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A world of industry fans and skeptics Shell executive says public opinion shaping energy decisions, while U.S. needs more domestic fuel and increased energy independence Alan Bailey Petroleum News
In a world increasingly polarized into aging oil industry fans and young industry skeptics, public opinion, as much as the availability of domestic energy sources, is shaping the future of U.S. oil and gas supplies, David Lawrence, Shell’s executive vice president for exploration and commercial, told the Alaska Support Industry Alliance Meet Alaska energy conference on Jan. 22.
The fans tend to understand the oil industry, have lived through gasoline shortages in the 1970s and perhaps have held oil company stock; skeptics have bought 89-cent-per-gallon gasoline, have lived through wars that they believed to be fought over oil, and know well the story of Exxon Valdez, Lawrence said.
But the lines are blurred in the oil and gas development debate, he said. The fans don’t necessarily want oil developments in their backyards; the skeptics want new jobs, low gasoline prices and an improving economy.
“As diverse as they are, our fans and our skeptics are again today Americans, all of whom want to work, all of whom want to find a job, and they want even better opportunities for their kids,” Lawrence said.
Broaden the debate In the United States, with double-digit unemployment and an escalating bill for foreign oil, there is a need to broaden the debate about the responsible development of domestic resources, Lawrence said.
“Currently the oil and gas industry directly employs 9 million Americans,” Lawrence said. “The economic contribution that the oil and gas industry makes was nearly $1 trillion last year. That’s 7 percent of the U.S. domestic gross product. … We, as an industry, need to pump ourselves up about what we’re doing. … We’re making a meaningful contribution and no one can complain that we aren’t pulling our weight.”
But, as evidenced by Shell’s struggle to leave the starting gate in exploring the Alaska outer continental shelf, the oil industry faces significant challenges in obtaining the space in which to grow its operations.
Shell’s prospects could produce 400,000 to 500,000 barrels of oil equivalent per day, with employment of 400 to 500 people for exploration drilling and an eventual creation of perhaps 35,000 in-state jobs. But, despite strong support from Alaska politicians, Shell’s plans for offshore drilling remain “high centered” by “political roadblocks and a disjointed permitting process,” Lawrence said.
“Four years after Shell purchased leases in the Alaska continental shelf, Americans are still waiting for the prosperity that would surely result from offshore exploration and development in the Arctic,” he said.
During those four years Shell has drilled with minimal environmental impact more than 400 exploration and appraisal wells around the world, in places as diverse as offshore Norway, the northwest gulf of Australia and the deep waters of Malaysia, Nigeria and the Gulf of Mexico, Lawrence said. Of those 400 wells, 200 proved successful, he said.
Permit delays But in Alaska the length of time taken, for example, to obtain an air emissions permit for Shell’s single drilling ship now threatens Shell’s plans for drilling in 2010, thus potentially causing the loss of 500 jobs this year and delaying by another 12 months the creation of new jobs and energy sources that the United States desperately needs, Lawrence said.
“Environmental concerns about domestic resource development get plenty of headlines these days, but we don’t read about the social and economic impact of not developing our resources,” he said.
And the vast potential oil and gas resources of Alaska’s outer continental shelf could prolong the life of the trans-Alaska oil pipeline and could contribute to the U.S. natural gas supply, a clean energy source that is emerging as a key stepping stone to America’s energy future. Between conventional gas sources and new unconventional shale gas sources, and including the gas resources of Alaska, North America has a total gas resource of around 1,000 trillion cubic feet, enough to provide power for 100 years, Lawrence said.
“The combination of natural gas from Alaska and the Lower 48 states brings the U.S. … into a major resource status. … We are a major resource holder, with a resource potential that is approximately equivalent to Saudi Arabia’s current oil reserves,” Lawrence said. “… In fact nearly 30 years of gas supply have been discovered … in just the last three years. That’s how quickly natural gas has become a centerpiece of just about any conversation about energy.”
Power play But gaining access to new oil and gas resources has become a power play over exactly who will govern industry in the Arctic, he said.
“Will it be the administration? Will it be regulators? Will it be the courts? I can tell you that today we’ve been taking directions from all of them,” Lawrence said.
Emerging challenges include the Obama administration’s interim U.S. ocean policy that does not consider the necessary balancing act between economic uses of the oceans and other legitimate ocean priorities, he said.
The continuing dialogue over the future of the Arctic needs to take place in town halls and assembly chambers, and not in the courts or Congress, Lawrence said. And in that respect, Lawrence acknowledged the efforts of the North Slope Borough and Mayor Edward Itta to engage in dialogue, rather than participate in the new lawsuit against approval of Shell’s Chukchi Sea exploration plan. The mayor and the borough residents still have wide-ranging concerns about offshore drilling, but by maintaining a dialogue everyone can focus their energies on what can be accomplished, Lawrence said.
“Shell employees have spent weeks and weeks … month after month visiting North Slope communities to talk about our plans and engage with our fans and our skeptics, both young and old,” Lawrence said.
And recent approvals of Shell’s Beaufort and Chukchi Sea exploration plans have demonstrated what can be achieved when people work together, he said.
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