Nat Turner

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An Energy Policy for the United States (updated)

The following was written by my dad (we have the same name, not to be confused)

-------------------------------------------

By: Nat S. Turner

July 25, 2008

 

 

In my mind the greatest threat and danger to the United States is related to the importation of approximately 14 million barrels of oil and distillates every day (some 68% of our total --- and growing).  Using an oil price of $135/bbl, this translates into the direct transfer of approximately $690 billion per year to foreign suppliers, many of which are hostile to the US.  (For reference, the US’s balance of trade deficit for 2007 was $711 billion --- a number that would in essence be zero, or in balance, if not for oil importation).  This “exportation” of American wealth is clearly growing and has dire long-term consequences in domestic and international policy as well as our long-term economic viability.

 

Currently the world produces, and consumes, approximately 87 million barrels of oil per day (of which the US consumes approximately 25% of this amount).  To make the above more compelling and urgent is the fact that supply/demand balances are severely strained and any current excess production capacity is all but non-existent.  The ability for the oil markets to handle the projected future demand and growth profiles (and the inherent depletion of existing fields) is a huge challenge.

 

A detailed study of global production capacity along with lower yielding exploration results over the last several decades, suggest to me and many other fellow geoscientists, that we are very near a plateau in the global production capacity of conventional oil---or at best, incremental production increases will be much more expensive and capital intensive relative to the past.  If this is even close to being true, then there are very severe consequences given the fact that global demand has been on a near continuous increase of approximately 1.6% per year for the past several decades, while at the same time existing fields are depleting at an average global rate of approximately 4% per year.  (Some very disturbing recent data suggest that this historic average depletion rate may actually be accelerating to levels greater than 4%.  Additionally, the rapid increase in oil consumption from Asian and OPEC countries suggest that demand rates may actually increase beyond the historic levels of 1.6%.)

 

A 1.6% annual demand increase from current levels would place global demand at approximately 120 million barrels per day in 2028, up from 87 million barrels today.  Over this same period, this current “base production” of 87 million barrels per day will decline to approximately 40 million barrels per day by 2028 based upon the historic decline and depletion rates of 4% per annum.  This leads to a gap of 80 million barrels per day of new production that must be sourced and filled over just the next 20 years --- a number that rivals the entire globe’s current daily production today.  In essence, over the next 20 years we will effectively need to replace barrel for barrel the entire global production capacity existent today.  Unfortunately, global exploration results over the last several decades cast great doubt as to whether this volumetric increase in conventional oil will be feasible or obtainable.

 

Based on the foregoing, a very severe energy and economic dislocation could occur in this country if our policy is to continue to rely on foreign imports of oil for our primary energy source. Basically, countries (i.e., global consumers) will continue to bid up the price of oil so that resultant demand destruction will bring demand into balance with the available supply.   Having said this, it is my strongest opinion the US will not be able to singularly drill its way to energy stability.   Drilling is part of the solution but is not solely a long term and sustainable route to energy or economic security. 

 

Significant “carbon” energy potential exists in the US and North America in the form of oil shale and tar sands (i.e., non-conventional oil) and coal.  These forms of energy in combination with nuclear (fission and fusion) and “alternative” energy sources (i.e., solar and ‘power-sat’, wind, geothermal, tidal, biomass, etc.) will need to increasingly become a larger part of the overall energy mix, in combination with conservation, as the costs and supply of oil becomes more and more restrictive.   Many of these technologies will require significant amounts of fundamental R&D efforts as well as enormous capital expenditures for full development and implementation. I will loosely categorize all of these sources listed above as “non-oil” alternatives.

 

Okay, now down to some specifics. Were I to be President, I would immediately launch the proverbial “Manhattan Project” to begin the fundamental R&D to address many of these non-oil energy sources.  The US is very clearly an “oil economy” and will be for the foreseeable future (i.e., 10 -20 years?).  During this time period, I would do as much as possible to reduce the levels of oil importation while at the same time significantly increasing the amount of R&D and capital investments into “non-oil” alternatives, which would need to take a bigger burden of our energy load over the next 20 years and beyond.

