Ultra-Deepwater Gulf of Mexico Oil and Gas: Energy Return on Financial Investment and a Preliminary Assessment of Energy Return on Energy Investment

Abstract

Abstract:The purpose of this paper is to calculate the energy return on financial investment (EROFI) of oil and gas production in the ultra-deepwater Gulf of Mexico (GoM) in 2009 and for the estimated oil reserves of the Macondo Prospect (Mississippi Canyon Block 252). We also calculated a preliminary Energy Return on Investment (EROI) based on published energy intensity ratios including a sensitivity analysis using a range of energy intensity ratios (7 MJ/$, 12 MJ/$, and 18 MJ/$). The EROFI for ultra-deepwater oil and gas at the well-head, ranged from 0.019 to 0.022 barrels (BOE), or roughly 0.85 gallons, per dollar. Our estimates of EROI for 2009 ultra-deepwater oil and natural gas at the well-head ranged from 7-22:1. The independently-derived EROFI of the Macondo Prospect oil reserves ranged from 0.012 to 0.0071 barrels per dollar (i.e., $84 to $140 to produce a barrel) and EROI ranged from 4-16:1, related to the energy intensity ratio used to quantify costs. We believe that the lower end of these EROI ranges (i.e., 4 to 7:1) is more accurate since these values were derived using energy intensities averaged across the entire domestic oil and gas industry. Time series of the financial and preliminary EROI estimates found in this study suggest that the extraction costs of ultra-deepwater energy reserves in the GoM come at increasing energetic and economic cost to society.

The implications of the declining energy return on investment of oil production

“…1 Moerschbaecher & Day [11] estimated the EROI for deep-water oil production to be between 7 and 22. The range in EROI values is due to a sensitivity analysis performed by the authors that incorporated three different energy intensity values as proxies for the energy intensity of the ultra-deep-water oil industry.…”

“…Over the past few years, there has been a surge in research estimating the EROI of a number of different sources of oil, including global oil and gas [7], US oil and gas [8,9], Norwegian oil and gas [10], ultra-deep-water oil and gas [11] and oil shale [12]. In addition, there have been several publications relating EROI to long-term economic growth, firm profitability and oil prices [3,[13][14][15].…”

The substitution of marginal oil with biofuels

“…These values are average values and still do no t state something about how high the EROI is of the different oil sorts and of the marginal production. Single analyses of unconventional oils and deep‐sea oil show clearly lower EROI‐values as the world average values . In this way, bitumen of tar sand exhibits an EROI between 2 and 4:1, shale oil of 5:1 and deep‐sea oil a value between 4 and 16:1.…”

“…Single analyses of unconventional oils and deep-sea oil show clearly lower EROI-values as the world average values. 43,[59][60][61] In this way, bitumen of tar sand exhibits an EROI between 2 and 4:1, shale oil of 5:1 and deep-sea oil a value between 4 and 16:1. Th e lower value for deep-sea oil corresponds with the results of our GHG analysis, that deep-sea oil can reach the emissions of tar sand.…”

Preliminary Calculation of the EROI for the Production of Crude Oil and Light Oil Products in Russia

“…In 2007, the EROI for oil and gas production was about 11:1 [6];  Production of ultradeep-water oil and natural gas in the Gulf of Mexico. In 2007, at the well-head the EROI ranged from 7-22:1 [7];  Oil production in Norway. In later half of last the decade the EROI was about 40:1 [8];  Preliminary calculation of the EROI for Oil Shale including internal energy is 2:1 [9];  Oil production on the Daqing field, China.…”