Why did the government have to prod Exxon into drilling for oil?

"Exxon Mobil says it has begun drilling at Alaska's Point Thomson oil and gas field.

Patrick McGinn, a company spokesman, says drilling operations were launched Friday.

In February, Exxon returned eight of its Point Thomson leases that were part of 13 added to the field in 2002. Exxon had promised to drill wells and begin producing oil within four years, but no drilling occurred.

The state has been fighting with the Irving, Texas-based oil giant and other lease holders over the lack of progress there.

Alaska officials have tried to cancel the leases, but in January it did allow Exxon to drill on two leases after the company said it would start production within five years."

http://www.kansascity.com/438/story/1187983.html

Drill here, drill now, drill less?

Why was Exxon just sitting on this land for years? And remember that just last year we had record high oil prices.

And why isn't Congress investigating this? They say they're going to drill on land we lease to them, this merits an investigation.

But back to the question at hand, what is Exxon doing?

refineries. But I guess they can't get enough illegal immigrants to complete the job.

things to do. I always like to have a little something for rainy days, perhaps Alaska is their little something.

Last year the oil companies were drilling everywhere they could to take advantage of the $ 140 per barrel oil. They knew that wouldn't last.

The problems out here in oil country were that all the rigs were being used and were backed up and the skilled people were all working 80 hours a week for incredible hourly wages.

Each well has a cost per barrel of extracting the oil, and the producers can guess that cost pretty closely. One well might cost $ 30 per barrel to get the oil up. Another well might cost $ 50 pb. As the price goes down, wells get capped off. As the price goes up more wells are pumped and drilled.

From a profit perspective alone, it doesn't make sense for wells to not be pumping at $ 140 pb oil. My guess is the scarce equipment or skilled workers were used to produce at places where the oil could be brought up at a cheaper price. Now that equipment is freed up from capped wells and workers are being laid off, it's time to tap those tougher jobs like Alaska.

In the interest of full disclosure, I want to tell you that I worked in the oil industry--at a large company--for 22 years.

When an oil company leases land for exploration purposes, it means they have performed non-invasive tests of the land using technical means at their disposal (usually seismic interpretation, perhaps also gravity-magnetic surveys, followed by extensive mapping of the data thus acquired).

If they map a large area which shows the POSSIBILITY of having oil/gas, several criteria will have been met in order for a tract of land to be considered possibly productive of oil or gas. You need to have:
*a rock reservoir which will hold the oil/gas
*a seal over that reservoir which will trap the oil/gas and prevent it from percolating up to the surface of the earth from the postulated reservoir
*an organic source for the oil (usually a thick layer of ocean mud which contains lots of carbon)
*burial of the organic source to a depth, temperature, and pressure to "crack" the carbon compounds in the source
*and, finally, a pathway through which the cracked organics (oil and gas) can make their way up to the rock reservoir waiting above

The presence of ALL these elements must be shown by analysis of the non-invasive data. The degree to which each element may or may not be present is a RISK, all of which are factored together to determine an overall chance of success for drilling a successful exploration well.

Possible quantity of oil/gas present is calculated, then combined with
*postulated price of a barrel of oil to be produced from the postulated field (remember, prices will rise and fall over the 10-50 year life of the field--sometimes going below the postulated price)
*amount paid for the lease
*cost to drill one exploration well
*cost to drill enough wells to fully produce the new field assumed to be discovered, as well as the infrastructure required to get the oil/gas to market

in order to generate a possible return on investment.

This exercise is undertaken for every exploration lease, then--for each lease the company holds--the possible returns are ranked by size/risk. THEN the company decides which land to lease.

Once the company acquires the lease, it may do further detailed investigation to fine-tune its assumptions about size of the possible oil/gas reserve.

Sometimes those detailed investigations indicate that the going-in assumptions were too optimistic, or sometimes the company just has better prospects for success in its drilling portfolio, and they "let the leases go back". That may be the case with the undrilled Alaska leases. Nothing sinister involved, just good business decisions.