ENERGY STATISTICS

The AAPG Division of Professional Affairs is making this information available to all AAPG members and other interested parties so that discussions regarding energy policy can be documented with accurate statistics.  Unless otherwise noted, all energy statistics are from the database of the US Energy Information Agency (www.doe.eia.gov).  1999 figures are actuals, and 2000 figures are projections.  The weekly “Industry Scoreboard” in the Oil & Gas Journal is a good source for additional statistics.

Total U.S. Energy Consumption by Primary Energy Source, 1998

(EIA Sept. 1999)

Petroleum                                 40.7%

Natural Gas                              24.1%

Coal                                         23.3%

Nuclear                                                 7.9%

Hydro                                       3.8%

Other                                        0.2%

            Total:                            100.0%

USA Electricity Supply by Source in 1999

(Calculated from EIA, October 2000 data)

Coal                                         50.6%

Nuclear                                                19.6%

Natural Gas                              15.0%

Hydroelectric                              8.3%

Petroleum                                   3.8%

Geothermal, Solar, Wind              2.4%

Other gaseous fuels                    0.3%

            Total:                            100%

PETROLEUM DEMAND

(million barrels oil per day)

                                                                        1999                            2000

World Petroleum demand                                   74.8                              75.9

USA Petroleum Demand                                   19.52                            19.58

USA demand as % World Total                         26%                             25.8%

USA CRUDE OIL & LEASE CONDENSATE PRODUCTION

(million barrels per day)        

                        1970                1980                1999                2000

                        9.6                    8.6                    5.88                  5.84

USA CRUDE AND NGL PRODUCTION    

(million barrels per day)

                        1970                1980                1999                2000

                        11.1                  10.1                  9.0                    9.1

The U.S. now imports about 56% of its crude oil and refined product needs; therefore USA energy policy impacts world markets and economies.

Crude oil production in the US has declined 33% since 1985, from 8.9 million barrels per day (MMBOD) to 5.9 MMBOD.  At the same time, however, domestic petroleum demand has increased 23% from 15.90 MMBOD to 19.58 MMBOD. 

USA PROVEN OIL RESERVES

USA Proven Oil Reserves @ 12/31/99:              21.0 billion barrels

USA Proven Oil Reserves @ 12/31/85:              28.4 billion barrels

Proven oil reserves have declined 26% since 1985.  Following discovery of the giant Prudhoe Bay Field in Alaska in 1970, USA proved oil reserves were 39 billion barrels as of year-end 1970.

MIDDLE EAST COMPARED TO USA

The Middle East produces about 20 million barrels of oil per day, and has proven reserves of 673 billion barrels, representing about 65% of total world proven reserves. Saudi Arabia alone has reserves of 259 billion barrels and produces 8 million barrels per day.

During 1999, according to the EIA, the US obtained 23% of its oil imports of 10.6 MM bbl/day, or 2.43 MM bbl/day, from the Persian Gulf Region.

            During 1999, OPEC supplied 29.4 million BOPD, or 39.7% of total worldwide supply of 73.9 million BOPD.

CRUDE OIL IN 1999 WAS USED FOR:

8.4 MM bbl/d (43%) for motor gasoline;

3.6 MM bbl/d (18%) distillate fuel;

1.7 MM bbl/d  (9%) jet fuel;

840,000 bbl/d (5%) residual fuel;

5.0 MM bbl/d (26%)  “other oils”

USA NATURAL GAS DEMAND (Trillion cubic feet)

1985                1999                2000

17.3                  21.36                22.22

Natural gas presently supplies about 25% of the nation’s primary domestic energy requirements.

Gas demand is skyrocketing, particularly as a “clean” fuel for electric power generation.  Recent studies by the EIA, Gas Research Institute, and the National Petroleum Council (NPC), indicate annual demand will grow to as much as 32 TCF over the next 15 to 20 years. In its 1999 study, the National Petroleum Council projected annual demand to reach 29 TCF as early as 2010. 

Security analysts at Dain Rauscher Wessels, Inc. estimate that more than 275 new gas-fired power plants are planned to begin operation by 2006.  These new electric power plants are expected to consume an additional 8.5 TCF/year. 

USA NATURAL GAS PRODUCTION (TCF)

            1973    1983    1985    1990   1995  1999

            22.6      16.8      17.2      17.8     18.6      18.7

USA NATURAL GAS RESERVES (TCF)

1970                1999

290                   164

Proven gas reserves in the United States have dropped 43% during the past 30 years, from 290 TCF at year-end 1970, to only 164 TCF now.  Approximately 14% of the nation’s natural gas supply is presently imported from Canada.  The NPC estimates that LNG imports will supply less than 1% of natural gas demand through 2015.

OIL AND GAS WELLS DRILLED

In 1999, there were only 20,770 oil and gas well completions in the United States. This is a pathetic shadow of the 70,000-85,000 wells drilled per year in the period 1980-1985, when we were able to actually increase deliverability and make significant new reserve additions beyond just replacing annual consumption. 

