t say no. The first thing I learned as a boy was to fend for yourself because nobody else will. and, I think that’s good advice.