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Saturday
Lagniappe
The
Real Issue: Security of Supply
By
Curtis D. Burton
Here we are again. Congress wants to know why gasoline prices
are going up. Gasoline prices are, well, simply unreasonable.
Congress wants to have hearings and investigate.
Am I the
only person in America that sees this for the self-serving,
TV-pandering "breaking news" headline that it really
is? How many times since 1973 has Congress, be it Democrat
or Republican, demanded answers about why gasoline prices are,
in Congress' words, "too high"?
The simple fact, as with just about every other issue that
really matters in America, is that Congress fiddles while America
disintegrates. Congress wants to know how the terrorists were
able to fly those planes into the World Trade Center. They
hold hearings and play politics. But we certainly cannot go
anywhere those folks came from and kill them before they kill
us; that would be unfriendly.
Congress wants to know why energy prices go up. They hold
hearings and play politics. Never mind that every major CEO
in the oil and gas industry has been testifying in private
and in public for years about what the issues are and what
the solutions are, and no one in Washington has been willing
to take action.
Congress wants to know why illegal immigrants continue to
come to America. They hold hearings and play politics - and
build a fence. Creates jobs, looks like action, but is it a
solution?
The same happens when Congress looks at energy. I have been
in the energy industry since the late 1970s. Part of my interest
in the industry arose from a desire to do my part to provide
energy to my country, which needed a secure energy supply after
the Arab oil embargo. Over the past 35-plus years, I have watched
with absolute amazement as our politicians - Democrat, Republican,
right wing, left wing - have played politics rather than generating
solutions. They have posed for the cameras while pretending
to care about the citizens they claim to serve and the issues
they were sent to Washington to address. The truth is they
like the news coverage and have no interest whatsoever in doing
anything other than getting into the limelight. Why such harsh
words? There are only two possibilities about why Washington
behaves as it does. One explanation is that Washington is peopled
by the highest concentration of imbeciles found anywhere on
the planet. Another explanation is they are lining their pockets
at the expense of the taxpayers and need to keep attention
on the important things they do for the citizens while they
really serve only themselves.
How Does This Relate to Energy?
Have you ever wondered about what has happened after all the
congresspeople and senators have paraded in front of the cameras
beating their chests about energy prices? They haul in the
CEO of Chevron, shake their fingers at him and threaten him
with sanctions, and then what happens? Nothing substantial.
Energy people, myself included, have been going to Washington
for years trying to get someone, anyone, to listen to us. We
keep telling Washington that there are finite inexpensive energy
supplies in the world and that we should be doing things to
manage America's energy situation. That's right: we the government,
we the citizens and we the energy sector. The energy industry
itself has espoused alternative energy. We have tried to educate
about global supply-and-demand issues. We have tried to work
with anyone we could drag away from the news cameras long enough
to educate. All to no avail.
After 9/11, I wrote about how the energy landscape had changed
in a fundamental way due to the attack. Sadly, as I survey
the energy picture in 2007, I see that little has changed on
any of the subjects that matter. The political pundits remain
more interested in keeping out or kicking out the other party
than in paying attention to a serious and continued threat
to the American way of life: our increasingly at-risk energy
supply. While Al Gore and his followers waste our time and
resources on global warming, America's political system continues
to ignore the fact that the United States is the richest, most
industrialized country in the world, and that it got that way
because we had access to inexpensive energy.
We have
a nut in Venezuela who provides an unacceptably high level
of our crude. We have an American-hating, dangerously
unhinged group of players in the Middle East who control another
big portion of the supply. And what do the occupants of Capitol
Hill do? They hold hearings on how the oil and gas community "gouges" the
consumer on gasoline prices. If it were not so sad, it would
be laughable the way energy is not an issue at all at $2 a
gallon (that is merely evidence of the free market working),
but when it hits $3 a gallon, it is a vast conspiracy of the
oil and gas community to gouge the American consumer.
The United States needs to move past the rhetoric about the
price of gasoline and begin to address the problem of secure
energy for our country. By that I do not mean that the price
of gasoline is not important. It is. But if we solve the larger
and more important problem of a secure supply, we can ensure
affordable energy prices. Gasoline price is a tactical issue;
secure supply is a strategic issue. We, the citizens, should
expect and even demand some accountability from our elected
representatives on this critical issue.