 

Oil is clearly a finite resource and we are unfortunately beginning to see the ramifications of this fact.  Again, I do not believe that simply increasing the levels of drilling will singularly solve the  “energy” problem.  It is imperative to take a long-term view (i.e., 20 plus years) when developing and formulating an energy policy.  We are clearly going to need a much greater percentage of “non-oil” sources of energy over the next 20 years or so --- if not sooner.  From this perspective, I believe that we must rely on existing exploration opportunities as not the solution but the “bridge” to alternatives.

 

Put into this overall context, I believe that ANWR and the Outer Continental Shelf (“OCS”) must be part of the solution as we strive towards longer-term “non-oil” sources.  To this end, I would proceed with exploration in these current areas of moratoria and dedicate the bonus monies, royalties, and taxes from such endeavors to the funding of our energy R&D efforts.  (While I believe there is strong need for a governmental role in supporting and funding the larger R&D efforts, I strongly believe that, in the main, the capital investments for eventual implementation and delivery of such energy should come from the private sector.)

 

The funding capabilities and economic impact of the OCS and ANWR could be enormous.  The current mean reserve estimate for ANWR is 10.4 billion barrels of recoverable oil.  At oil prices of $135 per barrel, the usage of ANWR could result in an approximate $1.4 trillion dollar savings over a 20-year production life that would otherwise be spent on foreign imports.   Perhaps equally important, several groups have estimated that the bonus, royalty, and tax revenues for this reserve estimate could exceed $200+ billion, again funds that I would solely dedicate to the R&D of “non-oil” alternatives.

 

Additional to ANWR, a tremendous potential exists in many currently restricted areas of the OCS.  Many of these areas lend themselves to significant potential reserves plus a fairly rapid cycle-time for first production.  By way of example, I was personally involved in the exploration and drilling of a series of dry gas discoveries approximately 25 miles due south of Pensacola, Florida.  This discovery and nearby geologic features are estimated to contain upwards of 1 trillion cubic feet of dry natural gas.   Immediately after making these discoveries (and capital investments), this area was made subject to a drilling and production moratoria.  This discovered field and many other equally compelling geologic features offer significant reserve potential and rapid cycle-time to first production.   Again, I would use the proceeds from bonuses, royalties and tax the same as suggested for ANWR.

 

Approximately one-third of the US’s daily oil production is currently produced from the portions of the OCS Gulf of Mexico that are not subject to moratoria.   The track record of safety and environmental stewardship from this offshore production has been exemplary. This track record combined with current technologies appear to clearly suggest that continued offshore development can be done in an equally safe and proficient manner.  If one thinks back to previous national and international oil spill incidents over the past 25 years, the overall preponderance of any spills have been from tanker accidents---not drilling and pipeline incidents.   The irony of the offshore debate, and a fact that is never referenced, is that any barrel of oil that we do not allow to be produced from the safety of the OCS is a barrel that must be subsequently imported via tanker from a foreign supplier.

 

As to ANWR, one only has to look to Prudhoe Bay as a starting point for future ANWR production and development.  Since the 1970’s, drilling and production from Prudhoe Bay has recorded a very strong environmental track record, while at the same time delivering 15 billion barrels of oil.  The minimal impact to the tundra, wildlife, and the environment in general has been well documented at Prudhoe Bay.  ANWR drilling and production would be done with even stronger protection to the environment with technologies and methods that are far more developed than 30 years ago.

 

Prudhoe Bay utilized a combined footprint of approximately 5000 acres.  Using current drilling technologies (extended reach drilling, multilateral wells, temporary ice roads, etc.), the footprint for ANWR is estimated to be 60% less than Prudhoe Bay, or approximately 2000 acres --- about the size of a large metropolitan airport. As with Prudhoe Bay, much of this area would be concentrated in several large composite sites.

 

An often-cited reason for not pursuing ANWR is the length of time to first production.  An interesting point that never seems to make the news is that this length of time is directly related to the environmental manner in which the development would take place. Because of sensitivities to the tundra and the overall environment, drilling and seismic operations would only take place for 3-4 months per year during the winter months.  By working during this time, activities would be conducted over “hard ice” conditions so as to protect the tundra (such ice, both natural and from temporary roads and pads would simply melt during the summer months, thus leaving the underlying tundra untouched or harmed.)  Correspondingly, the predominance of transportation would take place during the 3-4 months of summer at which time barging and marine shipping operations could take place.