POTENTIAL UNDISCOVERED USA OIL AND GAS RESOURCES

The most recent assessment by the U.S. Geological Survey demonstrates that the petroleum and natural gas resource base is large enough to sustain an active domestic petroleum industry for many decades. The technically recoverable onshore U.S. resource base is estimated to be 110 billion barrels of oil and 1,015 trillion cubic feet of gas.

The National Petroleum Council (NPC) in its 1999 study concluded that the United States has a remaining gas resource base in the Lower 48 States of 1,466 TCF.  It should be noted that only 157 TCF, or just 10% of the identified resource, is considered proven.  There are an additional 313 TCF in Alaska; however, this gas is useless without a pipeline to the Lower 48 markets.  The total identified USA gas resource, including Alaska, is a whopping 1,779 TCF.  Even at 32 TCF/year consumption, there is more than a 50-year supply.  Cumulative domestic production over the past hundred plus years is estimated to be about 890 TCF.

            The 1999 NPC report concluded that the most prospective areas for major new discoveries, particularly natural gas, are on public lands in the Rocky Mountain sedimentary basins, offshore in the Gulf of Mexico, in the Eastern Gulf of Mexico, and on the Atlantic and Pacific OCS.  Despite the huge potential of these areas, Federal law presently prohibits exploration on the Atlantic and Pacific OCS, and in the Eastern Gulf of Mexico. Access to much of the remaining resource potential of the Rocky Mountain basins is restricted or closed.  A total of 213 TCF gas resources have been identified by the NPC in the areas that are closed and/or subject to severe access restrictions.

            The total area of the U.S. Federal offshore, including Alaska, to the 200-mile economic limit, is about 2 billion acres. Only 2 percent has been leased.  In its 1995 study, the Minerals Management Service assessed a mean undiscovered recoverable resource of 46 billion barrels of oil and 268 trillion cubic feet of natural gas in the Federal OCS.  This is 2.5 times the offshore reserves found to date.

WORKING DRILLING RIGS

The number of drilling rigs working on a daily basis has decreased from over 4000 in 1982 to an average of only 623 in 1999.

USA REFINING CAPACITY

Since 1981, the number of operating refineries in the United States has declined 47% from 324 to 174, representing a loss of over 3.0 million bbls/day of capacity. Refinery utilization has increased from 69% in 1981 to 96% in 2000. 

            Refinery closings were caused by deregulation (elimination of price controls and allocations), and the cost to retrofit older refineries to meet current environmental regulations.  There have been no new grass-roots refineries built in over a decade.  According to the EIA’ April, 2000 Energy Report, “financial, environmental, and legal considerations make it unlikely that new refineries will be built in the United States.”

CRUDE OIL PRICES

Crude oil prices over the past 10 years have consistently lagged the consumer price index inflator. The average price from January 1990 through August, 2000, has been $19.95.  The price spiked over the CPI during the Persian Gulf War, briefly in late 1996-early 1997, and recently in 2000.  Crude oil prices rose from an inflation adjusted  53-year low of $8.03/bbl in December, 1998 to an average price of $22.55/bbl in December, 1999.

GASOLINE PRICES

In an October, 2000 press release ExxonMobil said that it makes a profit of five cents on every gallon of gasoline it sells, while Federal and State Governments take an average of 40 cents in taxes for every gallon sold.  The ExxonMobil press release went on to say:

“Since the end of World War I, inflation-adjusted gasoline prices have steadily declined, interrupted only by a few peaks and valleys. Through the end of World War II, when average real incomes for Americans were much lower than they are today, gasoline prices varied between $2.00 and $2.50 per gallon ($1999). The price then dropped steadily to about $1.50 per gallon before the oil shocks of the 1970s and early 1980s drove prices temporarily higher, peaking at over $2.50 in 1981. The lowest gas prices of the period occurred in 1998, when low crude prices drove gasoline near, and in some parts of the U.S. below, $1.00 per gallon. Prices have moved up sharply in 2000, but from a very low level and continue to be below historical levels.

The declining price of gasoline has contributed to the growth of our standard of living over the years. In 1966, the average American family spent each year a total of about $35,000 (in $1999), of which about three percent went for gasoline. Today, the average American family spends over $60,000 each year, with only two percent on gasoline. Over the same period, the vehicle fleet (cars, vans, light trucks and SUVs) increased from 91 million to over 200 million, and the average number of miles driven annually per vehicle rose from 9,500 in 1966 to almost 12,000 today. With vehicle efficiency improving from about 13.5 miles per gallon in 1966 to nearly 20 mpg today, the average cost of driving one mile has fallen from over 12 cents in 1966 to about six cents in 1999. Recent gasoline price increases have brought that cost back to only about seven cents per mile.

            In its October, 2000 Energy Report, the EIA said that “Regular unleaded, self-service retail motor gasoline prices hit their highest monthly level ever, in nominal terms, averaging $1.63 per gallon in June.  Still, in real terms (adjusted for inflation) that price was about 40 percent lower than the price experienced in March 1981.

Motor gasoline demand has increased 28% from 6.58 MM bbl/day in 1981 to 8.47 MM bbl/day, despite conservation efforts.

