Charles Karren

Prudent Development of North American Oil & Gas: Highlights from the National Petroleum Council Meeting

by Charles P. Karren, Director Oil & Gas Industry Strategy, September 2011

North America’s oil and natural gas resources “are far bigger than anyone thought”. Furthermore, these oil and gas resources should be prudently developed according to the National Petroleum Council which issued its landmark two year study to US Secretary of Energy Steven Chu at its 121st meeting in Washington DC.

The study called: “Prudent Development: Realizing the Potential of North America’s Abundant Natural Gas and Oil Resources” stated that the United States and Canada have abundant natural gas and oil resources that can last for decades, but they must be developed in an environmentally responsible way.

The study also concluded that opening new offshore areas for exploration and the increasing ability to access tight oil sources onshore will result in a more robust supply of North American oil that can last for decades and reduce dependence on imported oil.

The study, conducted with the input of over 400 participants including personnel from Oracle’s Oil & Gas Industry Business Unit, concluded that “significant technology advances have unlocked abundant natural gas and oil resources.” These greatly expanded resources—especially natural gas—have already benefited the United States economically, lower market prices have aided many U.S. industries. Furthermore, increased use of natural gas can reduce emissions and improve America’s energy security.

To these ends, the NPC study reached four significant conclusions:

  • The potential supply of North American natural gas is far bigger than previously thought. It is now understood that the natural gas resource base is enormous and that its development, if carried out in acceptable environmentally ways, is potentially transformative for the United States economy, energy security, and environment, including reduction of carbon and other emissions. These resources could meet high projections of demand.

  • North America’s oil resources are also (surprisingly, to many) much larger than previously thought. These oil resources could offer substantial supply for decades and help the United States reduce, though not eliminate, reliance on imported oil.

  • Natural gas and oil resources will be needed even as energy efficiency reduces demand and lower carbon alternatives become more economically available on a large scale. Moreover, the natural gas and oil industry is vital to the U.S. economy, generating millions of jobs, widely stimulating economic activity, and providing significant revenues to governments.

  • The benefits of natural gas and oil depend on environmentally responsible development. The nation can realize the benefits of these larger resources by ensuring they are developed and delivered in a safe, responsible, and environmentally acceptable manner in all circumstances.

With these findings in mind, the NPC recommended five core strategies for government and industry: 

  • Support prudent development and regulation of natural gas and oil resources. By developing measures such as councils of excellence, the public and private sectors can work to address environmental, safety, and health best practices. Corporate and regulatory commitment to advancing environmental performance can strike a balance between exploration and ecology. Increased efforts to engage communities affected by exploration and to reduce methane emissions will advance prudent policies for the development of and access to resources.

  • Advance efforts for a market-based valuation of greenhouse gas emissions. The United States will find it difficult to reduce greenhouse gas emissions further without a mechanism for putting a price on greenhouse gas emissions that is economy-wide, market-based, predictable, transparent, and part of a global framework; keeping options open for carbon capture and sequestration; and developing information and methodologies on environmental footprints and full fuel cycle impacts.

  • Enhance the efficient use of energy. Governments and manufacturers must continue support of policies that encourage continued progress to adopt cost-effective efficiency standards for buildings and appliances. Disincentives that prevent utilities from deploying efficiency measures must be removed and heat and power delivery must be combined to increase the efficiency of electricity production.

  • Modernize energy markets to reduce price volatility. Market rules and service arrangements between the wholesale natural gas and wholesale electric markets must be harmonized and visibility into new environmental regulation must be increased to remove uncertainty affecting investments and fuel choices in the power sector.

  • Support the development of a skilled workforce. Increased public and private financial support for educational and training activities will create a workforce for the energy markets of the next generation.

Secretary Chu, who attended the meeting, first thanked Council members, including Oracle Chairman Jeff Henley, and told the associated gathering “I want to stress how impressive oil and gas exploration technologies have been over the past decade.” Recovery rates have gone from 20-30% to as high as 75% in some places, he said, adding, “Horizontal drilling has transformed natural gas exploration and production, and is transforming oil exploration and production”.

Chu also stated who said the study would be “very useful in guiding policy.” He elaborated that the US oil production now accounts for about 11%, of the world’s output, and that the study “shows we have abundant resources.”