Wednesday, 19 October 2011

Drill, Baby, Drill!

Foreseeable Crisis: The mile-deep disaster that overtook the Deepwater Horizon oil-rig in the Gulf of Mexico had massive technological assistance within a day's sailing of the catastrophe. Even so, it took BP several months to bring the massive ecological crisis under control. Given the authorities' obvious logistical difficulties in dealing with the comparatively small oil-spill from the Rena, is deep-sea oil exploration really the best answer to New Zealand's energy deficit?

“DRILL, BABY, DRILL!” It’s the battle-cry of the believers in “business as usual”. Sarah Palin’s infamous injunction is also the Populist Right’s translation of former American Vice-President, Dick Cheney’s, much more ominous observation that: “The American way of life is non-negotiable.”

What did the Vice-President mean? In brutally simple terms, Mr Cheney’s words meant that nothing should be allowed to come between Americans and the supply of cheap fossil fuel that underpins the USA’s extraordinary wealth.

“Drill, baby, drill!”, also sums up the National-led Government’s policy on fossil fuels. The Rena may be leaking heavy fuel-oil into the Bay of Plenty, but the Government’s plans for promoting deep-sea oil exploration within New Zealand’s exclusive economic zone (EEZ) have yet to be put on hold. Indeed, the Greens and Labour have been chastised for even suggesting such a moratorium, and thereby giving the relevant authorities time to absorb the causes, consequences and lessons of Rena’s grounding.

Why the gung-ho attitude? Why is the Government so determined to proceed in the face of so much evidence suggesting the need for extreme caution? The enormous difficulties already encountered in off-loading just 1,700 tonnes of fuel-oil from a coastal container ship pale into insignificance when compared to the ecological tragedy which unfolded in the Gulf of Mexico between April and July of 2010.

That disaster took place within a day’s sailing of the USA and Mexico, two of the world’s largest energy producers and refiners. So, help was close at hand. A similar deep-sea drilling accident occurring off the coast of New Zealand: a country at the end of the world’s sea-lanes; thousands of miles, and weeks of sailing, away from international assistance; would swiftly dwarf the Deepwater Horizon catastrophe.

Simple common-sense suggests that even the most rudimentary of cost-benefit analyses would flag deep-sea exploration in New Zealand’s EEZ as, at best, marginal, and, at worst, grossly irresponsible.

Of course, the same could’ve been said (and was) about the radical deregulation of our coastal shipping industry. Allowing so-called “flag of convenience” vessels (crewed not by the best, but by the cheapest officers available) to supplant New Zealand flagged and crewed vessels, made a Rena-style accident all-but-inevitable. The Maritime Union of New Zealand warned successive governments over and over again about the risks. Nobody listened.

So, what is it? How is this refusal to recognise simple common sense, and heed the warnings of experts, to be explained?

The answer is frighteningly simple. Politicians like Sarah Palin, Dick Cheney, Gerry Brownlee and Hekia Parata (Mr Brownlee’s stand-in as Energy Minister) are all in a state of denial.

Even though a succession of reputable international agencies (the latest being the IMF) have warned the world’s governments that the moment of peak oil production occurred five years ago, and that the chances of the current and future global demand for oil being met by the discovery and exploitation of new deep-sea fields are extremely low (the world needs to locate the equivalent of four Saudi Arabia’s to meet the looming shortfall of cheap oil supplies) the politicians just go on denying that any of this alarming information is true.

Given New Zealand’s acute vulnerability to price and supply shocks, our political leaders’ refusal to face the facts is, perhaps, understandable. The best evidence available suggests that this country’s domestic fossil fuel reserves will be largely exhausted by 2020. That will leave our automobile-dependent society and economy dangerously exposed to the vagaries of international supply and demand.

Try these numbers for size.

The current price of “Brent Crude” is between $US100-$US120 per barrel. The NZ Treasury forecasts that in 2015 our exchange rate with the US dollar will be 0.60$US/$NZ. Assuming that by 2015 the declining global supply of oil has pushed the price of Brent Crude to $US200 per barrel, means New Zealand would need to find an additional $10.5 billion, annually, to pay its net fuel import bill. (Compare this with the total cost to Government of rebuilding Christchurch, estimated by Treasury to be $8 billion.)

The economic consequences of such a massive increase in the price of oil are easily imagined: falling GDP, rising inflation, declining real income, decreased consumer spending, increased unemployment, recession.

