Shell exec: U.S. risks losing drilling dollars to Brazil, Canada and Mexico

Fuel Fix ^ | April 15, 2015 | Jennifer A. Dlouhy

[thackney]

The Obama administration is eyeing an auction of offshore oil drilling leases along the East Coast in 2021, but that’s not enough to keep the United States competitive with other Atlantic nations, a Shell executive told Congress on Wednesday.

“The Gulf of Mexico has kept the United States globally competitive for decades,” Mark Shuster, Shell’s executive vice president of upstream Americas exploration, told a House Natural Resources subcommittee. “The U.S. stands to lose a lot if we don’t make new acreage available.”

At issue is the Interior Department’s draft plan for selling oil and gas leases on the U.S. outer continental shelf from 2017 to 2022, which tentatively proposes just one auction along four East Coast states in 2021, and none in the eastern Gulf of Mexico, where exploration is barred by statute until 2022.

Sticking to that schedule — or canceling the Atlantic auction altogether — would make the United States lag behind Canada, Mexico, Brazil and other countries that are “actively” competing for the oil industry’s limited drilling dollars, Shuster said. “If the United States adopts policies that prematurely remove areas and limit leasing opportunities, the U.S. diminishes our country’s competitive edge for decades to come.”

Shuster and other oil industry representatives on Wednesday used their congressional testimony to implore the Interior Department’s Bureau of Ocean Energy Management to add another Atlantic auction between 2017 and 2022 and shift the proposed sale earlier in that five-year plan.

New sales can still be added at this early stage in developing the five-year plan, they said, before the bureau launches legally required environmental analyses of the proposed offshore leases.

Bureau Director Abigail Hopper said the agency has the discretion to reschedule the Atlantic auction penciled in for 2021 but that the draft plan provides a fixed ceiling on the number and area of potential sales, making an additional Atlantic offering impossible.

And she repeatedly stressed that the oil development and offshore leasing structure built up over decades in the Gulf of Mexico can’t immediately be transferred to the Atlantic. Although energy companies drilled 51 wells in U.S. Atlantic waters between 1975 and 1984, the region is still very much a frontier for oil and gas development, Hopper said.

“This is not the Gulf of Mexico; this is the Eastern seaboard, which has a different character,” Hopper said. It’s not analogous to “everything that’s happening in the Gulf of Mexico” and you can’t “translate that whole structure to the East Coast.”

Seismic research dating back to the 1970s and 1980s gives a limited view of the possible oil and gas lurking along the U.S. East Coast, but discoveries in other Atlantic waters around the world suggest potential.

For the oil industry, the U.S. Atlantic offers the promise of new reserves — with potential production that could be brought online decades from now, supplementing and even replacing declines in domestic onshore crude harvests.

And as relatively virgin territory, the U.S. Atlantic gives oil companies the chance to mark new discoveries and add new reserves to their own balance sheets.

But Rep. Alan Lowenthal, D-Calif., said the oil industry has an insatiable desire for more territory, even though it isn’t actively developing all of the acreage currently leased.

“Most in the industry would not be satisfied until every acre of the outer continental shelf were open for drilling,” he said. “They always want more.”

[E. Pluribus Unum]

That would be Obola’s intention.