Federal land not part of the US oil output surge

July 9, 2014
If it were an oil producer, the US federal government would look much like Mexico, with output declining while adjacent areas boom.

If it were an oil producer, the US federal government would look much like Mexico, with output declining while adjacent areas boom.

At least Mexico has begun reforming its xenophobic oil industry with an eye toward joining the North American surge in production from unconventional reservoirs and deep water.

With an administration squeamish about hydrocarbons, the US government shows no sign of comparable enlightenment.

Production numbers tell the story.

In its latest Short-Term Energy Outlook, the US Energy Information Administration projected an increase in average annual production of crude oil and lease condensate to 8.4 million b/d this year from 7.4 million b/d in 2013.

It predicts a further increase next year to 9.3 million b/d—highest since 1972.

Driving this impressive increase—from a recent low of 5 million b/d in 2008—is the surge from shales and other reservoirs requiring massive hydraulic fracturing of horizontal wells.

Just as geology conducive to high-technology completions doesn’t stop at the Rio Grande, it makes no distinction between land under control of the federal government and the other kind.

But federal agencies have been in no hurry to lease acreage they administer or to issue permits for work on existing leases.

In the first year of the administration of President Barack Obama, sales of crude oil and lease condensate produced from federal and Indian land averaged 1.77 million b/d, up from a recent low of 1.55 million b/d the year before, according to EIA.

Last year, the average was 1.66 million b/d.

The high year for oil production from federal land during the Obama presidency was 1.98 million b/d in 2010, the year of the Macondo tragedy, which resulted in an offshore drilling freeze that helps explain output declines in subsequent years.

But leaping production from unconventional onshore plays more than offset the offshore lull nationally. No compensating surge has come from the federal onshore.

Production can’t increase where access and work are discouraged.

Federal officials should watch Mexico. They might learn something.

(From the subscription area of www.ogj.com, posted July 9, 2014; author’s e-mail: [email protected])