Chevron's Gulf Find

(Posted by John.)

So Chevron announced a 15 billion barrel find in the Gulf of Mexico this week.  And yay for them.  Except...  well, except for a number of things.  First of all, Chevron hasn't announced a 15 billion barrel find.  They've announced a find that could, if testing turns out right, contain anywhere from 3 to 15 billion barrels.  But somehow the only number the press ran with is the highest end of the margin.  How many polls are ever reported that way, especially with a margin that large?

Even that isn't a sure thing, because earlier this year the Mexican government announced a similar-sized field that was later revised downward by a small margin - you know, only 99%. The fact is that the deepest water fields are still basically an unknown where oil is concerned, and this is one of the deepest "finds" so far.

Additionally, even if it turns out legit this oil will not be cheap, it won't be easy to get, and it won't be secure - despite the talk from CNN about how this will increase "America's oil reserves by 50%", the reality is this field faces all the same challenges that oil in the gulf does today, most especially hurricane-prone weather.  Texas it ain't.  Talk about this lowering the price of oil by $10-$15 is almost certainly premature.

Some have said that this discovery proves that all the talk about Peak Oil is so much gas.  Well, I happen to agree with Jonathan at Past Peak on this one:  rather than disprove it, this is exactly the kind of corporate behaviour we would expect if conventional oil is nearing or at it's Peak.  The oil majors are betting billions on unconventional oil, such as the tar sands, ultra-deepwater, and the perennial loser of the oil industry, oil shale.  (Lumping these all together as "unconventional oil" hides some obvious differences, but the common thread is they're far more expensive and difficult to get at than conventional oil.)

Finally, there's the cynical political angle:  Congress is about to revisit the ban on most offshore oil exploration, and this kind of a "find" is perfect fodder for the Republicans.  Chevron and other offshore oil companies have a massive amount of money to make if they can explore off of California and Florida, and the idea that America could be "independent of Mideast oil" simply by drilling within the territorial waters (an impossible dream, but whatever) is too good for them to pass up.

As Brad says, it's almost like a well-timed terror alert.