While We Dither On Oil, It’s Drill, Beijing, Drill

Energy Policy: A Chinese oil company is now the world’s top producer. While we sleep and watch pump prices rise, China, India and even Cuba seek supplies the world over, including drilling off the Florida coast.

Global demand for oil is rising, as is its global price, as energy-hungry economies such as China, India and Brazil scour the earth for oil they know will be the energy of the present for some time to come.

Even those lacking their own technology are asking others to help them get more. For them, there is no such thing as “peak oil.”

The U.S., however, stands alone as the only major country not actively seeking new supplies.

Less than two years after the Deepwater Horizon explosion of a single rig virtually shut down our efforts in the Gulf of Mexico, a Chinese rig built for a Spanish company, Repsol, has begun exploratory drilling for oil off Cuba as close as 50 miles to Key West, Fla. The Scarabeo 9 rig will drill at a depth of 6,000 feet underwater. The 2010 Deepwater Horizon spill happened at a shallower depth of 5,500 feet.

The U.S. Geological Survey recently estimated the North Cuban Basin contains as much as 9 billion barrels of oil and 22 trillion cubic feet of natural gas. Other estimates range from 5 billion to 20 billion barrels.

Pools of oil and natural gas tend not to obey lines drawn on a map. It is certain that at least some of Cuba’s wells will be tapping oil pools that straddle the boundary separating our zone from theirs, meaning Havana will be getting oil that should be ours.

Countries like China clearly don’t see oil as an energy source of the past. China and India provided a combined $24 billion in oil industry subsidies in 2010, according to the International Energy Agency. The figure dwarfs the $4 billion in industry incentives that President Obama is seeking to end.

India’s crude oil production is likely to jump 21% in 2013-14 vs. 2010-11 on the basis of output from newer fields, oil minister S. Jaipal Reddy has said. Meanwhile, 94% of federal onshore land in the U.S. and 97% of federal offshore areas are off-limits to American oil companies.

In 1859, oil was struck in Pennsylvania. From 1859 to 1939, the U.S. produced two-thirds of the world’s supply. Today we import much of it. U.S. oil production continues a general 40-year decline, despite the shale oil boom in the Dakotas and the massive fracking effort by the gas industry.

We sit on a 200-year supply of oil by some estimates and are not allowed to get at it.

As the Institute for Energy Research reports, PetroChina, which is 86% owned by the Chinese government, produced 2.4 million barrels of oil a day last year, surpassing Exxon Mobil by 100,000. PetroChina’s output increased 3.3% in 2011 while former leader Exxon fell 5%.

PetroChina also outspent Western companies, acquiring petroleum reserves in Iraq, Australia, Africa, Qatar and Canada. State-owned Chinese oil and gas firms have invested more than $10 billion in Alberta’s oil sands and British Columbia shale gas just in the past couple of years.

Canada has indicated that our failure to complete the Keystone XL pipeline that would bring 700,000 barrels of crude daily to the U.S. will cause them to send their oil to a willing China.

The Chinese are involved in the Northern Gateway oil sands pipeline and a separate one for natural gas that would run westward to Vancouver for export to China. Canadian Prime Minister Stephen Harper has stated that it is a national priority, and Sinopec, a Chinese state-controlled oil company, has a stake in the $5.5 billion plan to build the Northern Gateway Pipeline from Alberta to the Pacific Coast province of British Columbia.

As pump prices head toward the European levels desired by Energy Secretary Steven Chu, Americans should ponder the prospect of oil just north of our border and off the Florida coast going to countries like China.

Investor’s Business Daily