The long-term prospect for increasing oil and gas consumption coupled with declining domestic production of oil and gas has renewed interest in the US outer continental shelf (OCS). This region contains a substantial amount of unexplored oil and gas reserves – that could prove an invaluable resource after crunch-led consumption cuts abate – but some areas in this region are subject to strict drilling restrictions.
The US OCS comprises of the Gulf of Mexico OCS, the Atlantic OCS, the Pacific OCS and the Alaska OCS. The Pacific OCS, with estimated recoverable reserves 400m barrels of oil and 1 trillion cubic feet of gas, will prove to be an important source of primary energy for the US in the long run. With the freeze on exploration of oil and gas in the POCS set to expire in 2012, the area is expected to become an attractive investment destination in the US oil and gas industry.
The outer continental shelf was made off-limits for drilling oil and gas by the US Congress and Presidential Executive Order. In the final days of the previous US government under President George Bush, plans were made to lease areas in the OCS for oil and gas exploration between 2010 and 2015. But after the presidential inauguration of Barack Obama, and as the economy ground to an almost halt, the plan was delayed and a six-month extension for public comment period granted.
In 2008, crude oil and natural gas consumption in the US stood at 7,574 million barrels and 656.7bcm respectively, while production stood at 1,835.3 million barrels and 575.1bcm.
With the consumption of crude oil and natural gas expected to increase at an annual growth rate of 0.39% and 0.72% until 2020, the US will have to explore all of its possible reserves, particularly those in the OCS region.
According to estimates by Mineral Management Services (MMS) of the US Department of the Interior, the quantity of undiscovered, technically recoverable resources from the US OCS region is 85.9 billion barrels of oil and 419.9 trillion cubic feet of natural gas, with the Pacific OCS contributing 9% of the total oil and gas resources.
OCS Pacific potential
The Pacific OCS in particular could be an important contributor to the US domestic oil and gas inventory. A 2006 MMS assessment of the area estimated undiscovered technical recoverable reserves of 10.53 billion barrels of crude oil and 18.29 trillion cubic feet of natural gas. In addition it has a total hydrocarbon endowment of 16.82 billion barrels of oil equivalent.
According to the 'US Pacific Outer Continental Shelf Oil and Gas Exploration and Production Industry Investment Opportunities, Analysis and Forecasts of All Active and Planned Exploration Blocks and Oil and Gas Fields to 2013' report from GlobalData, in the US Pacific OCS, a total of 1,887 blocks have been offered and 470 leases issued. Currently, the area has 79 active leases.
The main players are Santa Barbara Channel, Santa Maria Basin and South of Santa Barbara Channel, which have 40, 35, and four leases respectively. Out of the 79 active leases, 43 leases have been developed and are producing oil and gas. The total exploration acreage under all the active leases is 400,505 acres, with Santa Barbara Channel being the largest area.
ExxonMobil Corporation and Plains Exploration & Production Company are the two major operators of active leases in the US Pacific OCS and are also the top two producers of oil and gas in this area.
These companies, as well as Dos Cuadras Offshore Resources, account for more than 90% of the total crude oil and natural gas produced in the US Pacific OCS.
According to GlobalData's 'US Pacific Outer Continental Shelf Oil and Gas Exploration and Production Industry Investment Opportunities, Analysis and Forecasts of All Active and Planned Exploration Blocks and Oil and Gas Fields to 2013' report, the total crude oil production of the top six companies in the US Pacific OCS was 22.9 million barrels in 2008, a steady increase with an AAGR of 3.84% since 2003. The total natural gas production of the top six companies in the US Pacific OCS was 45.1bcf in 2008 – a slight rise from 2003 levels.
Lifting the freeze
As economic recovery begins, demand will rise and the US will have to focus on the exploration of oil and gas in different areas of the OCS. The Pacific OCS, with considerable proved and undiscovered reserves, could be an important source of oil and gas and could help in meeting the domestic demand in the long-run.
If the freeze is lifted, the resources in the area will be fully exploited by the oil and gas companies.
The Obama administration is still considering the issues relating to offshore drilling and is expected to make a decision on them in the coming months.
This report was produced by GlobalData. For further reports and information visit www.global-market-research-data.com.