And so the cry of “drill, baby, drill!” goes up. Because it’s easier to imagine some lucky offshore prospector uncovering another North Sea oil and gas field than it is to imagine how any government might even broach, let alone manage, the winding-back of our fossil-fuel-based civilisation.

It’s all too hard. Just as it was too hard to resist the deregulation of our coastal shipping industry – and so keep our beaches and wildlife free from stinking, toxic sludge.

Fifty years from now, when the foreign ships no longer call, may our grand-children laugh where we now weep – and wonder at our folly.

This essay was originally published in The Press of Tuesday, 18 October 2011.

10 comments:

Brendan said...

An update on 'Peak oil'.

The U. S.. Geological Service issued a report in April 2008 that only scientists and oil men knew was coming, but it was big. It was a revised report (hadn't been updated since 1995) on how much oil was in the western 2/3 of North Dakota, western South Dakota, and extreme eastern Montana.

The Bakken is the largest domestic oil discovery since Alaska's Prudhoe Bay, and has the potential to eliminate all American dependence on foreign oil. The Energy Information Administration (EIA) estimates it at 503 billion barrels.

Even if just 10% of the oil is recoverable( 5 billion barrels), at $107 a barrel, we're looking at a resource base worth more than $5.3 trillion.

"When I first briefed legislators on this, you could practically see their jaws hit the floor. They had no idea.." says Terry Johnson, the Montana Legislature's financial analyst.

"This sizable find is now the highest-producing onshore oil field found in the past 56 years," reportsThe Pittsburgh Post Gazette.

It's a formation known as the Williston Basin, but is more commonly referred to as the 'Bakken.' It stretches from Northern Montana, through North Dakota and into Canada.

A recent technological breakthrough has opened up the Bakken's massive reserves, and there is access of up to 500 billion barrels. And because this is light, sweet oil, those billions of barrels will cost Americans just $16 per barrel.

That's enough crude to fully fuel the American economy for 2041 years straight. (apparently).

U. S. Oil Discovery - Largest Reserve in the World

Stansberry Report Online - 4/20/2006

Hidden 1,000 feet beneath the surface of the Rocky Mountains lies the largest untapped oil reserve in the world. It is more than 2 TRILLION barrels. On August 8, 2005 President Bush mandated its extraction.

Here are the official estimates:

8 times as much oil as Saudi Arabia
18 times as much oil as Iraq
21 times as much oil as Kuwait
22 times as much oil as Iran
500 times as much oil as Yemen

Why is it not being fully extracted? Because (apparently) the environmentalists and others have blocked all efforts to help America become independent of foreign oil.

For confirmation check this Government website:

http://www.usgs.gov/newsroom/article.asp?ID=1911

If this reserve was developed, there would be no need for off shore drilling.

Armchair Critic said...

Good stuff Chris, very thought-provoking.

Nick said...

In reply to Brendan best people look at two realities.... first the facts and what they mean in terms of US consumption of oil...Bakken may be 4 years worth, See http://theamericanwestatrisk.wordpress.com/2010/06/25/bakken-oil-hype/

Second, you use it up, then what?

Sanctuary said...

I knew this old guy when I was a kid. he was in his late seventies, and he just refused to believe that men had been to the moon. Not because he thought it an elaborate hoax or a plot carried out for obscure political advantage, but just because we hadn't. For him, in a life filled with the shock of the new - lord only knows, since his birth in the very early 1900s he had seen so much change - this was one bit of new information to far. He stopped accepting the new, he stopped thinking about the implications of the new, and he went into a denial he carried to his grave. This, I think, is the psychological root of the denial of politicians like Sarah Palin, Dick Cheney, Gerry Brownlee and Hekia Parata (Mr Brownlee’s stand-in as Energy Minister). And, I think, the root of the hopeless, wide eyed cargo-cult credulity of Brendan's post above. They are all in a state of denial, expressed in a different way.

Sanctuary said...

Oh and by the way Brendan, much as I hate to rain on your parade (hah! Who am I kidding? I am loving it!) may I direct you to the oil drum's long report on the bakken formation - http://www.theoildrum.com/node/3868

Whilst it is a long report, I don't think Mr. Trotter will mind me quoting it's conclusions here so we can put your little corner of conspiracy driven mis-information to bed.

Conclusions

1. The Bakken shale has produced about 111 million barrels of oil during the last 50+ years in Montana and North Dakota.

2. Total Bakken production is still rising, and producing at the rate of 75,000 BOPD in October 2007.

3. Because of the highly variable nature of shale reservoirs, the characteristics of the historical Bakken production, and the fact that per-well rates seem to have peaked, it seems unlikely that total Bakken production will exceed 2x to 3x current rate of 75,000 BOPD.

