U.S. plumbs the depths in search of homeland oil and gas
BARRIE McKENNA
From Saturday's Globe and Mail
POSTED AT 4:00 AM Saturday, October 18
ON BOARD SHELL'S URSA OIL PLATFORM, THE GULF OF MEXICO — Flying in a chopper over the Mississippi Delta, bound for the Gulf of Mexico, is like riding a time machine through a century of U.S. oil and gas industry history.
Where the muddy Mississippi meets the azure waters of the Gulf, the pancake-flat wetlands of the delta are littered with rusting relics of a bygone era — abandoned rigs, barges and ramshackle structures.
Decades of drilling activity have scarred the landscape with channels as straight as runways and a snake-like network of pipelines.
Heading south, the treeless swamp gives way to ever-smaller islands, sand bars and finally open sea, where the future of Louisiana's multibillion-dollar offshore industry lies. From one horizon to another, the sea is dotted with hundreds of working oil and gas rigs.
Louisiana's first offshore wells were drilled in barely a few metres of water — initially on floating barges and then built up from the ocean floor like dock cribs as producers probed ever-deeper depths.
That intense activity peters out in the deep water. Here, 210 kilometres from the Louisiana coast, Royal Dutch/Shell Group's $1.5-billion (U.S.) Ursa platform floats alone like a giant octopus a kilometre above the sea floor, boring into pockets of oil and gas as far as eight kilometres away.
This is the final frontier of the United States' relentless hunt for oil and gas within its borders. Beyond Ursa, which set a world depth record when it went into production in 1999, the continental shelf drops off sharply into waters so deep that current technology can't yet get at the trapped hydrocarbons beneath.
“I'm hoping we're just beginning,” Walt Rawlings, Ursa's installation manager, said of Louisiana's deep offshore. “You would think that as you go deeper, you'd find more oil. With better seismic technology, we're hopeful our engineering group will find it.”
The reality, however, is that every year less of the energy the United States consumes is produced at home.
As early as next week, the U.S. Congress will try to put the United States on the road to self-sufficiency with the first overhaul of U.S. energy policy in two decades.
Negotiators for the U.S. Senate and the House of Representatives are completing negotiations on a compromise on a bill that is expected to throw tens of billion of dollars of government incentives at everything from ethanol to clean coal and hydrogen, rewrite electrical grid rules and open up new public lands — and waters — to oil and gas exploration.
In recent weeks, Ursa's crew has begun drilling the last of 14 planned wells, raising the rig's production to near its daily capacity of 150,000 barrels of oil and 400 million cubic feet of gas. That's enough oil to run a car 225 million kilometres and enough gas to heat 6,000 homes for a year.
The discovery beneath Ursa — one of five floating tension-leg platforms Shell operates in the Gulf — contains as much as 400 million barrels of oil. The field has proved so bountiful that the rig has already paid for itself, barely four years into its projected 30-year life span.
It's unlikely that many more “elephant fields” such as Ursa will still be found — here, or anywhere else in the United States.
U.S. President George W. Bush and a coterie of Texas oil industry veterans came to Washington 2½ years ago, convinced the United States was literally running out of its own energy. They vowed to rewrite energy policy to make it easier to fully exploit whatever resources might still be out there — off the continental shelf, beneath the Rocky Mountains and in the farthest reaches of Alaska.
The Bush administration's determination to address the country's energy problems took on new urgency after the 9/11 terrorist attacks, an emerging natural gas shortage and this summer's blackout.
But even before the ink is dry on the bill, critics from both ends of the political spectrum are complaining that the legislation will do little to halt the yawning gap between surging U.S. demand and flat domestic oil and gas production.
“This energy bill has something in it for everyone, at some level, but maybe not enough for anybody to actually have an impact on supply,” remarked Mark Bernstein, a top energy adviser in the Clinton White House and now a policy analyst at Rand Corp. in Santa Monica, Calif.
“It's frustrating and it's disappointing. I would love to see a comprehensive energy bill that would lead to a greater portfolio of energy options for the United States. But I'm not convinced the politicians care that much.”
The energy legislation has become the most intensely debated piece of legislation of the Bush presidency. Its sweeping contents have become a flashpoint for environmentalists, competing energy sector interests and even regions of the country.
“What we have today is an energy bill that looks like a Christmas tree — a little bit of everything for everyone, but nothing substantial on either the supply side or the demand side,” lamented Robert Abel, director of the energy program at the Washington-based Center for Strategic and International Studies.
