Press Conference: USGS World Estimate for Conventional Oil and Gas Resources

NWX-DEPT OF INTERIOR-NBC
Moderator: Adam Fetcher
April 18, 2012

Coordinator: Welcome and thank you for standing by. All participants will be in listen-only until the formal question and answer session. To ask a question at that time, please press star 1 on your touchtone phone. 

Today’s conference is being recorded. If you have any objections please disconnect at this time. I would now like to introduce your host, Secretary of the Interior, Ken Salazar. Please begin. 

Kenneth Salazar: Thank you very much to all of you for being on this call. I’m here with Dr. Marsha McNutt who is the Director of the U.S. Geological Survey, and with Brenda Pierce and Chris Schenk who have led this effort of the USGS Global Petroleum Assessment.

It is a continuing effort on the part of the USGS to have these assessments conducted. Many of them have been conducted here on the United States lands and Outer Continental Shelf.

This assessment is about the global assessment of petroleum resources. It is a press call based on the science, and so I’m going to make a few remarks here at the outset and then I’m going to turn it over to Dr. McNutt and her team.

And then at that point questions that the press may have on the results of this report or their scientific conclusions will be handled by our science team here.

So first I want to underscore the huge role that the U.S. Geological Survey plays in our nation’s energy security. I often say this as I travel around the country and around the world that the USGS is the best earth science agency on earth, and it’s something that we in the United States should always be very proud of.

The type of information and science that the USGS is putting forward to day is critical to industry, to governments, the public and to the world as we make decisions about our energy future.

The USGS is the only provider of publicly available estimates of undiscovered, technically recoverable oil and gas resources. The USGS is continually assessing American domestic resources.

In fact within the past 12 months the USGS released oil and gas resource assessments for areas all over the United States. Their analysis extends to all regions of the world.

Today’s announcement represents a complete reassessment of world conventional energy resources. There has not been this kind of assessment conducted since 2000, so this is an assessment which is fresh - first time in the last 12 years.

USGS also assesses the unconventional resources like shale gas and oil, which have been such a prominent part of the energy discussion here in the United States over the last several years.

On the unconventional resources, for example on oil and shale gas, I was just in South - in North Dakota at Fort Berthold visiting plays that we now have underway in the Bakken Formation.

That USGS report was very important in determining that the Bakken was a world-class unconventional accumulation of oil and gas. It’s a report which the USGS is currently updating, because with new geological and geophysical information they probably will have changed.

And earlier this year USGS released a shale oil and gas estimate for Alaska’s North Slope. There are - these are just a few examples of how USGS is leading the way for the world in providing quality information to governments, industry, NGOs, investors, public and private corporations and citizens.

The second brief point I want to make is that USGS’ assessments, both domestic and international, are of huge strategic value to the United States’ energy security.

 Knowing the size and the location of our energy reserves here at home and around the world can help us continue to responsibly understand the energy future of our country.

I just returned from Brazil this morning where I was in a meeting with governments and industry leaders, including my counterparts at mines and energy and AMP and a whole host of other organizations, including Petrobras - with the new leader of Petrobras.

With the offshore Brazil holding nearly half of all of South American oil resources, we have a shared interest in helping Brazil safely develop its oil and gas reserves.

And by so doing and by encouraging the expansion of responsible development of conventional and renewable resources here at home, we can secure more of our energy from the Western Hemisphere and strengthen our overall energy security.

Again I want to thank our outstanding Director of the U.S. Geological Survey, Director Marsha McNutt. I want to thank Brenda Pierce who works tirelessly on these issues of science and heads up our USGS Energy Resources program.

And I want to thank Chris Schenk who has been the lead for the United States Geological Survey in putting this assessment together. They will make brief remarks and at that point members of the press can be free to direct their questions to Dr. McNutt and to her team. With that, Marsha.

Dr. Marsha McNutt: Thank you very much Mr. Secretary and I want to thank you very much for your support of the USGS and for our programs. To put this in perspective the numbers that the USGS is releasing today are just one piece of the energy equation.

We’re talking today about the technically recoverable undiscovered resources. So for example this doesn’t include reserves that oil producers already have on their books, nor are we talking about the unconventional oil and gas resources, which of course have been a total game changer in terms of the potential for recoverable energy.