Perhaps there is no better way to underline the importance
of a secure strategic energy supply than to recall another
relatively recent event. On December 7, 1941, the surprise
Japanese attack on Pearl Harbor triggered America's entry into
World War II. Most Americans are aware of that pivotal date
and event. Most Americans are not aware that the Japanese attack
was, in part, triggered by the U.S. government's decision early
in 1941 to cut off Japan's energy imports. Those imports accounted
for 100 percent of the Japanese energy supply.
Fast forward to 2007. America consumes more than 19 million
barrels per day of various forms of oil and its by-products.
Of this amount, 60 percent is imported; of the imports, 47
percent come from the Organization of the Petroleum Exporting
Countries (OPEC). Those statistics may not be surprising or
alarming. But the significance of these figures grows once
it is understood that in 1973, America imported only 15 percent
of its energy needs from OPEC. As a veteran of sitting in gasoline
lines in 1973 to buy gas at twice the price I had paid prior
to the boycott (and happy to get it, I might add), I am alarmed
by the following:
• The
United States' dependence today on OPEC supply is more than
three times what it was in 1973.
• Over the past three years, we have more than doubled the number
of rigs drilling in the lower 48 but have had no effect on
boosting U.S. production figures.
• In 2000, the entire country was amazed when California suffered
blackouts because they could not afford to buy natural gas
for electricity production at $10 per thousand cubic feet -
a price spike in excess of three times the average gas price
caused by spot supply shortages.
• If just the Saudi percentage of our imports (15 percent) were
cut off, the United States would suffer immediate and significant
economic loss, including a drop in gross national product,
the loss of U.S. manufacturing jobs, major economic upheaval
in the travel industry and a significant spike in energy prices.
This spike would probably be a jump of three to five times
the current value per barrel; in simpler terms, gasoline would
sell at the pump for $6 to $10 per gallon.To almost everyone
in the energy industry, these figures or ones similar to them
are not new. Most energy insiders have known for some time
that there are serious problems with our energy supply. Most
significant of all, these facts are known to our Washington
representatives. The question is: What do we as a nation, as
companies and as individuals do about it? Can we afford to
continue to relegate our nation's energy health to a subject
for discussion only when prices are high and supply is in question?
A Challenge to Change the Energy Outlook
Many readers of this magazine are developing business strategies
for their companies to deal with the ever-changing energy market
and political realities. Let me challenge you to look beyond
your own business interests, even beyond your personal interests,
and begin this year to take an active role in changing America's
energy picture. Many of you possess knowledge of the special
energy supply problems that confront our country - knowledge
that the average American lacks. Let me ask you to begin, in
even a small way, to use that knowledge to change the reality
of America's energy crisis.
How? Well, that depends on you. President George W. Bush floated
a proposal recently for a National Energy Policy - the first
attempt that has been put forward by a U.S. administration
to recognize that the energy supply issue is a significant
one to the well-being of America. You may not have supported
his ideas, and you may even have opposed them, but whatever
your personal opinion, you probably did little or nothing in
direct response. So my challenge is this: Get involved. Call
your senator, your congressperson or your trade association
and explore ways in which you can raise America's awareness
of the energy challenges we face. America's leaders need to
hear from us that energy supply is a priority. One way to do
that is to call, write or e-mail them in an attempt to get
energy on the agenda for Washington. Beyond raising awareness,
offer your time and resources as a practical way to address
the problem. The solution to our energy challenge begins with
each of us doing our part.
It is a problem that not one of us can solve alone, but knowledgeable
individuals working together can indeed make a difference.
If you are in the energy industry and want some help in working
on these issues in an organized fashion, I recommend that you
contact the National Ocean Industries Association. This is
an industry group that, among other endeavors, works to promote
awareness of the energy picture and other aspects of the energy
industry. The association has excellent programs and contacts
in Washington and would be delighted to receive your input
and assistance.
In 1991,
the energy industry faced seemingly insurmountable problems
with the high cost of deepwater development. The DeepSTAR
program, a major industry-wide research effort, was born out
of recognition on the part of several individuals that the
deepwater basins of the world represented significant potential
as clean, long-term sources of energy. This could only become
a reality if the commercial barriers associated with deepwater
development could be breached. The comment I most frequently
heard as I attempted to sell the DeepSTAR program to the energy
industry in the early 1990s was, "It just isn't possible
to make deepwater commercial; the technology isn't there."