 

Oil production from Prudhoe Bay utilizes the Trans-Alaska Pipeline System (“TAPS”), which covers some 800 miles and was completed in 1977 at a cost of $8 billion (at the time the largest private investment project in the world).   Production from ANWR, which lies slightly over 50 miles east of Prudhoe Bay, would take place through the TAPS system.   Anticipated oil production from ANWR would tie into and flow through the TAPS system (and basically be accommodated by the production declines that have taken place at Prudhoe Bay).   In my mind, it would be an absolute shame to outwait the economic and mechanical life of TAPS to develop ANWR; at which point an entire new system may need to be constructed.

 

In summary, global oil production capacity combined with increasing levels of demand and lower yielding exploration results have severely strained supply and demand balances.  Resultant price increases have and will continue to inflict damage to the US as we continue to import increasing levels of foreign oil.  I strongly believe that our nation needs a well-formulated energy policy based upon a multi-decade view of these supply/demand issues and the recognition that we will need to increasingly add more and more non-oil sources of energy to our overall blend.  This increase in non-oil sources will undoubtedly require significant levels of R&D and capital investments over the next 20 years.  Increased drilling cannot solely solve this energy gap but can provide a bridge towards the development of increased levels of non-oil alternatives.

 

 

Nat S. Turner

Certified Petroleum Geophysicist

 

 

nturner [ at ] paradigmstrategic [dot] com

 

 

____________________________

This video is amazing

See more funny videos and funny pictures at CollegeHumor.

An (email) article on energy policy from my dad

The following is an interesting and informative article that my dad (Nat Turner IV) wrote as a reply to a recent email regarding energy policy:

I was interested to see the forwarded note from Pierre Howard. I had the honor and pleasure to work with him when I was a senior at Georgia Tech as an intern to the Georgia Senate during the 1980 session. During that session, I worked directly for Howard Overby who at the time was Chairman of the Judiciary Committee, a committee in which Senator Howard was also a member. Senator Howard was a most impressive, knowledgeable and passionate official who took undue amounts of time to help me understand the issues and workings of the Committee. Perhaps being a fellow SAE helped! I clearly remember telling my parents to keep their eye out for Senator Howard and be sure and vote for him when he showed up on a statewide ballot.

Anyway, on my last day working at the Senate, Senator Howard coordinated a gift of a beautiful book about Georgia in which he inscribed with a Phi Alpha. To this day, this book is proudly displayed in my office.

Okay, on to ANWR (Arctic National Wildlife Refuge) --- albeit in a very circuitous and lengthy route (you may want to print this email, otherwise your finger may get tired hitting the down button!). My views on ANWR, as well as the overall issues of energy and “drilling” are founded in over 25 years of oil and gas exploration --- both domestic and international--- with a top five US oil company and now a small private independent. I have spent much time traveling and studying the global energy issues, so my thoughts on ANWR really can’t be addressed without putting it in the context of an overall energy overview and policy.

In my mind the greatest threat and danger to the US is related to the importation of approximately 14 million barrels of oil and distillates every day (some 68% of our total --- and growing). Using an oil price of $145/bbl, this translates into the direct transfer of approximately $675 billion per year to foreign suppliers, many of which are hostile to the US. (For reference, the US’s balance of trade deficit for 2007 was $711 billion --- a number that would in essence be zero, or in balance, if not for oil importation). This “exportation” of American wealth is clearly growing and has dire long-term consequences in domestic and international policy as well as our long-term economic viability. 

Currently the world produces, and consumes, approximately 87 million barrels of oil per day (of which the US consumes approximately 25% of this amount). To make the above more compelling and urgent is the fact that supply/demand balances are severely strained and any current excess production capacity is all but non-existent. The ability for the oil markets to handle the projected future demand and growth profiles (and the inherent depletion of existing fields) is a huge challenge.

A detailed study of global production capacity along with lower yielding exploration results over the last several decades, suggest to me and many other fellow geoscientists, that we are very near a plateau in the global production capacity of conventional oil---or at best, incremental production increases will be much more expensive and capital intensive relative to the past. [The figures and data to support this statement are outside the scope of this all too long email, but I’d be happy to elaborate further if there is interest.] If this is even close to being true, then there are very severe consequences given the fact that global demand has been on a near continuous increase of approximately 1.6% per year for the past several decades, while at the same time existing fields are depleting at an average global rate of approximately 4% per year. (Some very disturbing recent data suggest that this historic average depletion rate may actually be accelerating to levels greater than 4%. Additionally, the rapid increase in oil consumption from Asian and OPEC countries suggest that demand rates may actually increase beyond the historic levels of 1.6%.)

