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The OCS is estimated to contain substantial resources of crude oil and
natural gas; however, some areas of the OCS are subject to drilling restrictions.
With energy prices rising over the past several years, there has been increased
interest in the development of more domestic oil and natural gas supply,
including OCS resources. In the past, Federal efforts to encourage exploration
and development activities in the deep waters of the OCS have been limited
primarily to regulations that would reduce royalty payments by lease holders.
More recently, the States of Alaska and Virginia have asked the Federal
Government to consider leasing in areas off their coastlines that are off
limits as a result of actions by the President or Congress. In response,
the Minerals Management Service (MMS) of the U.S. Department of the Interior
has included in its proposed 5-year leasing plan for 2007-2012 sales of
one lease in the Mid-Atlantic area off the coastline of Virginia and two
leases in the North Aleutian Basin area of Alaska. Development in both
areas still would require lifting of the current ban on drilling.
For AEO2007, an OCS access case was prepared to examine the potential impacts
of the lifting of Federal restrictions on access to the OCS in the Pacific,
the Atlantic, and the eastern Gulf of Mexico. Currently, except for a relatively
small tract in the eastern Gulf, resources in those areas are legally off
limits to exploration and development. Mean estimates from the MMS indicate
that technically recoverable resources currently off limits in the lower
48 OCS total 18 billion barrels of crude oil and 77 trillion cubic feet
of natural gas (Table 10).
Although existing moratoria on leasing in the OCS will expire in 2012,
the AEO2007 reference case assumes that they will be reinstated, as they
have in the past. Current restrictions are therefore assumed to prevail
for the remainder of the projection period, with no exploration or development
allowed in areas currently unavailable to leasing. The OCS access case assumes
that the current moratoria will not be reinstated, and that exploration
and development of resources in those areas will begin in 2012.
Assumptions about exploration, development, and production of economical
fields (drilling schedules, costs, platform selection, reserves-to-production
ratios, etc.) in the OCS access case are based on data for fields in the
western Gulf of Mexico that are of similar water depth and size. Exploration
and development on the OCS in the Pacific, the Atlantic, and the eastern
Gulf are assumed to proceed at rates similar to those seen in the early
development of the Gulf region. In addition, it is assumed that local infrastructure
issues and other potential non-Federal impediments will be resolved after
Federal access restrictions have been lifted. With these assumptions, technically
recoverable undiscovered resources in the lower 48 OCS increase to 59 billion
barrels of oil and 288 trillion cubic feet of natural gas, as compared
with the reference case levels of 41 billion barrels and 210 trillion cubic
feet.
The projections in the OCS access case indicate that access to the Pacific,
Atlantic, and eastern Gulf regions would not have a significant impact
on domestic crude oil and natural gas production or prices before 2030.
Leasing would begin no sooner than 2012, and production would not be expected
to start before 2017. Total domestic production of crude oil from 2012
through 2030 in the OCS access case is projected to be 1.6 percent higher
than in the reference case, and 3 percent higher in 2030 alone, at 5.6
million barrels per day. For the lower 48 OCS, annual crude oil production
in 2030 is projected to be 7 percent higher2.4 million barrels per day
in the OCS access case compared with 2.2 million barrels per day in the
reference case (Figure 20). Because oil prices are determined on the international
market, however, any impact on average wellhead prices is expected to be
insignificant.
Similarly, lower 48 natural gas production is not projected to increase
substantially by 2030 as a result of increased access to the OCS. Cumulatively,
lower 48 natural gas production from 2012 through 2030 is projected to
be 1.8 percent higher in the OCS access case than in the reference case.
Production levels in the OCS access case are projected at 19.0 trillion
cubic feet in 2030, a 3-percent increase over the reference case projection
of 18.4 trillion cubic feet. However, natural gas production from the lower
48 offshore in 2030 is projected to be 18 percent (590 billion cubic feet)
higher in the OCS access case (Figure 21). In 2030, the OCS access case
projects a decrease of $0.13 in the average wellhead price of natural gas
(2005 dollars per thousand cubic feet), a decrease of 250 billion cubic
feet in imports of liquefied natural gas, and an increase of 360 billion
cubic feet in natural gas consumption relative to the reference case projections.
In addition, despite the increase in production from previously restricted
areas after 2012, total natural gas production from the lower 48 OCS is
projected generally to decline after 2020.
Although a significant volume of undiscovered, technically recoverable
oil and natural gas resources is added in the OCS access case, conversion
of those resources to production would require both time and money. In
addition, the average field size in the Pacific and Atlantic regions tends
to be smaller than the average in the Gulf of Mexico, implying that a significant
portion of the additional resource would not be economically attractive
to develop at the reference case prices.
Contact: Phyllis Martin
Phone: 202-586-9592
E-mail: phyllis.martin@eia.doe.gov
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