U.S. Onshore Oil Math
We take another look at Federal onshore production
We are sure the WSJ data is correct - indeed oil & gas lease sales have been canceled, delayed or hung-up in litigation for much of the Biden administration
But now is a time for serious discussions about U.S. energy policy - there is little-to-no correlation between Federal acres leased by the oil & gas industry and production from Federal lands
Onshore production from Federal leases is highly concentrated - indeed just the top-10 counties (3.4% of all counties with Federal production) produce 90.7% of all Federal oil production
Although it makes a good political narrative, it is time to stop implying there is a black wave of oil just waiting to be unleashed from onshore Federal lands - there is no easy button, no prize behind door #3, no Federal lease oil market panacea from this administration or any other
Tough Math
Federal onshore acreage leased for oil & gas drilling is down by 40% since 2003.
Oil production from federal onshore acreage is up 325% since 2003.
Put simply, more acreage does not necessarily equate into more oil any more than less acreage results in less oil.
The oil & gas industry has generally been letting more Federal lease acreage expire the last decade than acreage added from new leases.
Concentrate For Us
- 68% of 2021 US oil production from onshore Federal leases came from Lea and Eddy counties in New Mexico
- 91% of 2021 US oil production from onshore Federal leases came from the top-10 counties
- 44% and 71% respectively of US oil production from Federal leases since 2003 came from Lea/Eddy and the top-10 counties, respectively
- Nearly 80% of the entire onshore Federal oil production increase since 2003 came from Lea and Eddy counties
- 78% of 2021 US natural gas production from onshore Federal leases came from the top-10 counties
We aren't sure how many more ways to put it, oil & gas production from Federal leases is highly concentrated.
We have highlighted this data in the past but the math is important enough to reiterate. Production outside the current top-10 counties is down since 2003 for both oil & natural gas production. Rock determines where oil will be produced, not arbitrary federal, state or private lease lines.
Lea and Eddy counties combined production has grown at roughly 33% a year on average the last 5 years. If those two counties grow at the same rate in 2022 - despite labor and materials shortages - and all other counties grow at a higher than normal 50% rate, total production from US onshore Federal leases would increase 350,000 barrels per day in 2022, a drop in the ocean of a 100 million a day global oil market.
The BLM has 244 million Federal acres. Nearly half of that acreage comes from the top-2 states, Alaska (70+ MM acres) and Nevada (nearly 50 MM acres). Rhetorically speaking, does more Nevada acreage being leased help the US produce more oil?
24+ million BLM acres are currently leased, with 4.3 million of those acres in New Mexico. We estimate under 1 million of those acres are producing in Lea and Eddy counties. Do the math and less than 5% of Federal onshore acreage is producing nearly 70% of the oil from Federal onshore acreage.
Good acreage needs to be leased, not simply more acreage. We should note the Inflation Reduction Act has provisions that required oil & gas leases to be offered in order for wind and solar activity to move forward on Federal lands. Nowhere in the legislation does it say the acreage has to be desired lands.
The WSJ piece includes offshore acreage in the amount of leased acreage discussed. We have pointed out the average time from lease to production for the current top-10 oil producing fields in the Gulf of Mexico was 14 years. We think deepwater production timeframes can be condensed through hub-and-spoke strategies and overall lessons learned, but offshore is generally a long-cycle game.
There will be no immediate relief from recent offshore lease sales. Onshore is the only game in town for short-cycle production bumps and the math simply doesn't work for the numbers to be material from Federal lands only.
As the maps above indicate there are close to zero Federal lands in Texas, Oklahoma, Louisiana, Kansas, Pennsylvania, West Virginia, or Ohio. These states are nearly 100% private lands where nobody need ask the Federal government for permission to lease or drill (although pipeline permitting and environmental reviews can still impact).
If US oil production is meant to exceed prior peak production levels, it will require strong growth from private lands.