BALANCE OF TRADE DEFICIT

The largest component of the projected 2000 foreign trade deficit of $387 billion is imported crude oil and refined petroleum products.  In 1973, at the time of the Arab Oil Embargo, the United States imported 35% of its petroleum requirements.  That figure now stands at 56%.

The EIA estimated total 1999 oil imports at $66.9 billion. This year that bill will be significantly higher.

INVESTMENT CONSIDERATIONS

According to the Financial Reporting System, the 23 largest producers reported an average return on assets of just 5.4% over the 12-year period from 1986 through 1997. During the past decade, the average oil industry return on capital employed has been only a meager 7-8% due to low commodity prices.

            The December 1999 National Petroleum Council study concluded that the growth in natural gas demand will require funding of approximately $1.5 Trillion  (in 1998 $).  This includes $700 billion for operating expenses, and $658 billion dollars in upstream capital expenditures from 1998 through 2015.  This latter figure includes all exploration, development, production, and gathering capital expenditures.  In order to satisfy supply growth an increased annual average capital expenditure of $39 billion per year is required from 1999 through 2015, versus an average of $27 billion from 1991 through 1998.  However, these needed levels of investment will take place only if investors have confidence that competitive rates of return will be earned.

REASONS FOR DECLINE IN DOMESTIC DELIVERABILITY AND RESERVES

1.                   Low and volatile commodity prices have discouraged investment.

2.                   Low return on petroleum investment compared with other economic sectors.

3.                   More attractive alternate investment opportunities for private capital (stock market).

4.                   Access denied to most prospective exploration areas on environmental grounds.

5.                   Onerous regulatory disincentives.

6.                   Tax disincentives.

ARCTIC NATIONAL WILDLIFE REFUGE (ANWR)

The AAPG believes that the 1002 area of the Arctic National Wildlife Refuge (ANWR), and the similar coastal plain area of the National Petroleum Reserve-Alaska (NPRA), should be opened to exploration and development.  A study recently released by the United States Geological Survey (March, 1998) cites potential economically recoverable oil resources beneath the ANWR Coastal Zone 1002 Area of 5.7 to 16 billion barrels of crude oil, with a mean expected resource of 10.3 billion BO. Mean peak production rates of 1.0 to 1.35 million BOPD are expected. The 1002 Area represents only 8% of ANWR’s 19 million acres.  Less than 1 percent of the land within the 1002 area would be affected by petroleum exploration and development activities. Parts of the coastal plain of the NPRA, held back by the Bureau of Land Management (BLM) from the 1999 lease sale at the instruction of the Secretary of the Interior, contain an estimated minimum of 1.5 billion barrels.

The major objection to development of the Prudhoe Bay Field and Trans Alaska Pipeline was the potential threat of the development to Caribou migrations.  According to the US Senate Committee on Energy and Natural Resources, the Prudhoe Bay herd, also known as the Central Arctic Herd has increased from 6,000 in 1978 to 19,700 in 2000. The caribou are not bothered by the petroleum development infrastructure – in fact they prefer it to the prospect of having their calves devoured by wolves.

Opponents of ANWR development say that it is not worth forever despoiling ANWR for a few months of oil supply. This is a specious argument that assumes that supply from all other sources ceases during the life of the ANWR reserves.  According to Government studies, the 2001 area of ANWR, could produce over 1.0 MMBO per day. Like the Prudhoe Bay area, production operations will likely run for more than 25 years, providing vital crude oil and natural gas for the nation’s economy, significant employment in Alaska and in the Lower 48 from production operations and equipment supply, hundreds of millions of dollars of annual state and federal tax and royalty income, as well as a reduction in the outflow of funds for the purchase of imported crude oil. 

During this year US Secretary of Energy Bill Richardson has repeatedly been on his hands and knees before OPEC producers to beg for production increases of initially 200,000 BOPD and then 800,000 BOPD. The current supply/demand balance is so precarious, that even the threat of a storm in the Gulf of Mexico causes oil and gas prices to shoot up momentarily. An incremental 1 million barrels of oil per day from ANWR for a sustained period of at least 10 years would make a huge difference in the supply side of the supply/demand equation. 

During 1999, according to the EIA, the US obtained 23% of its oil imports of 10.6 MM bbl/day, or 2.43 MM bbl/day, from the Persian Gulf Region.  If one were to use the same argument as the ANWR opponents about supply, development of potential ANWR reserves of  10+ billion barrels would eliminate 11 years of dependency on imports from the dangerously volatile Middle East. 

The giant Alaskan Prudhoe Field went into production in 1977, and produced its 10 billionth barrel of crude oil in May, 2000.  The field reached a regulated peak of 1.5 million barrels per day in 1979, and produced at this rate through 1988.  Production is now in a steep decline.

This information was compiled by G. Warfield “Skip” Hobbs, 1999-2000 President of the AAPG Division of Professional Affairs.  Please send any corrections and/or additions via e-mail to Skiphobbs@ammoniteresources.com.

DPA Energy Statistics.doc

10/18/00