The U.S. offshore is estimated to contain substantial resources of both crude oil and natural gas, but until recently some of the areas of the lower 48 OCS have been under leasing moratoria [56]. The Presidential ban on offshore drilling in portions of the lower 48 OCS was lifted in July 2008, and the Congressional ban was allowed to expire in September 2008, removing regulatory obstacles to development of the Atlantic and Pacific OCS [57, 58]. 

Although the Atlantic and Pacific lower 48 OCS regions are open for exploration and development in the AEO2009 reference case, timing issues constrain the near-term impacts of increased access. The U.S. Department of Interior, MMS, is in the process of developing a leasing program that includes selected tracts in those areas, with the first leases to be offered in 2010 [59]; however, there is uncertainty about the future of OCS development. Environmentalists are calling for a reinstatement of the moratoria. Others cite the benefits of drilling in the offshore. Recently, the U.S. Department of the Interior extended the period for comment on oil and natural gas development on the OCS by 180 days and established other processes to allow more careful evaluation of potential OCS development. 

Assuming that leasing actually goes forward on the schedule contemplated by the previous Administration, the leases must then be bid on and awarded, and the wining bidders must develop exploration and development plans and have them approved before any wells can be drilled. Thus, conversion of the newly available OCS resources to production will require considerable time, in addition to financial investment. Further, because the expected average field size in the Pacific and Atlantic OCS is smaller than the average field size in the Gulf of Mexico, a portion of the additional OCS resources may not be as economically attractive as available resources in the Gulf. 

Estimates from the MMS of undiscovered resources in the OCS are the starting point for EIA’s estimate of the OCS technically recoverable resource. Adding the mean MMS estimate of undiscovered technically recoverable resources to proved reserves and inferred resources in known deposits, the remaining technically recoverable resource (as of January 1, 2007) in the OCS is estimated to be 93 billion barrels of crude oil and 456 trillion cubic feet of natural gas (Table 8). The OCS areas that were until recently under moratoria in the Atlantic, Pacific, and Eastern/Central Gulf of Mexico are estimated to hold roughly 20 percent (18 billion barrels) of the total OCS technically recoverable oil—10 billion barrels in the Pacific and nearly 4 billion barrels each in the Eastern/Central Gulf of Mexico and Atlantic OCS. Roughly 76 trillion cubic feet of natural gas (or 17 percent) is estimated to be in areas formerly under moratoria, with nearly 37 trillion cubic feet in the Atlantic, 18 trillion cubic feet in the Pacific, and 21 trillion cubic feet in the Eastern/Central Gulf of Mexico. It should be noted that there is a greater degree of uncertainty about resource estimates for most of the OCS acreage previously under moratoria, owing to the absence of previous exploration and development activity and modern seismic survey data. 

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To examine the potential impacts of reinstating the moratoria, an OCS limited case was developed for AEO2009. It is based on the AEO2009 reference case but assumes that access to the Atlantic, Pacific, and Eastern/Central Gulf of Mexico OCS will be limited again by reinstatement of the moratoria as they existed before July 2008. In the OCS limited case, technically recoverable resources in the OCS total 75 billion barrels of oil and 380 trillion cubic feet of natural gas. 

The projections in the OCS limited case indicate that reinstatement of the moratoria would decrease domestic production of both oil and natural gas and increase their prices (Table 9). The impact on domestic crude oil production starts just before 2020 and increases through 2030. Cumulatively, domestic crude oil production from 2010 to 2030 is 4.2 percent lower in the OCS limited case than in the reference case. In 2030, lower 48 offshore crude oil production in the OCS limited case (2.2 million barrels per day) is 20.6 percent lower than in the reference case (2.7 million barrels per day), and total domestic crude oil production, at 6.8 million barrels per day, is 7.4 percent lower than in the reference case (Figure 13). In 2007, domestic crude oil production totaled 5.1 million barrels per day. 

With limited access to the lower 48 OCS, U.S. dependence on imports increases, and there is a small increase in world oil prices. Oil import dependence in 2030 is 43.4 percent in the OCS limited case, as compared with 40.9 percent in the reference case, and the total annual cost of imported liquid fuels in 2030 is $403.4 billion, 7.1 percent higher than the projection of $376.6 billion in the reference case. The average price of imported low-sulfur crude oil in 2030 (in 2007 dollars) is $1.34 per barrel higher, and the average U.S. price of motor gasoline price is 3 cents per gallon higher, than in the reference case. 

As with liquid fuels, the impact of limited access to the OCS on the domestic market for natural gas is seen mainly in the later years of the projection. Cumulative domestic production of dry natural gas from 2010 through 2030 is 1.3 percent lower in the OCS limited case than in the reference case. Because the volume of technically recoverable natural gas in the OCS areas previously under moratoria accounts for less than 5 percent of the total U.S. technically recoverable natural gas resource base, the impacts for natural gas volumes are smaller, relative to the baseline supply level, than those for oil volumes. 

In 2030, dry natural gas production from the lower 48 offshore totals 4.1 trillion cubic feet in the OCS limited case, as compared with 4.9 trillion cubic feet in the reference case. The reduction in offshore supply of natural gas in the OCS limited case is partially offset, however, by an increase in onshore production. Reduced access in the OCS limited case results in higher natural gas prices, which increase the projection for U.S. onshore production in 2030 by 0.2 trillion cubic feet over the reference case projection. The average U.S. wellhead price of natural gas in 2030 (per thousand cubic feet, in 2007 dollars) is 21 cents higher in the OCS limited case, and net imports increase by 240 billion cubic feet. The higher average wellhead price for natural gas from the lower 48 States in the OCS limited case is associated with a decrease in consumption of 360 billion cubic feet in 2030 relative to the reference case. Total U.S. production of dry natural gas is 210 billion cubic feet less in 2020 and 600 billion cubic feet less in 2030 in the OCS limited case than projected in the reference case (Figure 14). 

Offshore production, particularly in the OCS, has been an important source of domestic crude oil and natural gas supply, and it continues to be a key source of domestic supply throughout the projections either with or without the restoration of leasing moratoria as they existed before 2008. 

Notes and Sources

Contact: Phyllis Martin/Dana Van-Wagener
Phone: 202-586-9592/202-586-4725
E-mail: phyllis.martin@eia.doe.gov/dana.van-wagener@eia.doe.gov