4. The latest boom in Bakken production is driven by the application of horizontal wells and hydraulic fracturing technology, which has added about 70 million barrels of production in 7 years. Ultimate recovery of the already-drilled wells should be at least double this volume.

5. The USGS estimates the mean volume of technically recoverable hydrocarbons to be 3,649 million barrels of oil. This is roughly 7 to 12 times the size of already known resources.

6. Based on current production and areas likely to be drilled, the USGS estimate of technically recovery resources seems optimistic.

7. The Bakken potential resource, while large by US onshore field standards, will have only a minor effect on US production or imports. Using 2006 US imports and consumption for comparison, the Bakken undiscovered resource of 3,649 million barrels of oil, if subsequently discovered and fully developed, would provide us with the equivalent of six months of oil consumption or 10 months of imports, spread over 20 or more years. In reality, the reserves developed are likely to be many times smaller than this value.

8. The October 2007 production rate of 75,000 BOPD amounts only 0.4% of US oil consumption, or 0.6% of imports.

9. Per-well Bakken production peaked in August 2005 at 116 barrels a day, and was down to 79 barrels a day in October 2007. If the Bakken production history in the 1990s can be used as a guide, the peaking of per-well production may portend a peak in total Bakken production.

Jules31 said...

Good point Chris about us being at the 'ends of the eaarth". We cannot cope with the "Rena", how on earth would we cope with a broken spewing deep sea well. It is simply not worth the risk.
Mankind needs to wean itself off the internal combustion engine.

Boss Hogg said...

Chris, I have heard you on the radio and have read a number of your articles over the years and I think your political opinions are generally off the planet. Having said that, I have to admit to agreeing with your stance on off shore exploration and drilling in deep waters around NZ.

I work in the oil and gas industry as well as renwables. This may sound contradictory, but the renewables market sector we are in utilises many similar technologies.

I believe that all of the risks associated with deep sea work can be controlled and they are in thousands of deep sea locations continuously around the world. But when there is a less than perfect safety and maintenance culture then there will be accidents.

Petrobras from Brasil that were doing some survey work in NZ have a relatively good safety record, but google "Petrobras P-36" and you can see they have their off days as well. Where I live over looks the largest Shell refinery in the world and they had a wee glitch a few weeks ago. The fire burnt for 32 hours and the fire balls were going about 200 plus ft up. This was land based and all safety systems worked as they should have - so we are told. The refinery was shut down for two weeks and is now in the process of being gradually restarted. Both these cmpanies have strong safety cultures - but perfection does not exist where humans are in control over extended periods.

I would also suggest that there are more sub sea time bombs out there than some would admit to. I was talking to a business here in Singapore that specialise in rebuilding sub sea valve systems and blow out preventers. Since the Deep Sea Horizon disaster there business has seen unprecedented growth and they service clients worldwide. This suggests a lot of overdue maintenance or revision of some budgets to mitigate some risks.

Anyway, keep up the writing and opinions, I do not agree with you much but still enjoy complaining about most of what you write.

Cheers !

Anonymous said...

Sigh. So lets all run round like headless chooks, maybe occupy a park somewhere and demand something from somebody. The world will be a better place.
Or we can use our God-given talents to progress with safer drilling.

I spent nearly 25 years associated with wildcat drilling in the offshore oil industry. It was drummed into us that the only reason for pressure on the surface out of control was human error.

The same applies to ships that drive up onto the bricks with the screws turning.

Lets get rid of humans and cut the risk in living. Rich pricks can be made to look after us as they've got more money than us Luddites.

Mick

Anonymous said...

Good evening Chris,et al.
I have always been a supporter of harvesting sustainably our natural resources, but the CV Rena issue has opened my eyes a little.Ships will always run aground , and when they do they will almost always spill HFO, MGO,( My old tug runs on MGO ), CPP fluid or marine diesel oil. The 1700 tonnes of HFO aboard CV Rena is not a lot in the scheme of things compared to what was spilt in the deepwater horizon disaster, but what a catastrophic effect it has had on NZ's best beaches. I am not a greenie at all never have been , but I am now getting it into my skull that fossil fuels are running out. If the same money was spent on developing alternative fuels as is spent on oil exploration, we would be better placed for the future.Oil is going to run out. We need to explore safer, and more sustainable alternatives now.
Enjoying your blog Chris, as always, regards Greg

Anonymous said...

Maui, enough said...