But I do want to say that the numbers we’re talking about today are important ones for the future potential because by looking at the amount of oil and gas, where it is and how much it is. this is exactly the kind of information that is useful for long- and medium-term planning as government and industry leaders and citizens alike consider what will be the infrastructural needs, the environmental impacts and all the other decisions that need to be made for our energy decisions and our energy mix as we go forward into the future.

So for example if we look at what the technically recoverable but undiscovered oil versus gas ratio was 12 years ago versus today, what we’re seeing is more gas versus oil.

And that’s telling us something about how plentiful gas is likely to be in the future relative to oil. And that is something that we might want to take into account in our future energy mix as our nation moves forward.

So now I’d like to pass it over to Brenda who is the head of our Energy program at the USGS, so Brenda? 

Brenda Pierce: Thank you Marsha. I will be brief because I’m sure there are lots of questions. I just want to emphasize that this is a complete reassessment since the world petroleum assessment 2000.

Chris and his team looked at all of those areas plus many, many more, so this is a complete evaluation of the world. We used the same methodology as in 2000 and we used the same methodology for the world as we do the United States, and so everything’s comparable.

We’re comparing apples to apples and so I think that’s important for folks to keep in mind. And just to reemphasize the point that Marsha made, we do not do reserves.

These are resources, undiscovered but technically recoverable onshore and offshore. And with that Chris I don’t know if you want to say a few words about results or we open it up to questions.

Christopher Schenk: We can just summarize the results. As you can see on that fact sheet in front of you, the mean estimates are in there. Mean estimates for oil about 560 billion barrels, and again that’s a mean of the distribution that we create to define the uncertainty on these numbers.

The mean gas is about 5600 tcf, which is up considerably from the assessment that we completed in 2000. That’s the basic summary. We have much of the grain behind those numbers that we can provide in addition to that summary. 

Kenneth Salazar: All right, with that we’d take it to questions. 

Coordinator: Thank you. At this time to ask a question, please press star 1 on your touchtone phone. You will be asked to record your name. I will announce you prior to asking your question.

To withdraw your request, press star 2. Once again to ask your question, please press star 1 on your touchtone phone. One moment please. Your first question will come from Ayesha Rascot of Reuters. 

Ayesha Rascot: Hi. Thanks for having this call. I was wondering did the USGS have any sense of why there was that big rise in gas, and then you also have the decline in oil?

And then also I just wanted to ask, there - this new assessment included more areas. I wanted to get a sense of how large these areas were that were newly included and where they were at.

Christopher Schenk:  Well to answer your question the - just take the gas first. The assessment we did this time includes the first time for the USGS we did the Arctic, and that turns out to mainly a gas area and so that increased the gas numbers.

This time we included the basins of East Africa, mainly a gas province, so those two areas in a sense created the rise in the undiscovered potential for gas.

The decrease in oil is a complex - it’s a complex issue. It includes oil that’s been produced, areas that we reassessed and thought they were more gassy than oil, so there’s complex reasons why the oil numbers have dropped slightly. 

Dr. Marsha McNutt: And more - yes more areas - significantly more areas assessed this time. 

Christopher Schenk: Yes. 

Kenneth Salazar: Okay, next question please.

Coordinator: Comes from Rebecca Smith of Wall Street Journal.

 Rebecca Smith: Hello. Thanks a lot for doing this call. I’m just curious if you could talk about places in the world where nations were considered to have been energy resource poor, but now with more research you’re beginning to think that maybe they have significant resources that could help them develop at a faster pace. And I’m thinking particularly of natural gas.

 Christopher Schenk: These were done - where the gas numbers have really risen are areas offshore, and a lot of times in countries they just don’t have the infrastructure or the capabilities to do that deep drilling, particularly East Africa, offshore South America, outside of Brazil.

So there’s many countries, Madagascar, Mozambique, Tanzania, Surinam, Guyana, French Guyana, where we have considerable gas resources that would really improve the resource picture for these countries. 

Kenneth Salazar: The next question please. 

Coordinator: Comes from Rob Lever of AFP. 

