On the first morning of our 2010 ILN Regional Meeting of the Americas in Houston, we had a fascinating presentation from Beirne Maynard & Parsons’ Brit Brown and Ben Escobar on "Deepwater Gulf Oil Spill – An Energy Update."
A Little Oil History…
Brown started by saying that it used to be incredibly easy to find oil in Texas – it would just bubble up. The first oil well was actually the Drake Oil Well in Pennsylvania and it produced about 400 barrels a day. About the same time, they figured out how to distill oil into kerosene, and that became the cheap alternative to well oil.
The well oil industry started to boom, and the first gusher was Spindletop, which started on January 10, 1901. Brown said that it was a phenomenal gusher by any standards, taking nine days to control. It only went to 1,100 feet, which is a relatively shallow well by today’s standards.
Spindletop was outside of Beaumont, Texas and produced, during the gushing stage, about 100,000 barrels of oil a day. To compare, Brown said that the government estimate for the Macondo well was a high of 63,000 barrels a day when it was gushing into the Gulf.
Brown said when that well came through, they started drilling "like it was going out of style," and within a year, they had about 300 producing wells. This started to go down after a time, but in 1927, it hit peak production. The field had a peak production of 21 million barrels a year, which was incredible for this period.
However, things have changed. Brown said that in Texas, the railroad commission used to be like OPEC. Even in the 50’s and 60’s, the railroad commission controlled all of the oil and gas production in the state of Texas. They acted like OPEC and could actually control price. They started to lose that edge going into the 1970’s, when the US hit peak production. Ever since, production has been going down.
Where Are We Now?
Brown said that the greatest oil production (based on barrels of proven reserves) is in the Middle East, followed by South and Central America, Europe and Eurasia. The US proven reserves is right about 28 billion barrels, which is not a lot when you consider that the US consumes about seven billion barrels of oil each year and was once the largest producers of oil in the world.
Brown compared US consumption of oil (7 billion barrels a year) to production, which is about 2.6 billion. He said that oil provides about 90% of our motor fuel, and 40% for total power. He commented that the demand for oil has increased, resulting in the US having to import 75% of its oil and added that at the current rate of consumption, it would take the world 45.7 years, approximately, to exhaust the world’s current proven reserves.