more remote waters. However, the petroleum 

 industry has been willing to make these large 

 investments and develop the necessary technology 

 because it has been operating in a framework of 

 reasonable profit incentives; industry has succeed- 

 ed in producing these marine resources economi- 

 cally and in competition with other available 

 domestic sources. There appears to be little doubt 

 that the industry will continue to expand these 

 efforts into ever-deeper waters throughout the 

 world so long as it can be done economically. 



A. Physical Limitations 



As discussed above, there are probably no 

 purely technological limitations to developing the 

 petroleum resources throughout all of the conti- 

 nental shelves of the United States, and possibly 

 into much deeper water as well. The principal 

 limitations are the economics of the technology 

 and the oil or gas field. 



Among the physical factors affecting the eco- 

 nomics are the size, shape, and depth of an oil or 

 gas reservoir, its physical characteristics (porosity, 

 permeability, and reservoir pressures), the depth of 

 water overlying the reservoir, and its distance from 

 shore. The ice-bound waters over much of Alaska's 

 continental shelves present a specific problem in 

 both technology and economics. 



If a large enough field could be found offshore, 

 with thick reservoir beds and high productive 

 capacity of several billion barrels of reserves, it is 

 possible that it could be developed economically 

 in very great water depths with technology that 

 exists now or which could be employed in a short 

 time; the cost of development becomes less impor- 

 tant as the volume of the reserves and the 

 production rate increase. However, it is unlikely 

 that a reservoir of this size will be found on U.S. 

 continental margins. Conversely, technology and 

 efficiency become extremely important in smaller 

 fields— say less than 100 million barrels of reserves 

 which are typical of those now being developed 

 offshore. 



Similarly, if an oil field covers a large area, 

 requiring the drilUng of a great many wells, it is 

 less economic than a field containing the same 

 volume of reserves but confined to a small 

 geographic area. It is also much more expensive to 

 develop a field which is 20,000 feet below the 

 earth's surface than a field of the same size which 



is 10,000 feet deep. The economic feasibiBty of 

 developing a field is also limited if the petroleum 

 can be produced only along with formation water 

 or unmarketable natural gas. 



There are a few purely physical or technological 

 barriers to developing marine petroleum deposits; 

 these are completely interdependent with the 

 economic limitations. J. E. Wilson, '* of Shell Oil 

 Company, recently commented on this relation- 

 ship between technology and economics: 



/ say without rancor that it seems everybody 

 wants to help the oil industry solve the problems 

 of offshore operations ... We aren 't the least bit 

 reticent about using ideas and help wherever they 

 may be found. The main drawback is that it all 

 costs money. For instance, I think we could today 

 get the equipment built to drill and operate an oil 

 field completely beneath the sea— and would, if 

 that were the cheapest way. 



The petroleum industry is continuing to make 

 great improvements in technological capabilities 

 and efficiency, and as long as fields of reasonable 

 size can be found there is every reason to expect 

 continued development of U.S. marine petroleum 

 resources. In fact, much of the investment off- 

 shore to date has been made on the assumption by 

 industry that development technology could be 

 improved sufficiently to extend the economic 

 limits now imposed by water depth, distance from 

 shore, field size, and field depth. 



B. Economic Limitations 



Most of the world's marine wells have been 

 drilled in the waters off Louisiana. An historical 

 review of petroleum development in this area 

 should be the most adequate economic evaluation 

 available. Such a review has recently been made by 

 T. D. Barrow,'^ considering the 15-year history 

 between 1951 and 1965. The geophysical work by 

 industry devoted to finding new fields during this 

 period which amounted to about $160 million. 



J. E. Wilson, Economics of Offshore Louisiana 

 (Annual Meeting of Louisiana-Arkansas Division, Mid- 

 Continent Oil and Gas Association, preprint, Sept. 12, 

 1967). 



' ^T. D. Barrow, Economics of Offshore Development, 

 in Exploration and Economics of the Petroleum Industry 

 (Houston: Gulf PubUshing Co., 1967), pp. 133-147. 



VII-208 



