The inset photo is of Blind Faith, Chevron’s deepwater oil and gas platform being constructed in Corpus Christi. We visited the site in November and were reminded of it by remarks today by Red Cavaney, president and CEO of the American Petroleum Institute:
To meet the continued, growing demand for oil and natural gas, our industry has been heavily investing. New investment in 2006 reached more than $174 billion – a 29 percent increase over the prior year. Reinvestment between 1992 and 2006 is equally impressive. During that period, the U.S. oil and natural gas industry invested more than $1.25 trillion on a total net income base of $900 billion – that’s an unprecedented reinvestment rate of 139 percent.
The Blind Faith platform is a $1 billion project, before the first barrel of oil is even pumped (from more than 7,000 deep in the Gulf of Mexico). Chevron has 27 billion-dollar projects under way around the world — and that’s just one company.
Billion dollar (and multi-billion dollar) projects aren’t undertaken unless you make a profit and can put that profit back into research and development and building the platforms necessary to produce the product. Since most of the oil which is easy to extract has already been extracted, that which is left is harder and harder to bring up out of the ground. New technology both for finding and extracting oil are necessary. And that costs money. Profits. No profit means no exploration or technological advances. No exploration means our supply eventually dries up. No technological advances means that even if new supplies of oil can be found they can’t be extracted because the means to do so won’t exist. Size matters in profits too.
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