The US must adopt new policies if it is to take full advantage of the potential "energy bonanza" resulting from advances in unconventional oil and natural gas production, ConocoPhillips Chairman and CEO James Mulva said Wednesday.
"We are in fact well into an industrial revolution, one that represents the biggest oil industry breakthrough since the 1940s, when we first moved offshore into the Gulf of Mexico," Mulva said in a keynote address to the North American Energy Resources Summit at Rice University in Houston.
"An energy bonanza lies within our reach -- if we only take full advantage of the unconventional resources right beneath our feet," he said.
He said the revolution began with development of technology that allowed the exploitation of the US shale gas resources.
"As recently as the 1980s, [gas production] was considered a sunset industry in the US. Domestic production, reserves and demand were all falling," Mulva said.
Proved gas reserves bottomed out in 1993 at 162 Tcf -- the lowest since 1946 -- representing less than an eight-year supply.
"Since then, reserves are up 68%, and production is rising fast. But that's only the beginning," Mulva said, adding that the "Energy Information Administration now estimates that US recoverable gas resources total 2,700 Tcf -- more than a century of supply."
"The revolution has spread to domestic oil production," he said. "US oil reserves peaked in 1970. By 2008 they had fallen by half to only 19 billion barrels, their lowest level since 1940," Mulva said. "But in the three years since, that long decline has reversed. Reserves have increased and production is up almost 20%. Mostly thanks to drilling in liquids-rich shale areas, the pace of US oil development is picking up fast."
Mulva said that for the first time since the early 1990s, more rigs in the US are drilling for oil than for gas. "Some 1,200 rigs are now drilling for oil here, the most in 25 years," he said.
He called on US lawmakers to adopt policies to encourage the oil and gas production from public lands and to allow energy imports from friendly countries, particularly Canada.
"In the case of oil, US import dependence could fall at least by half by 2025," he said.
Mulva said that "of the 1.7 billion acres of US Outer Continental Shelf lands, less than 3% is leased. Nearly all of that is confined to the central and western Gulf of Mexico." He added that because of restrictions, production from federal lands has fallen 40% over the last 10 years.
"Opening more federal lands onshore could undoubtedly contribute to unconventional production. Meanwhile, opening some of the federal waters that are off-limits to drilling could contribute to conventional production," he said.
Mulva also called for the Obama administration to approve the Keystone XL project, a proposed 1,600-mile crude oil pipeline from Alberta, Canada, to the US Gulf Coast.
"Keystone would not be much different from other oil pipelines. The oil it would carry does not differ materially in carbon intensity from some of the oil already produced or used here" he said.
"Opponents are trying to block the pipeline in the mistaken hope of stopping Canada's oil sands development. But there are compelling economic and employment incentives for Canada to continue development, wherever the oil goes, Mulva said.
"In fact, the Keystone delay is forcing Canada to consider improving its oil transportation capacity to the Pacific Coast," he said. "If America turns away, others will step forward for this oil. If that happens, the US would lose not only energy security, but economic stimulation."
The Washington Post this morning reported on its website that the White House planned to announce later Wednesday that it would reject TransCanada's request for a permit to build the line. The company would be permitted to reapply once it develops a new route avoiding the environmentally sensitive Sandhills region.