Rob Lever: Yes hi. Thanks for taking the call. Just a couple of quick questions. I know it’s a little bit confusing because you’re trying to exclude certain things that have been discovered, and some things might’ve changed in the past 12 years.

What does this say about sort of the future of fossil fuels and how long they will last, how much we have and does that - does it tell us anything different than what we knew 12 years ago?

The second question is it seems to be - you seem to be - have the richest resource here in the Western Hemisphere now as opposed to other regions. Is that a change and what does that signify?

Christopher Schenk: I think - to answer the first part of your question, to keep it scientifically based I think we have to consider all resource classes, and we don’t have that picture completed yet.

This is just a conventional assessment and we are in the middle at the USGS for assessing the unconventional resources of the world, both oil and gas. So I think once that’s done we’ll have a much clearer picture of the endowment of the world.

But I think you have to include the unconventional in any conversation about, you know, the longevity of fossil fuel resources. 

Dr. Marsha McNutt: And Rob I think the other thing that goes with that is the - this is technically recoverable but it doesn’t say at what price. So you have to also ask the question not only how much is there, but how much are you willing to pay to get it? 

Brenda Pierce: And in terms of the richest resource in the Western Hemisphere there’s significant gas resources all over the world, the Arctic, Africa - that’s pretty well distributed, the oil that’s significantly changed, but we had a lot more information this time, 12 years more, 14, 16 more years of data and information. 

Dr. Marsha McNutt: Yes. And so - and I think the issue about how much oil and gas energy we have is - the problem we see that we face right now for example in the U.S. is that natural gas is not always a replacement for oil, and so that’s the difficulty that we face.

 Kenneth Salazar: Good. Next question please.

Coordinator: Comes from Gary Gentile, Platts. 

Gary Gentile: Hi. Two questions. One, why 12 years between the studies? Is that a - like a regular interval that you would normally do or is there some reason...? 

Christopher Schenk: Did he ask why the 12 years because...? 

Dr. Marsha McNutt: Why the 12 years, yes. 

Christopher Schenk: I can answer that one. We finished the USGS assessment of the world in 2000, and then our main goal in the - in the decade that followed was to really look at detailed assessments of the unconventional resources of the United States. 

And we spent a long time doing each province in the United States. And so then same group of people - we then started on the world assessment so...

Dr. Marsha McNutt: So much work, so much... 

Gary Gentile: No, no, I appreciate that and thank you. The other quick question I had was though on the chart in your report here, and forgive me if this is explained somewhere and just missed it, could you tell me what F95, F50, F5, what those mean? 

Christopher Schenk: Oh sure. Those are the fractiles of a probability distribution, so when we talk about the mean numbers those are the means of a probability distribution. And those - the F95 is the 95% chance of something occurring.

The F5 is the 5% chance of that resource occurring, so it’s just probability distribution. 

Brenda Pierce: And we do that to reflect the uncertainty because these are undiscovered resources. They have not been drilled. They’re not for certain and so if you delve down into some of the detailed information from the detailed reports, you’ll see that some of those probability distributions are somewhat narrow and some are very wide.

And that is reflective of the uncertainty of how much information was in the area to study, how much data went behind each assessment so that we’re very transparent that these - there is uncertainty in these estimates.

Kenneth Salazar: Okay, we have time for one more question please. 

Coordinator: That’ll come from Nick Juliano, Greenwire. 

Nick Juliano: Yes hi. Thanks everybody for doing the call. A few people mentioned in the opening statement that, you know, techniques were in form how we think about what our resource mix should be going into the future.

I’m wondering if you could just sort of expand on that a little bit, like what are the implications for U.S. policy? Should this, you know, lend support to bans on export of domestically produced natural gas, shifting transportation away from, you know, reliance on oil? I mean, what’s the, you know, what’s the takeaway for policymakers here? 

Dr. Marsha McNutt: You know, USGS just puts out the science. We don’t do the policy and we’re really happy when people use our numbers and use it to inform policy, but that’s not our job. 

Kenneth Salazar: Okay, I’d like to thank everyone for joining today’s call and have a good rest of the day. 

Coordinator: Thank you. That does conclude the conference call for today. Please disconnect all remaining lines.

END