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

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  • Matthew Moerschbaecher

    () (Department of Oceanography and Coastal Sciences, Louisiana State University, 2237 Energy, Coast, and Environment Building, Baton Rouge, LA 70803, USA
    Department of Renewable Natural Resources, Louisiana State University, 2231 Energy, Coast and Environment Building, Baton Rouge, LA 70803, USA)

  • John W. Day Jr.

    () (Department of Oceanography and Coastal Sciences, Louisiana State University, 2237 Energy, Coast, and Environment Building, Baton Rouge, LA 70803, USA)

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.

Suggested Citation

  • Matthew Moerschbaecher & John W. Day Jr., 2011. "Ultra-Deepwater Gulf of Mexico Oil and Gas: Energy Return on Financial Investment and a Preliminary Assessment of Energy Return on Energy Investment," Sustainability, MDPI, Open Access Journal, vol. 3(10), pages 1-18, October.
  • Handle: RePEc:gam:jsusta:v:3:y:2011:i:10:p:2009-2026:d:14475
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    References listed on IDEAS

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    1. Charles A. S. Hall & Stephen Balogh & David J.R. Murphy, 2009. "What is the Minimum EROI that a Sustainable Society Must Have?," Energies, MDPI, Open Access Journal, vol. 2(1), pages 1-23, January.
    2. Cleveland, Cutler J., 2005. "Net energy from the extraction of oil and gas in the United States," Energy, Elsevier, vol. 30(5), pages 769-782.
    3. Gately, Mark, 2007. "The EROI of U.S. offshore energy extraction: A net energy analysis of the Gulf of Mexico," Ecological Economics, Elsevier, vol. 63(2-3), pages 355-364, August.
    4. David J. Murphy & Charles A.S. Hall & Michael Dale & Cutler Cleveland, 2011. "Order from Chaos: A Preliminary Protocol for Determining the EROI of Fuels," Sustainability, MDPI, Open Access Journal, vol. 3(10), pages 1-20, October.
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    Citations

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    Cited by:

    1. Fizaine, Florian & Court, Victor, 2015. "Renewable electricity producing technologies and metal depletion: A sensitivity analysis using the EROI," Ecological Economics, Elsevier, vol. 110(C), pages 106-118.
    2. repec:spr:bioerq:v:3:y:2018:i:1:d:10.1007_s41247-018-0035-6 is not listed on IDEAS
    3. Hallock, John L. & Wu, Wei & Hall, Charles A.S. & Jefferson, Michael, 2014. "Forecasting the limits to the availability and diversity of global conventional oil supply: Validation," Energy, Elsevier, vol. 64(C), pages 130-153.
    4. Alexander Safronov & Anton Sokolov, 2014. "Preliminary Calculation of the EROI for the Production of Crude Oil and Light Oil Products in Russia," Sustainability, MDPI, Open Access Journal, vol. 6(9), pages 1-19, September.

    More about this item

    Keywords

    Gulf of Mexico; net energy; Deepwater Horizon; Macondo; oil spill;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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