The EROI of U.S. offshore energy extraction: A net energy analysis of the Gulf of Mexico

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Abstract:

<p>In 2004, the U.S. Department of the Interior's Minerals Management Service estimated that 49% of the oil and 57% of the natural gas yet to be discovered offshore in the United States are located in the Gulf of Mexico Outer Continental Shelf region. While the existence of these energy resources is critical to the nation's future economic well being, of equal importance is the amount of already extracted energy that will be required to deliver the new fuel to society in a useful form. The difference between the two energy quantities is the net supply. In many respects, net energy is the most relevant measure of fuel supply because it represents the energy available to produce final-demand economic goods and services. Unfortunately, there currently exists no standard procedure for determining net energy, and so the data are extremely limited and inconsistent. In this paper, we present an &ldquo;energy return on investment&rdquo;, or &ldquo;EROI&rdquo;-based approach. EROI is defined as the ratio of gross energy produced by an energy supply process to the total, direct plus indirect, energy cost of its production. If the EROI of an energy supply process is known, then it's net energy output can be derived easily given gross production data. Below, we specify an empirical computer model programmed to simulate the productivity dynamics of offshore energy extraction in the Gulf of Mexico and estimate the EROI of the &quot;offshore process&quot; over a twenty-year period (1985&ndash;2004). At the conclusion of the simulation, the model calculates the EROI of the process to range from 10 to 25, depending on how energy costs have been defined. In comparison, it has been estimated that the EROI of U.S. domestic petroleum extraction in the 1930s was approximately 100.</p>