The Economics of Oil and Gas Development
The
oil and gas industry is having a field day with the numbers they
throw out about the potential oil and gas resources that could
be extracted from the Greater Otero Mesa Area. Like all great
fishing stories, this whopper is completely out of touch with
reality. One recent story in the El Paso paper made the claim
that there was enough natural gas under Otero Mesa to "supply
100 million homes for 100 years." In this case industry made
the claim that over 19 trillion cubic feet of gas could be found
in the Orogrande Basin. Part of which underlies the Greater Otero
Mesa Area. Unfortunately for industry, the majority of the Orogrande
field is under the White Sands Missile Range, an area used by
the military for national defense that will never be opened for
oil and gas development. Making the industry figures completely
baseless. But even if we were to take industry at their figures,
we discovered by using U.S. Department of Energy numbers from
1997, that there were 101.4 million households in the entire United
States, of those 61.9 million used natural gas. In 1997, natural
gas use by these households was 5.143 trillion cubic feet. Meaning
that even if industry figures were correct the gas in Otero Mesa
would only last 3.7 years, not 100. If we included commercial
and industrial use, the supply would theoretically last 10 months.
 However,
industry likes to talk in large numbers to garner support and
inflate the potential numbers of jobs and revenue to excite local
communities and Representatives. In reality a more important figure
is the economically recoverable amount of oil and gas an area
offers. In this case how much gas can be extracted at the current
price on the open market for oil and gas and a company make a
profit? This will almost always dramatically drop the amount of
oil and gas that can be recovered. For comparison, look at the
industry forecast for Alaska's Arctic National Wildlife Refuge.
In 2001, they claimed that 735,000 jobs and 9.2 billion barrels
of oil could be recovered from the coastal plain. However, this
was based on the unrealistic price of $43 per barrel. In 2001,
oil prices varied from $22.11 to $14.19, thus the economically
recoverable amount of oil in the refuge would be between none
and roughly 3.2 billion barrels. This formula holds true for the
Greater Otero Mesa Area. Currently the United States Geological
Survey estimates that nationally 37 trillion cubic feet of gas
is economically recoverable, but that is based on a price of $3.90
per thousand cubic feet. The current price of gas is fluctuating
between $2.00 and $2.50.
For
the Greater Otero Mesa Area, the reality is that the amount of
gas and oil that can be recovered is much less than industry claims,
if there really are any economically recoverable amounts available.
But they stand poised to build a pipeline from Texas and carve
roads across this great grassland in the hopes that great profit
can be realized. The real costs both socially and environmentally
have yet to be calculated.
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