A 1.6% annual demand increase from current levels would place global demand at approximately 120 million barrels per day in 2028, up from 87 million barrels today. Over this same period, this current “base production” of 87 million barrels per day will decline to approximately 40 million barrels per day by 2028 based upon the historic decline and depletion rates of 4% per annum. This leads to a gap of 80 million barrels per day of new production that must be sourced and filled over just the next 20 years --- a number that rivals the entire globe’s current daily production today. In essence, over the next 20 years we will effectively need to replace barrel for barrel the entire global production capacity existent today. Unfortunately, global exploration results over the last several decades cast great doubt as to whether this volumetric increase in conventional oil will be feasible or obtainable.

Based on the foregoing, a very severe energy and economic dislocation could occur in this country if our policy is to continue to rely on foreign imports of oil for our primary energy source. Basically, countries will continue to bid up the price of oil so that resultant demand destruction will bring demand into balance with the available supply. Having said this, it is my strongest opinion the US will not be able to singularly drill its way to energy stability. Drilling is part of the solution but is not solely a long term and sustainable route to energy or economic security. 

Significant “carbon” energy potential exists in the US and North America in the form of oil shale and tar sands (i.e., non-conventional oil) and coal. These forms of energy in combination with nuclear (fission and fusion) and “alternative” energy sources (i.e., solar and ‘power-sat’, wind, geothermal, biomass, etc.) will need to increasingly become a larger part of the overall energy mix as the costs and supply of oil becomes more and more restrictive. Many of these technologies will require significant amounts of fundamental R&D efforts as well as enormous capital expenditures for full development and implementation. For the purposes of this email, I will loosely categorize all of these sources listed above as “non-oil” alternatives.

Okay, now down to some specifics. Were I to be President, I would immediately launch the proverbial “Manhattan Project” to begin the fundamental R&D to address many of these non-oil energy sources. The US is very clearly an “oil economy” and will be for the foreseeable future (i.e., 10 -20 years?). During this time period, I would do as much as possible to reduce the levels of oil importation while at the same time significantly increasing the amount of R&D and capital investments into “non-oil” alternatives, which would more and more take a bigger burden of our energy load over the next 20 years.

Oil is clearly a finite resource and we are unfortunately beginning to see the ramifications of this fact. Again, I do not believe that simply increasing the levels of drilling will singularly solve the “energy” problem. It is imperative to take a long-term view (i.e., 20 plus years) when developing and formulating an energy policy. We are clearly going to need a much greater percentage of “non-oil” sources of energy over the next 20 years or so --- if not sooner. From this perspective, I believe that we must rely on existing exploration opportunities as not the solution but the “bridge” to alternatives.

Put into this overall context, I believe that ANWR and the Outer Continental Shelf (“OCS”) must be part of the solution as we strive towards longer-term “non-oil” sources. To this end, I would proceed with exploration in these current areas of moratoria and dedicate the bonus monies, royalties, and taxes from such endeavors to the funding of our energy R&D efforts. [While I believe there is strong need for a governmental role in supporting and funding the larger R&D efforts, I strongly believe that, in the main, the capital investments for eventual implementation and delivery of such energy should come from the private sector.]

The funding capabilities and economic impact of the OCS and ANWR could be enormous. The current mean reserve estimate for ANWR is 10.4 billion barrels of recoverable oil. At oil prices of $145 per barrel, the usage of ANWR could result in an approximate $1.5 trillion dollar savings over a 20-year production life that would otherwise be spent on foreign imports. Perhaps equally important, several groups have estimated that the bonus, royalty, and tax revenues for this reserve estimate could exceed $200+ billion, again funds that I would solely dedicate to the R&D of “non-oil” alternatives. 

