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Sunday, August 25, 2002 Energy bill possible production catalyst Peak in reserves not as gloomy as some predict By Kathi Stapp It isn’t really a new story — the world is facing a rapid decline in oil reserves. That is precisely what a group of experts said again at last May’s petroleum conference at Uppsala University in Uppsala, Sweden. This forecast was no different from others over the years, with the exception of those making the predictions. The predictors of a peak by 2010, soaring energy prices and an avalanche of economic upheavals were well recognized authorities in the petroleum industry: Matthew Simmons and Colin Campbell. Simmons, of Houston, always a key figure at conferences analyzing the petroleum industry, said, ‘‘There is no factual data to support the general sense that the world will be awash in cheap oil forever.” He added that the United States would experience a depletion of energy before 2010 because of a decline of as much as 10 percent in natural gas production, which he also is forecasting. Campbell, a retired geologist, went further, saying he doubted any more giant fields would be found. Unlike most industry watchers, he said he believed new technological advances in exploration and drilling would bring little to new production, resulting in a peak in oil production by 2010. Most petroleum industry experts do not agree with these predictions, and many say the world’s oil supplies will last well into this century. According to the latest estimates, total known reserves throughout the world are approximately 3 trillion barrels of oil and the amount of natural gas is well into the quadrillions of cubic feet in reserves. But the question remains. If there are adequate supplies of petroleum, what is being done by the Railroad Commission and other oil and gas entities to reverse the trend of policies and legislation that seem to squelch domestic exploration and production? Alex Mills, president of the Texas Alliance of Energy Producers, is encouraged by new legislation that he feels will have a positive impact on U.S. energy exploration and production. “We’ve been working on this bill, the Comprehensive Energy Bill, for 20 years. It has passed the House and Senate and is in conference committee now. If passed, the bill would do a lot to encourage new drilling and reserves. It’s the best thing on the horizon right now.” Mid-September is the expected date for the proposed legislation to be taken up. The Texas Railroad Commission has taken action in recent years to encourage more production of oil and natural gas. The commission is streamlining its permitting processes through the ECAP system to allow producers to electronically file for permits and get responses within hours rather than days or weeks. This initiative will result in an estimated savings to industry of $200 per permit or a total of $17 million based on a 25 percent utilization of the system by 2010. “The commission has also proposed many severance tax incentives/reductions over the years,” said Commissioner Charles Matthews. “The commission will continue to promote legislation to reduce or eliminate the state and local tax burden on oil and gas production. The Commission was very instrumental in getting federal tax credits for new tight gas formations. In addition, it is very active in making sure hydraulic fracturing techniques that enhance oil and gas productions are not restricted by federal authorities.” The commission regularly amends rules to accommodate and encourage the application of new technology such as horizontal drilling, 3-D seismic and fracturing techniques.
“American consumers decided they don’t need domestic production to enjoy cheap energy,” Robertson said. “Today politicians are under more pressure to preserve the environment rather than to encourage domestic producers.” “The oil and gas business has been instrumental to the state of Texas and continues to be a vital part of the economy to this day. In fiscal year 2001 the oil and gas industry employed approximately 422,300 Texans and pumped upwards of $75 billion into the Texas economy’“ said Williams. “In addition, the oil and gas industry contributed over $1.1 billion to the state’s budget through oil and gas severance tax. Texas schools have also benefited by the oil and gas industry that contributed more than $115 million to the Permanent University Fund and more than $236 million to the Permanent School Fund. The industry’s importance to the state is quite evident.
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Dan
Robertson, editor of the Permian Basin Oil and Gas Report, believes
that political pressure may explain why more legislation hasn’t
been directed at improving conditions for exploration and production.|
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E.W. Scripps Publications