Oil execs push back on jen bukkake psaki and joey bribes.
Energy industry representatives said the reason so many drilling permits sit unused is more complicated than White House Press Secretary Jen Psaki suggested.
www.foxbusiness.com
Stolen from another board...
From a petroleum expert, Tom West, in Houston...
Jen Psaki gives a very misleading statement on oil leases in the March 3rd, 2022 Press Conference:
Press Question: We also know, you know, the President, as recently as yesterday, talked about increasing domestic manufacturing to bring down prices on inflated items like goods. So why not apply the same logic to energy and increase domestic production here?
MS. PSAKI: Well, there are 9,000 approved oil leases that the oil companies are not tapping into currently. So I would ask them that question.
Here is the answer (it is long):
1) There are ~9,000 exploration leases that are held by industry but most of those *don't have any recoverable oil on them. Exploration leases are bought on speculation of a risked possibility of economic oil on them based on sparse data.
There is not oil everywhere beneath the ground. Only about 15% of the exploration leases purchased will end up with oil being found on them, and when you buy them you don't know which ones those are (that is why it is called “exploration”. There is a long process to find out which ones have actual recoverable oil on them.
1) The first thing you do after getting the lease is to acquire more accurate data through acquisition of new seismic data or reprocessing older data. This process takes anywhere from 6 months to a few years. The data is expensive and requires specialized boats and computers to acquire and/or process. You need this more accurate data to help you decide which of the leases you bought actually have a reasonable chance of having oil on them.
2) Once you have this more accurate data the odds of success will either decrease to around 10% on most of the leases or increase to around 25% on a few leases.
You will not drill the ones with a 10% chance of success. You don't do this exercise lightly because deep-water exploration wells cost between $150 to $250 million dollars to drill as they will be generally 4-6 miles deep, drilled with diamond-tipped bits, and continuously lined with concrete and steel for safety. If you just randomly drill wells that expensive in areas with a low chance of success, you will end up going bankrupt and drilling mostly dry holes with no oil on them.
3) Once you decide where to drill, based on a chance of success, generally better than 20%, you have to get a permit to drill, and lease a drilling rig capable of drilling the well. As part of the permit process you have to demonstrate that you can drill safely and environmentally responsibly, and contain any accidents or spills, in order to get the permit. The permit is at the whim of the government regulators and generally takes several months to obtain. The rig availability is also something you have to consider. To get a rig to drill the well, which is specialized equipment in a competitive market, you may have to lease the rig for one to two years and have several drill sites ready to go and permitted. Day rates for deep water rigs are generally in the range of $200,000 to $250,000 per day and a single well will usually take 60 to 200 days to drill safely. So you have a high incentive to drill once a rig is under contract.
4) This entire exploration well process generally takes *between 1 and 7 years, and most leases will be given back to the government un-drilled because the odds of finding economic oil will never get above 20% and so you would lose money by drilling them. But you do not know that when you purchase them. You have to acquire the data, analyze it, risk the well and do complex economic analysis.
So no, it is not true that oil companies are sitting on thousands of leases with lots of oil on them and is just choosing not to tap them. Exploration is a high risk, data, and time-intensive process.
5) Right now all new government lease sales have been cancelled and drilling permits are getting harder to get. There are constant threats to make the regulatory process more onerous and more expensive.
6) The entire time the leases are held, the government is paid for the leases whether the oil companies drill on them or not. There is an initial lease bonus paid and annual rentals which are paid directly to the U.S. treasury. If oil is found and produced the government gets a royalty share of every barrel produced.
7) The *U.S. government is the only entity guaranteed to make money off of leasing and oil production.
For oil companies it is about managing a high risk business and trying to maximize oil production and minimize drilling expensive dry holes (where no oil is found.)
Still the *majority of exploration wells will come up dry because there is only so much you can reduce the unknown elements of nature. Oil companies have been doing this for over 100 years so we have a good understanding of the odds and risks involved.
8.) Currently, there are about 650 active drill rigs, drilling wells in United States, most of them drilling onshore wells. This is an increase of about 250 rigs compared to this time last year. The offshore is where most of the large yet-to-find oil fields are statistically, likely to be, is seeing a decrease of active drilling rigs because of the cancellation of recent lease sales. The U.S. Gulf of Mexico offshore has one of the largest amounts of yet-to-be-found oil anywhere in the world based on statistics but to find it takes a lot of time and money and no new exploration leasing is currently allowed. Once you find an oil field a given field will generally be able to produce oil for 15-50 years.
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