In the modern petroleum industry, amounts of recoverable oil and gas in fields and countries are a function of knowledge. The more engineers and geoscientists learn about a particular reservoir, the more fluid hydrocarbons they usually recognize to be in place, or recoverable from volumes previously known to be in place, or both. An obvious corollary: The more engineers and geoscientists know about how to explore for and produce oil and gas, the more oil and gas they can find and produce from a given reservoir at a given level of geophysical knowledge.
The exploration and production business is no longer the drill-and-hope enterprise that it used to be. It is now, and has been for many years, mainly an intelligence activity. Success comes not so much from being bold and lucky but rather from learning as much as possible about the subsurface, applying technology economically, and managing risk. Future supplies of oil depend greatly on the extent of this type of success-on the extent, that is, of knowledge.
Large stake
A country that needs as much oil and gas as the US does thus has a large stake in geophysical knowledge and production technology. The federal government, therefore, has traditionally involved itself in oil and gas research.
The administration of President George W. Bush wants that to stop. Its fiscal 2006 budget for the Department of Energy’s Office of Fossil Energy (OFE) cuts spending on oil and gas research and development to $20 million from $79 million in fiscal 2005 with the aim of ending the activities by yearend. A formal assessment of the 2004 and 2005 budgets rated the targeted programs “ineffective,” explains OFE, “based primarily on not demonstrating clear results of the research efforts.”
A serious argument can be made that the government has no business conducting research that companies can do for themselves, especially in a period of elevated commodity prices. But that argument applies as well to energy research not being halted, mostly involving clean-coal technologies, spending on which this year is three times that on oil and gas. And companies benefiting directly from federally assisted oil and gas research might not, in fact, do the work themselves. Most of the programs being cut address technology needs of independent producers, who drill most of the wells in the US and who don’t have lavish research budgets.
Independents dispute the assertion about ineffectiveness of the threatened programs. In Mar. 18 testimony submitted to the House Subcommittee on Energy and Water Development for itself and a number of other industry groups, the Independent Petroleum Association of America supported OFE research programs, pointing out that most require supplemental private funds. It also put the “ineffective” judgment in perspective by pointing out that the effort has been “plagued recently by inconsistent and decreasing funding.”
Of course, this budget move has little to do with performance. It has little to do with saving money, the amounts involved representing pittance in DOE’s $23 billion budget. The move has to do with politics and fuel choice. It’s a statement. The government would rather spend public money on hydrogen from coal than on oil and gas. A majority of Americans probably, if asked, would agree.
Real problems
But while the government dabbles in unproven energy forms that might never be produced commercially, real problems are developing with conventional supply. Demand is pressing hard against the limits of oil and gas deliverability and shows no sign of abating. In the years or decades it takes to bring energy to market from the exotic sources favored by politics, people will need a lot of oil and gas. Supplies of those fuels will, therefore, be important policy concerns. If the government can enhance supplies with modest investments in knowledge, it should make the effort.
At this, the government was failing even before its ill-advised retreat from oil and gas research. The best geophysical knowledge still comes from drilling. Despite its large appetite for oil and gas, the US precludes drilling on huge swaths of federal land. So canceling research is consistent with official hostility toward oil and gas supply and the knowledge essential to it. But it’s a politically safe position. Most fuel consumers don’t know what they’re missing. ✦
