Future of Petroleum Exploration in the United States

Abstract

The decline of United States oil and natural gas reserves could be moderated by increasing exploratory drilling. During each of the past three years, 1978-1980, the United States produced approximately 3.0 billion barrels of crude oil, 0.7 billion barrels of natural gas liquids, and 20 trillion cubic feet of natural gas, for a total of more than 7 billion barrels of oil equivalent. In contrast, discoveries have been more than 2 billion barrels of oil equivalent. Annual estimates of ultimate recovery (past production plus reserves) are calculated for each year since 1920 by the American Petroleum Institute and the American Gas Association. To each of these estimates, we must add an estimate of future reserve growth resulting from revisions, extensions, new pool discoveries, in-field drilling, and enhanced recovery. From the derived quantities of oil and natural gas discovered each year and from the estimates of the footage drilled annually in new field wildcat wells, the oil and natural gas discovered per foot are estimated. In the late 1940's, the average discovery per foot was more than 350 barrels of oil equivalent. By the late 1970's, the average discovery per foot had dropped to approximately 50 barrels of oil equivalent. Projections of t ese decline curves determine the number of feet of new field wildcats needed to find 2 billion barrels of oil equivalent per year, a limited rate of discovery in the United States. Projecting the average drilling depth permits calculation of the number of needed wildcats per year. The 1979-1990, 12-yr total is 388,514 wells, which is 5 times the drilling rate of recent years. Estimated discoveries are 7% oil and 8% natural gas. The projected increases in drilling and completion costs from 1979 to 1990, in inflated dollars indicate a total cost of $179 billion. Lease, geological and geophysical, development well, and overhead costs are not included. A projected increasing role of natural gas and natural gas liquids in the total energy mix is due to the relatively large proportion of natural gas, on a Btu-equivalent basis, being discovered per foot of new field wildcat drilled. At the present finding rates it is not possible to replace the production of more than 7 billion barrels of oil equivalent. The projected costs are so large that attaining these limited goals, 2 billion barrels of oil equivalent per year, does not seem possible. The total cost of the necessary new field wildcats, $179 billion, is of the same order of magnitude as the estimated federal income from the 'windfall' profits tax for 1980-1990. Total exploration costs, however, would be more than one trillion dollars, $50 per barrel of oil equivalent discovered. In any case, estimates of available oil and natural gas resources indicate that it is possible to moderate the decline in reserves and production.