With all the talk about opening up the offshore areas to oil drilling, perhaps someone should ask the question – can it be done on the schedule everybody’s talking about? I’m not talking about whether there is really that much oil there (doubtful), or policy roadblocks (permitting, environmental issues, etc.), but whether it is physically possible to drill and produce oil offshore within a few years.
To drill offshore you need an offshore drill rig. You can’t just go down to the corner oil rig store and pick one off the shelf. These rigs are big, complicated, and very expensive. It takes years (3-10 years depending upon the size, type, and other factors) to design and construct one and get it ready to drill. So any near future drilling is going to be done by existing rigs. How many rigs are available?
Worldwide, there are 693 offshore drill rigs, an increase of 25 from a year ago (in other words, the specialized shipyards that build these things are churning them out as fast as they can). Of the 693 worldwide, 628, or 90.6%, are already under contract. As of 1 August 2008 there were a grand total of 65 rigs available for drilling. (Data source: Upstream International Oil & Gas Newspaper, original data set from ODS-Petrodata.)
Let’s be really optimistic and assume none of those rigs are going to be drilling in the North Sea, the Barents Sea, off the west coast of Africa, off Sakhalin, offshore Venezuela, or any place else in the world. And let’s be pie-in-the-sky optimistic and assume that each rig develops two 2,000 bbls/day production wells each of two years. So in two years we could have 260 new offshore wells producing 520,000 barrels of oil each and every day. A half million barrels of oil every day is a lot. Why, it’s almost 5% of what we import each day.
To put it in perspective, under the most optimistic scenario possible, we could physically produce from offshore drilling less than a third of the oil that we import from Mexico. And we would be producing it at a much higher price.
Anyone who talks about drilling our way out of high oil prices with offshore oil development needs a reality check.
Update 1: Upstream has a neat graphic showing utilization of offshore rigs, reproduced below for the week ending 01 August 08. The first graph, 250-300 foot jack-ups, is irrelevant to most of the proposed offshore drilling, since all the discussion I’ve seen centers on >500 foot depths.
The bottom tow graphs, worldwide semi-submersible and floating rigs, tells an interesting tale. % Utilization is on the right side, and is indicated by the red dotted line. Notice that it is effectively 100% for the period of July 2005 until the present? That tells me that in order to get a drill rig to drill offshore on the U.S. continental shelf, you have to pay a significant surcharge to lure an already committed rig away from somewhere else.
Update 2: From Upstream, 22 August 2008:
US rig count is up eight from last week ending at 1,998, said oil services company Baker Hughes. Canadian rig count is up 31 from last week to 457.
Of the major oil and gas producing states Texas remained unchanged at 931 while Colorado lost three, ending at 117.
The US offshore rig count is up two from last week ending at 68.
Alaska rigs were down one to 9, California gained six ending at 51 and New Mexico gained two ending at 83.
Louisiana lost three ending at 193 while Oklahoma gained four to 212 and Wyoming lost three ending at 74.