10-06-08: Experts weigh likelihood of N.C. drilling

(c) 2008 Charlotte Observer

By Bruce Henderson, Staff Writer

Forty-five miles off Cape Hatteras, Chevron USA said a decade ago, lay a colossal gamble that sounds sweet today.

The oil company reckoned only a 7 percent chance of striking oil or gas more than 11,000 feet under the sea floor. The potential reserves, however, could become the largest found since Alaska's Prudhoe Bay, the biggest oilfield in North America.

A federal official called the Manteo Exploration Unit, as the site is known, "a high-risk prospect with world-class potential." And as a congressional ban on offshore exploration in the Atlantic expired last week, N.C. residents wracked by high energy prices are in a mood to drill.

But don't expect to see drill rigs anytime soon, experts say.

Oil company estimates of deposits off North Carolina could be overblown. Of 51 wells drilled elsewhere along the Atlantic coast in the 1970s and 1980s, none were commercially viable.

"There's really been no activity off the (N.C.) coast since 1984," said Roger Shew, a former Shell Oil geologist now at UNC Wilmington. "The fact of the matter is that this is all based on old data."

Instruments today can more accurately probe the sea floor for rock formations that trap hydrocarbons.

Even when previously closed portions of the Outer Continental Shelf open, Shew said, oil companies are most likely to invest in the known reserves in the Gulf of Mexico. Even there, he said, too few drill rigs exist to explore every prospective site.

"They are not going to take lightly coming up and poking some holes just to take a look," he said.

Any exploration would follow a lengthy process, including hearings and environmental studies, to issue leases. Federal law allows the governor to comment on drilling proposals, and the state can force drillers to comply with coastal-development regulations.

The state used its clout to fight off oil companies in the 1980s and '90s, but political opposition to drilling is waning.

In an Elon University Poll last month, two out of three said they favor drilling off the N.C. coast. Four in 10 believe drilling would affect gasoline prices within five years.

Geologists' take

Geologists say the Manteo exploration zone lies over an ancient limestone reef that stretches from Newfoundland to the Gulf of Mexico, where it is a big oil and gas producer.

Oil companies paid the federal government $296 million for 21 leases in the Manteo unit in the 1980s, but never explored them. Conoco gave up the last of the leases in 2000.

But untapped deposits off the East Coast would do little to ease the pain at gas pumps - most of them are believed to be of natural gas. Gulf, Alaskan and Pacific oil reserves probably dwarf those in the Atlantic, the federal Minerals Management Service says.

The agency estimates that the mid-Atlantic coast, including North Carolina, holds about 1.5 billion gallons of oil - enough to meet U.S. needs for a little more than two months. The estimated 15.1 trillion cubic feet of natural gas would last about eight months.

Mobil Oil had estimated that the Manteo unit alone could yield 5 trillion cubic feet of gas.

The southeastern Atlantic coast is believed to hold vast, though inaccessible, amounts of natural gas in another form. These ice-like crystals are called gas hydrates. The region might hold more than 21 quadrillion cubic feet of gas in that form, the U.S. Geological Survey has said, but the technology to capture it hasn't been developed.

Only the oil companies know their level of interest in the area, and they typically hold that information close. Neither Chevron nor ExxonMobil responded to requests this week for comment.

Rising prices could entice the companies to return to the N.C. coast, said Louis Bartek, who studies sediments and rock strata at UNC Chapel Hill.

"There's definitely a possibility, because drilling, seismic and imaging technology is way ahead of where it was then," he said. "Things that were not economically feasible then may be now."

Because the N.C. coast has no history of oil or gas production, the costs of building pipelines and storage tanks would have to be added to exploration and production expenses, said Kenneth Taylor, chief of the N.C. Geological Survey.

Even then, Taylor added, there's no assurance that any oil or gas that's recovered would be sold in the United States. After sinking millions of dollars into exploration, permitting and drilling, he said, companies could ship the raw product to more lucrative markets such as China.

"Once they actually drill, if they hit it, none of it might come back to North Carolina," Taylor said.