Why are oil companies like British Petroleum being allowed to drill so deeply in hazardous conditions under the Gulf? In other words, why has the government been so supportive of deepwater drilling in the Gulf?
The answer is that there is a tremendous amount of more oil deep under the Gulf, and that the United States government considers oil drilling in the deep waters of the Gulf as a “national security” priority.
It is a fact that the oil and gas industry and the United States government both face tremendous challenges to explore discover, appraise, develop, and exploit vast new hydrocarbon reserves in waters deeper than 6000 feet in the ultra-deepwater of the Gulf of Mexico. Yet these new reserves of hydrocarbons are needed to offset the economically detrimental, long-term decline in production from within the borders of the United States.
If successfully developed, the new play concept would fill an essential gap in the overall strategic defenses of the United States by decreasing the gap that results in the nation’s dependence on foreign oil and gas reserves in this volatile and hostile, post 9/11 world.
However, the successful production of oil and gas from this new carbonate play concept requires much more cost-efficient evaluation and appraisal technologies than exist today to economically conduct exploration, appraisal, and development activities. These new technologies must be developed before production can be practical in the ultra-deepwater operating environment…. The Ultra-Deepwater and Unconventional Gas Trust Fund of the DOE has as its mission to cut costs and time-to-market not incrementally, but radically, so that the United States can optimally utilize these strategic hydrocarbon reserves.
The U. S. Energy Bill of 2002 has allocated significant resources to fund innovative industry, academic, and national laboratory research initiatives to develop the new technologies necessary to explore and produce these new ultra-deepwater reserves economically. The purpose is not only to impact the national defense, but also to regain our international technological leadership in the deepwater, recently lost to the Brazilians, Norwegians, and Europeans.
Congress, never a big friend to energy interests, has acted to create the Ultra-deepwater Trust Fund that would add an astounding $200 billion by 2017, if successful at developing the new production technologies required.
So the Department of Energy and Congress have committed to development of the deepwater Gulf oil reserves in the name of national security. This also helps explain why President Obama has been pro-drilling in the Gulf.
Indeed, BP supplies most of the oil and gas to the U.S military. That might help to explain why the Obama Administration is talking tough but going easy on BP.
But let’s take a step back and ask why the government considers oil a national security priority in the first place.
Well, the concern of these lawmakers regarding the BP oil spill is understandable, but lest they overreact, they need to place their valid concerns within the broader context of the nation’s economic health and energy security.
Americans currently consume about 22 million barrels of oil daily, of which about two-thirds is imported. The Department of Energy’s Energy Information Administration (EIA) expects imports to reach 70% by 2025. This means we send billions of dollars abroad in payment for foreign oil. This makes little sense when, according to the U.S. Minerals Management Service (MMS), there are vast reserves of oil and gas beneath Federal lands and coastal waters. And it is likely that even these estimates are low. For instance, in 1987, MMS estimated that there were 9 billion barrels of oil in the Gulf of Mexico. By 2007, once drilling had begun in deeper waters, MMS had revised its estimate upward to 45 billion.
In addition, the U.S. military is the largest consumer of oil in the world. And the government is eager to ensure that the military maintains access to oil.
All the U.S. tanks, planes and ships guzzle 340,000 barrels of oil a day, making the American military the single-largest purchaser and consumer of oil in the world.
If the Defense Department were a country, it would rank about 38th in the world for oil consumption, right behind the Philippines.
U.S. military fuel consumption dwarfs energy demand in many countries around the world, adding up to nearly double the fuel use in Ireland and 20 times more than that of Iceland, according to the U.S. Department of Energy.
By every measure, the Pentagon is the largest institutional user of petroleum products and energy in general. Yet the Pentagon has a blanket exemption in all international climate agreements.
The Feb. 17, 2007, Energy Bulletin detailed the oil consumption just for the Pentagon’s aircraft, ships, ground vehicles and facilities that made it the single-largest oil consumer in the world.
Even according to rankings in the 2006 CIA World Factbook, only 35 countries (out of 210 in the world) consume more oil per day than the Pentagon.
Sixteen gallons of oil. That’s how much the average American soldier in Iraq and Afghanistan consumes on a daily basis — either directly, through the use of Humvees, tanks, trucks, and helicopters, or indirectly, by calling in air strikes. Multiply this figure by 162,000 soldiers in Iraq, 24,000 in Afghanistan, and 30,000 in the surrounding region (including sailors aboard U.S. warships in the Persian Gulf) and you arrive at approximately 3.5 million gallons of oil: the daily petroleum tab for U.S. combat operations in the Middle East war zone.
And in 2008, Oil Change International released a report showing that between March 2003 and October 2007 the US military in Iraq purchased more than 4 billion gallons of fuel from the Defense Energy Support Center, the agency responsible for procuring and supplying petroleum products to the Department of Defense.
Each year, our military devotes substantial resources to securing access to and safeguarding the transportation of oil and other energy sources. I estimate that we will pay $90 billion this year to secure oil. If spending on the Iraq War is included, the total rises to $166 billion.
Are you starting to get the picture?
Bottom Line:
We at Blackhawk strongly believe that despite all of the above facts, it is vital for our national security – and our economy – to switch from dependence on oil to a basket of alternative energies.
It’s not just the one BP oil rig. For example, since the Deepwater Horizon oil drilling rig exploded on April 20th, the Obama administration has granted oil and gas companies at least 27 exemptions from doing in-depth environmental studies of oil exploration and production in the Gulf of Mexico.
And a whistleblower who survived the Gulf oil explosion claims in a lawsuit that BP’s operations at another oil platform risk another catastrophic accident that could “dwarf” the Gulf oil spill, partly because BP never even reviewed critical engineering designs for the operation.
Though many people still believe that alternative energy is an expensive, unrealistic pipe dream, we believe that is no longer necessarily true, especially when the externalities of environmental and military costs are taken into account.
Though existing national policy is to do whatever is necessary – drilling deep under the Gulf and launching our military abroad – to secure oil, we strongly believe that until we change our national security and energy policies, future mishaps – environmental, military and economic – may frequently occur.
Your feedback as always is greatly appreciated.
Thanks much for your consideration.
By : Ziad K Abdelnour
Ziad is also the author of the best selling book Economic Warfare: Secrets of Wealth Creation in the Age of Welfare Politics (Wiley, 2011),
Mr. Ziad Abdelnour continues to be featured in hundreds of media channels and publications every year and is widely seen as one of the top business leaders by millions around the world.
He was also featured as one of the 500 Most Influential CEOs in the World.
