US offshore energy said best buffer against price spikes

24 March 2009 18:45  [Source: ICIS news]

WASHINGTON (ICIS news)--Increasing offshore oil and gas production is the most effective near-term policy for improving US energy security and moderating future oil price spikes, a top energy authority told Congress on Tuesday.

Robbie Diamond, president of the energy think-tank Securing America’s Future Energy (SAFE), told a House hearing that US policy must pursue all available energy options, including increased efficiency and alternative and renewable resources, but that development of the nation’s substantial domestic oil and gas reserves also must be advanced.

In testimony before the House Subcommittee on Insular Affairs, Oceans & Wildlife, Diamond said that “by moving forward with an expanded range of production areas on the Outer Continental Shelf (OCS), the US can reduce its economic exposure to future price spikes”.

“Of course, ongoing improvements in efficiency and fuel diversification are critical as well,” Diamond said.  “But to the extent that we will need some oil for the next several decades, there is a powerful case for producing more of it at home.”

Diamond was testifying at a hearing to consider the ocean environmental impact as part of anticipated US development of offshore areas recently removed from drilling bans. Until October last year, 85% of US OCS areas were closed to energy development under a 27-year-long congressional moratorium.

The US petrochemicals industry and the downstream chemicals sector are heavily dependent on natural gas as a feedstock and have long pressed Congress to end the drilling ban in hopes for more domestic gas production and possibly lower or at least stable gas prices.

Diamond warned that when the US recession ends, domestic energy and fuel demands will again increase and “our dependence will once again put us at the mercy of rising oil and gas prices”.

“Now that Congress has allowed the OCS moratoria to expire, it is time to put in place a rational offshore energy development programme that leverages advances in technology to produce the most cost-effective oil supplies while safeguarding the environment,” he said.

Diamond dismissed arguments that US OCS regions do not contain oil and gas resources in sufficient quantities to justify the environmental risks of development. 

He cited federal studies indicating major offshore oil reserves, and he pointed out congressional research showing that development-related coastal spills have steadily declined in recent years as standards and technology have improved.

“In fact, nearly two-thirds of the oil that enters North American coastal waters each year comes from natural seeps, with only 5% coming from oil extraction and transportation,” he said.

Diamond said that new oil and gas resources in the OCS could be brought on stream as early as 2014 if Congress and the administration move to advance offshore development.

Representative Madeleine Bordallo (Democrat-Guam), chairwoman of the subcommittee, said that “while there are many who would like to see the moratorium on offshore drilling reinstated, the new administration has made clear that some drilling will be a part of our broader, national energy strategy”.

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By: Joe Kamalick
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