“It's business as usual and we will continue to import more oil and gas to meet our needs.”
And that's bad news for Mr. Bush, who is increasingly desperate for a policy victory on the home front to carry him into next year's presidential election. With the economy still wobbly and his foreign policy in tatters, a popular energy package would pad an otherwise short list of legislative gains that now includes tax cuts and an unremarkable package of school reforms. Hopes are also fading that Mr. Bush will be able to make good on his promise to create a national drug plan for seniors and defuse growing anger over crippling drug costs.
The energy bill that is now taking shape looks more like payoff for the Bush administration's friends in the energy business than a genuine attempt to deal with the country's energy problems.
And that perception is too bad, according to CharliCoon, a senior policy analyst at the conservative Heritage Foundation in Washington.
“I fear that Congress in its rush to get out of town before an election year may end up having a bill that is about energy in name only,” she complained. “The crux of the problem is the imbalance of supply and demand. We need to go to the outer continental shelf, the offshore, the Rocky Mountains. There's plenty of natural gas out there if we could just be allowed access to it.”
And yet, U.S. production of energy — most notably oil — has slowed to a crawl in the face of steadily rising consumption over the past two decades. The United States has made up the growing gap through imports of oil from Canada, the Middle East and elsewhere, pushing the import share of the market to 55 per cent in 2001, up from 37 per cent in 1980 and 42 per cent in 1990. And that gap is expected to grow to 68 per cent by 2025, according to the U.S. Energy Information Administration's 2003 Annual Energy Outlook.
Meaningful efforts to curb fossil fuel consumption, through stricter emission standards for cars and powerful incentives for use of alternative fuels, are likely to be exorcized from the final bill.
Conservatives complain that many of the most controversial supply-side options are also likely to be cut or watered down, including a move to open Alaska's Arctic National Wildlife Refuge and other sensitive areas to exploration and to radically reform the electricity market.
Opening new areas to oil and gas development is proving to be highly contentious. Alaska's Arctic National Wildlife Refuge, which likely contains the largest untapped reserves of oil in the United States, has been a symbolic battleground. Yet, dozens of less well-publicized clashes have raged, including the wisdom of looking farther into deep offshore waters for oil and gas.
For example, all but one of Florida's congressional delegates recently signed a letter opposing a provision in the bill that would direct the U.S. Interior Department to create an inventory of potential oil and gas reserves on the outer continental shelf. Environmentalists want to keep the deep offshore off-limits — precisely to prevent Florida's coast from becoming another Louisiana.
In Louisiana, offshore drilling is an integral part of the economic and social fabric. Ursa's crew of 140 is part of an industry that generates a quarter of the state's revenues and 12 per cent of all wages.
Louisiana's geological history created the optimal conditions for the formation of hydrocarbons. The state is part of subterranean salt and sediment deposits that ring the Gulf from Mexico to Florida.
Since oil was discovered in Louisiana more than 100 years ago, the industry has sunk more than 1.1 million wells, supplying the United States with 25.2 billion barrels of oil and 214 trillion cubic feet of gas.
After the best land prospects had been found and tapped, oil producers began to move offshore in the 1930s and 1940s. Offshore activity exploded in the 1950s as the exploration of a decade earlier began to bear fruit — first at depths of 30 metres and by the mid-1960s in waters twice that deep. By the late 1970s, Shell installed a fixed platform in about 300 metres of water in the Gulf, just beyond the edge of the continental shelf.
The western and central Gulf coast is now largely explored and on the way toward exploitation. The frontier is moving east, toward Florida, where environmental pressure not to drill is more intense.
“A key test for drilling's popularity will be whether a coastal inventory survives [in the bill],” noted James Lucier, an analyst at Prudential Financial in Washington.
Ursa is part of a new generation of rigs boasting a smaller “footprint” that the industry has held up as models of more environmentally benign development.
The rig displaces as much water as an aircraft carrier, but it doesn't sit on the sea floor. Instead, it is tethered to the ground by 16 steel tendons, each measuring 1,158 metres. One of these platforms produces as much oil and gas as multiple older rigs.
“It's a matter for the citizens of the United States to decide where they want their oil and gas to come from,” remarked Mary Dokianos, a Shell spokeswoman. “If they want it, we'll try to find it.”
Keep drillin boys, keeeep drillin. We will be sitting on your future supplys up here in Canada and Ralph won't run Alberta forever. 
CKA Super Elite 