Additional to ANWR, a tremendous potential exists in many currently restricted areas of the OCS. Many of these areas lend themselves to significant potential reserves plus a fairly rapid cycle-time for first production. By way of example, I was personally involved in the exploration and drilling of a series of dry gas discoveries approximately 25 miles due south of Pensacola, Florida. This discovery and nearby geologic features are estimated to contain upwards of 1 trillion cubic feet of dry natural gas. Immediately after making these discoveries (and capital investments) this area was made subject to a drilling and production moratoria. This discovered field and many other equally compelling geologic features offer significant reserve potential. Again, I would use the proceeds from bonuses, royalties and tax the same as suggested for ANWR.

Approximately one-third of the US’s daily oil production is currently produced from the portions of the OCS Gulf of Mexico that are not subject to moratoria. The track record of safety and environmental stewardship from this offshore production has been exemplary. This track record combined with current technologies appear to clearly suggest that continued offshore development can be done in an equally safe and proficient manner. If one thinks back to previous national and international oil spill incidents over the past 25 years, the overall preponderance of any spills have been from tanker accidents---not drilling and pipeline incidents. The irony of the offshore debate, and a fact that is never referenced, is that any barrel of oil that we do not allow to be produced from the safety of the OCS is a barrel that must be subsequently imported via tanker from a foreign supplier.

As to ANWR, one only has to look to Prudhoe Bay as a starting point for future ANWR production and development. Since the 1970’s, drilling and production from Prudhoe Bay has recorded a very strong environmental track record, while at the same time delivering 15 billion barrels of oil. The minimal impact to the tundra, wildlife, and the environment in general has been well documented at Prudhoe Bay. ANWR drilling and production would be done with even stronger protection to the environment with technologies and methods that are far more developed than 30 years ago.

Prudhoe Bay, utilized a combined footprint of approximately 5000 acres. Using current drilling technologies (extended reach drilling, multilateral wells, temporary ice roads, etc.), the footprint for ANWR is estimated to be 60% less than Prudhoe Bay, or approximately 2000 acres. As with Prudhoe Bay much of this area would be concentrated in several large composite sites. 

An often-cited reason for not pursuing ANWR is the length of time to first production. An interesting point that never seems to make the news is that this length of time is directly related to the environment manner in which the development would take place. Because of sensitivities to the tundra and the overall environment, drilling and seismic operations would only take place for 3-4 months per year during the winter months. By working during this time, activities would be conducted over “hard ice” conditions so as to protect the tundra (such ice, both natural and from temporary roads and pads would simply melt during the summer months, thus leaving the underlying tundra untouched or harmed.) Correspondingly, the predominance of transportation would take place during the 3-4 months of summer at which time barging and marine shipping operations could take place.

Oil production from Prudhoe Bay utilizes the Trans-Alaska Pipeline System (“TAPS”), which covers some 800 miles and was completed in 1977 at a cost of $8 billion (at the time the largest private investment project in the world). Production from ANWR, which lies slightly over 50 miles east of Prudhoe Bay, would take place through the TAPS system. Anticipated oil production from ANWR would tie into and flow through the TAPS system (and basically be accommodated by the production declines that have taken place at Prudhoe Bay). In my mind, it would be a shame to out wait the economic and mechanical life of TAPS to develop ANWR; at which point an entire new system may need to be constructed.

In summary, global oil production capacity combined with increasing levels of demand and lower yielding exploration results have severely strained supply and demand balances. Resultant price increases have and will continue to inflict damage to the US as we continue to import increasing levels of foreign oil. I strongly believe that our nation needs a well-formulated energy policy based upon a multi-decade view of these supply/demand issues and the recognition that we will need to increasingly add more and more non-oil sources of energy to our overall blend. This increase in non-oil sources will undoubtedly require significant levels of R&D and capital investments over the next 20 years. Increased drilling cannot solely solve this energy gap but can provide a bridge towards the development of increased levels of non-oil alternatives.

Great quote

From Michael Walrath, the current CEO of Right Media, in an interview:

How are you going to compete with Google when it launches the Doubleclick exchange?

It’s hard to tell what it’s going to be, when they haven’t brought a product to market and we don’t know whether it will be similar or different. But we have a number of advantages –  getting to critical mass and liquidity is not easy to do, and once you get there it’s hard to compete with you.