I am happy
to say that 16 years later, deepwater development is under
way on a scale undreamed of in 1991. The DeepSTAR
program continues to contribute new technology and innovative
solutions to the industry, enabling ever more commercial development
of deepwater basins worldwide. It was an "impossible" dream,
but individuals working singularly, and eventually in large
groups, made the impossible possible. I do not believe the
solution to America's energy crisis is any different.
Some quarters have suggested that the solution to the energy
problem is to move away from fossil fuels altogether in favor
of cleaner alternatives. As attractive as this sounds, it is
simply a denial of reality. The most authoritative sources,
both inside and outside the energy industry, indicate that
the nation's energy supply will be largely dependent on hydrocarbons
through at least 2075. To illustrate how significant hydrocarbons
are to our energy needs, note the sources of our energy supply
in 2001:
• 64
percent of our energy came from oil or natural gas
• 24 percent came from coal
• 8 percent came from nuclear power
• 4 percent came from renewable energy
Barring some major, unforeseen technology breakthrough, hydrocarbons
will continue to form the backbone of America's energy supply.
Therefore, we must address our hydrocarbon supply problem at
all levels: by the individual, through corporate efforts and
through government action.
The Role of Government
Someone in the federal government once told me that the correct
role of government was to focus on the needs of its citizens
and to provide what the individual and business could not.
An example of this appropriate role was national defense. The
citizen requires protection from external threats. Truly effective,
large-scale protection cannot emanate from either the individual
or the business sector, so it is a logical function of government.
Although assurance of an energy supply is obviously different
from national defense, it has evolved into a function in which
government must play a role.
Historically, the United States has subscribed to the idea
that energy is a commodity and that supply and demand should
govern its price. This is fine when there is an adequate supply
and the only impact of a high price is inconvenience. It is
not acceptable when the absence of that supply could destroy
our economy. The events of 9/11 should have focused the country
on the huge economic impact that can accrue from unexpected
and unpredictable acts. For instance, look at the extreme economic
impact of shutting down the aviation industry for a week, then
coping with a major drop in travel for the next month or more
due to the terrorist acts in New York and Washington. The ripple
effect from New York has been felt throughout the economy to
the extent that what was a weak financial picture was pushed
into a recession. Look also at the economic impact that was
felt in California when problems arose with energy supply at
an affordable price: The state's economy was impacted because
of a localized supply problem. Imagine what would happen to
the nation's economy if radical extremists were to seize control
of key elements of the Middle Eastern energy supply. Imagine
that only 15 percent of our energy supply were cut - the very
percentage, may I remind you, that we receive from Saudi Arabia
- and you begin to see a reason for the government to be involved
in the energy picture.
No one in the energy sector wants the government involved
with day-to-day operations. But the cost to the country, to
individuals and to corporations has risen to a level where
it can no longer be maintained that government has no role
to play in assuring the availability of this vital resource.
I believe that a balanced national energy policy is the first
step toward a more sensible approach to America's energy picture.
Perhaps you disagree. Whatever your position, we all need to
move into a proactive role with regard to energy supply. We
cannot all pick up a gun and stand beside the military personnel
who are defending our political freedom, but those of us in
the energy industry can do our part to defend our energy freedom.
Whatever your view, whatever your position, I hope that you
will take personal action to raise the energy issue to the
point of national importance it deserves.
Curtis D. Burton is the chairman and CEO of Buccaneer Resources,
LLC. Mr. Burton is recognized by the oil and gas industry for
his role in moving the industry into the deepwater frontier.
Mr. Burton was a founder of DeepSTAR, Texaco's cooperative
deepwater technology-development vehicle. He has also served
as president and CEO of Azura Energy Systems, of Grant Prideco's
Marine Division and of Total Offshore Production Systems. Mr.
Burton is recognized as an innovator in the application of
new concepts and technologies in the oil and gas industry.
These have included innovative floating system designs for
North Sea operators and the implementation of one of the world's
largest subsea production control systems in the 1980s.
Mr. Burton's leadership has been characterized by his willingness
to seek out innovative solutions for "unsolvable" problems.
His in-depth international experience includes living and working
in the United Kingdom, Norway and Brazil. He has also completed
international projects in West Africa, Japan and Europe and
has extensive project experience in the deepwater Gulf of Mexico.
Curtis
D. Burton is Chairman
and CEO Buccaneer Resources, LLC. Petroleumworld
not necessarily share these views.
Editor's
Note:This article was first published by World
Energy Magazine,
Vol 10, No. 2.
Petroleumworld reprint
this article in the interest of our readers.
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