Statement of
Guido DeHoratiis
Acting Deputy Assistant Secretary for
Natural Gas and Petroleum Technology
U.S. Department of Energy
Before the
Subcommittee on Energy and Mineral Resources
House Committee on Resources
U.S. House of Representatives
on the
Environmental Benefits of
Advanced Oil and Gas Exploration and Production Technology
May 14, 2001
New Orleans, Louisiana

Thank you for the opportunity to appear before you today. I represent the Office of Natural Gas and Petroleum Technology, in the U.S. Department of Energy (DOE). My office is responsible for natural gas and oil technology research and development and policy. We manage the research, development, and demonstration of new and improved technologies that can enable the U.S. petroleum industry develop the Nation's oil and gas resources in a more cost effective and environmentally protective manner.

My comments today focus on the insights we have gained over many years in the development and deployment of improved exploration and production technologies and in the evaluation of policy initiatives to support the Nation's energy supply objectives. As a result of this experience, we have found that technological change in the U.S. oil and gas industry can be characterized as a history of continuous innovation, going back to the first oil well drilled by Colonel Drake in Pennsylvania in 1859. This trend extends to today, to the latest advances in technology that allow for exploration in waters of the Gulf of Mexico that are over two miles deep. In fact, finding, developing, and producing oil and gas today is an extremely high-tech venture, requiring cutting edge technologies that rival the most sophisticated technologies of any of our most advanced modern-day industries.

Technological advances have led to impressive gains in productivity and efficiency. Industry is now able to explore and develop prospects in ever more diverse and challenging settings. Moreover, these same advances have contributed something else of profound importance to the Nation: significant benefits to our environment.

To expand public awareness of the environmental benefits associated with advanced exploration and production technology, DOE in 1999 published a report entitled Environmental Benefits of Advanced Oil and Gas Exploration and Production Technology. This report provides more detail than I can present today on this remarkable story of environmental progress in E&P technology, but let me briefly review some of its key points:

First, this record of technological progress is critical to many national objectives, including:

• Ensuring secure, affordable energy supplies;

• Fostering responsible development by industry, by emphasizing the importance of environmental stewardship and ensuring that government policies stimulate, rather than stifle, technological innovation;

• Facilitating continued U.S. technological leadership, and its associated economic and environmental benefits; and,

• Inspiring future technologists, to ensure a skilled workforce that can implement new ideas and pursue further progress in science and technology.

Oil and natural gas provide most of the energy America uses for transportation, industrial, residential and commercial applications. Moreover, domestic production enhances our Nation's energy security, and provides public revenues and other benefits. And as our economy continues to expand, the demand for oil and natural gas is expected to grow in the foreseeable future.

In terms of oil and natural gas, the United States is the most explored and developed region of the world. Despite this, industry has continued to add new supplies of oil and gas to replace what has been produced. The reason is continuous technological development.

Technological progress has allowed industry to keep pace with the effects of resource depletion. As technology and understanding of our Nation's resource endowment advances, previously lower quality, higher cost resources become more accessible and economic, thereby making a larger contribution to oil and gas supplies.

Technological advances have enabled oil and gas producers to:

• Access new frontiers -- drilling in deeper waters, deeper in the earth, in the cold frontiers of the arctic, and new resource settings, such as coal seams, thought uneconomic not too many years ago.

• Find oil and gas more efficiently -- Drilling success rates have doubled in the last two decades, resulting in fewer dry holes.

• Find more oil and gas per well drilled -- Today, fewer than half as many wells must be drilled to locate the same amount of oil and gas reserves as two decades ago.

• Reduce costs -- In inflation-adjusted dollars, wells can be drilled today to the same depth 20 percent cheaper than in the 1980s.

• Extract more oil and gas from discovered fields -- Enhanced recovery now allows industry to produce a higher proportion of the hydrocarbons in discovered reservoirs, leaving less behind.

And, these same technological advances have yielded considerable environmental benefits:

• Fewer wells to add the same level of oil and gas reserves;

• Lower drilling waste volumes;

• Lower volumes of produced water;

• Smaller footprints for oil and gas rigs and other field facilities;

• Reduced air pollutant and greenhouse gas emissions; and

• Enhanced worker safety.

Examples of the technology advances that have enabled this success include:

• Three and four-dimensional seismic technology now provide the capability for virtually Aseeing@ the formation - including how the reservoir changes over time. This, in turn, allows better targeting of exploration prospects and improved recovery in discovered fields;

• Remote sensing technologies now include satellite imagery and aeromagnetic surveys that boost exploration success.

• Directional and multi-lateral drilling now enable industry to access oil and natural gas resources miles away from a surface drill site. Multiple boreholes can now be drilled into different producing horizons from a single wellbore - again minimizing surface disturbance.

• Advances in dynamic positioning now employ thruster units and sophisticated computer and navigation systems that can hold offshore drill ships, floating production, storage, and offloading systems, and survey vessels on location without anchors and mooring lines in deep water.

• New, high performance synthetic drilling fluids can be safely discharged without harm to the environment. These new fluids greatly improve the economics of drilling, allowing the pursuit of resources in complex geological settings.

• Developments in offshore platform technology now take advantage of advances in materials and computer-aided design. This has resulted in lower cost, modular production facilities that enable producers to pursue smaller prospects in deepwater settings.

Many of these technologies have been developed and demonstrated as a result of partnerships among government, industry, and academia. Examples of work supported by the Department include the demonstration of four-dimensional seismic in the Gulf of Mexico, near Eugene Island. The analysis showed that the field was being drained of oil over time, except for an area in the reservoir where no depletion was occurring, despite recovery from nearby wells. Suspecting that the anomaly represented an untapped pocket of oil, the team drilled a well into the area and recovered an estimated two million barrels of additional oil.

Another example was the development of cross-well seismic imaging technology first developed at a National Laboratory. This work expanded the use of seismic waves to image the reservoir by applying the technology downhole between wells rather than from the surface. This new seismic system generates images with much greater clarity, for example, surface seismic can detect features as small as fifty feet, cross-well imaging can detect features as small as five feet. This technology can be used to increase natural gas recovery, as well as increase the effectiveness of enhanced oil recovery technologies.

In the DOE report I mentioned earlier, we describe 35 distinct categories of technological advances, and the energy supply, economic, and environmental benefits that each of these has provided.

From the insights gained in DOE's technology research and development programs, let me conclude my testimony by sharing three observations concerning the reality of industry's adoption of advanced technology:

• First, the cumulative effects of technological advances are key to yielding the greatest benefits. Advances in technology take place along a continuum, from scientific and technology concept, to applied research and development, to demonstration and early deployment, to market saturation. Moreover, each new advance often fosters new concepts with even greater potential.

• Second, a comprehensive R&D portfolio and sustained private sector investment in new technology is key to yielding significant energy and environmental benefits. The benefits characterized do not result from just one or a few Abreakthrough@ technologies, but often are the result of squeezing more efficiency and cost effectiveness from existing technologies.

• Third, advanced technology applications are often situation-specific. New technologies are rarely applicable everywhere, for use by everyone. Their applicability depends on site conditions, project economics, and operator sophistication and financial capability.

Innovation in exploration and production technology will be critical to the Nation's energy and environmental future. And while the challenges to the domestic oil and gas industry over past decades have been significant, the future could be even more challenging.

This completes my statement. I will be pleased to answer any questions Members of the Subcommittee may have.