Also, in a more functional sense, running an exchange is very different to running an ad management platform. While many features overlap, constructing a different type of market is not as intuitive as people assume for companies in the ad serving space. We have had to learn a lot of really difficult lessons over the last few years about the really fundamental business problems of running an exchange. Anyone else that wants to play in the space will have to learn those lessons as well – and they are not the kind of lessons that you can just throw engineers at.

By no means do we underestimate the competition that is likely to come, but we’re pretty comfortable with our leadership position and we expect to extend that lead

Classic April fools joke

from http://www.museumofhoaxes.com/hoax/aprilfool/

#71: Michigan Shark Experiment

In 1981 the Herald-News in Roscommon, Michigan reported that 3 lakes in northern Michigan had been selected to host "an in-depth study into the breeding and habits of several species of fresh-water sharks." Two thousand sharks were to be released into the lakes including blue sharks, hammerheads, and a few great whites. The experiment was designed to determine whether the sharks could survive in the cold climate of Michigan. The federal government was said to be spending $1.3 million to determine this. A representative from the National Biological Foundation was quoted as saying that there would probably be a noticeable decline in the populations of other fish in the lake because "the sharks will eat about 20 pounds of fish each per day, more as they get older." County officials were said to have protested the experiment, afraid of the hazard it would pose to fishermen and swimmers, but their complaints had been ignored by the federal government. Furthermore, fishermen had been forbidden from catching the sharks. The Herald-News received a flurry of letters in response to the announcement.

Welcome new Invitee's!

Still working on our generic team name :)

We're hiring the best and the brightest at Invite Media, and today is no exception.  I'd like to officially welcome three new team members to Invite:

    Mark Chadwick
    Toby DiPasquale
    Drew Sudell

All three are joining our tech team and have stellar backgrounds.  We're extremely excited to see their contributions to the team! Welcome all

In related news, we're still hiring! If you're smart and know a lot about online advertising, shoot me an email (nat [at] invitemedia [dot] com).

Quote of the day

From Warren Buffet in the 2007 Annual Report Letter to the Shareholders:

"You may recall a 2003 Silicon Valley bumper sticker that implored, “Please, God, Just One More Bubble.” Unfortunately, this wish was promptly granted, as just about all Americans came to believe that house prices would forever rise. That conviction made a borrower’s income and cash equity seem unimportant to lenders, who shoveled out money, confident that HPA – house price appreciation – would cure all problems. Today, our country is experiencing widespread pain because of that erroneous belief. As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out – and what we are witnessing at some of our largest financial institutions is an ugly sight."

Quote of the day

From my insurance professor today in class:

"A long time ago, there was this professor of insurance here at Wharton, someone we looked up to almost as an icon.  He was involved in the Supreme Court.  He lectured all the way up into his 80's, and would shuffle into class like this [demonstrates it]. We were always scared he wouldn't make it to the podium.  When he finally got there, he would bang his fist on the wooden platform to start class, and would say 'Gentlemen! A man who dies without life insurance does not die, he absconds!"

Favorite current album

This is a runaway for me, Stephen Stills, "Just Roll Tape."  I purchased this album on iTunes without knowing any of the album's history.  I think it's important to know:

"The back story goes something like this. Stills was deeply in love with Judy Collins, but the feelings were largely unrequited. He was playing back up on her recording sessions for the album Who Knows Where the Time Goes. After the session ended, Stills paid the engineer a couple of hundred dollars and told him "Just Roll Tape"

and then from Wikipedia...

Stephen Stills was at a Judy Collins session in 1968, and when she was finished, Stills reserved a studio and recorded a tape of new songs. Stills left the masters in the studio, and they were almost discarded when the facility closed in 1978. Musician Joe Colasurdo, who was rehearsing there at the time, was told by the owner that he could cart off any tapes he wanted to before they cleared the place out. After seeing Stills' names on several of the boxes, Colasurdo kept them safe until he could find a reel-to-reel machine to play them on.

Joe began attempting to get the masters safely back into Stills' hands, an undertaking that took 25 years. In 2003, he was connected to Graham Nash after happening to meet a close friend of his. Nash received the tapes, passed them on to Stephen, encouraging him to release them.

The album has some amazing songs, including the first version of "Suite: Judy Blue Eyes" (made famous by CSNY), "Treetop Flyer", "Black Queen", "All I Know Is What You Tell Me."

Definitely worth checking out