Veterans and Offshore Drilling Why care, what it entails, and is it safe.

Meeting begins at 3:00 PM Eastern

Offshore Oil and Natural Gas

Briefing

Erik Milito Director, Upstream & Industry Operations

American Petroleum Institute

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The U.S. will require 12 percent more energy in 2040 and more than 60 percent of it will be met by oil and natural gas

Source: EIA

Qua

drilli

on B

TU

31.9%

2012

2.8% 6.0%

1974 3.3% 3.7% 3.5%

2040

Most energy analysts agree that sustaining even modest economic growth worldwide for the next several decades will require massive new investments in oil and natural gas

US Natural Gas Marketed Production

Top 10 Natural Gas Producing Countries - 2012

World Dry Gas Production in 2012 was 118 Tcf. The US accounts for over 20% of World natural gas production.

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U.S. Crude Oil Production Has Skyrocketed

Jan 2010 to Jan 2014 +2.6 million barrels per day +50%

Peaked in 1970

Source: EIA

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2

4

6

8

10

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2006 2007 2008 2009 2010 2011 2012 2013 2014

US Crude Oil Net Imports and Production

Crude Oil Net Imports U.S. Crude Oil Production

Projected

Millions Barrels per Day

Source: EIA Short Term Energy Outlook - December 10, 2013

Projected Economic Benefits of Expanded Atlantic Access

National Economic Impacts Job Creation by 2035 280,000

Total Increase in Capital Investment $194 Billion

Total Increase in GDP/Year by 2035 $23 Billion

Energy Production by 2035 1.34 MMBOE/D

Cumulative Government Revenue $51 Billion

Cumulative State Government Revenue $19 Billion

Bonus Bids Lease Date Area Leases Awarded Bonus Bids

233 Aug 28, 2013 Western Gulf 53 $102 million

227 Mar, 20, 2013 Central Gulf 320 $1.2 billion

229 Nov 28, 2012 Western Gulf 116 $133 million

222 June 20, 2012 Central Gulf 454 $1.7 billion

218 Dec 14, 2011 Western Gulf 191 $337 million

213 March 17, 2010 Central Gulf 446 $920 million

210 August 19, 2009 Western Gulf 155 $111 million

208 March 18, 2009 Central Gulf 328 $690 million

207 August 20, 2008 Western Gulf 319 $487 million

206 March 19, 2008 Central Gulf 615 $3.677 billion

224 March 19, 2008 Eastern Gulf 36 $64.7 million

193 February 6, 2008 Alaska- Chukchi 486 $2.662 billion

205 October 3, 2007 Central Gulf 682 $2.813 billion

204 August 22, 2007 Western Gulf 274 $287.1 million

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Royalties and Rentals Oil Royalties Natural Gas Royalties Rentals

2001 $ 2,062,099,728.48 $ 3,968,160,116.67 $ 188,455,045.00

2002 $ 1,632,638,228.21 $ 2,114,977,575.45 $ 153,303,576.33

2003 $ 1,243,694,450.82 $ 3,165,079,394.48 $ 245,963,858.75

2004 $ 1,194,196,781.74 $ 3,301,702,291.61 $ 214,303,045.22

2005 $ 2,118,772,810.28 $ 3,247,098,867.72 $ 223,544,134.53

2006 $ 3,271,073,374.50 $ 3,160,028,663.49 $ 224,006,816.08

2007 $ 3,661,800,666.66 $ 2,592,331,832.61 $ 200,993,254.55

2008 $ 4,885,461,310.24 $ 3,067,191,883.14 $ 237,074,433.14

2009 $ 3,091,723,788.99 $ 1,290,806,313.38 $ 233,146,675.43

2010 $ 2,983,660,809.16 $ 595,177,485.15 $ 245,645,026.79

2011 $ 5,102,402,377.22 $ 875,239,840.35 $ 223,243,632.40

2012 $ 5,216,309,404.25 $ 483,634,710.08 $ 228,022,724.29

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13 1220 L Street, NW • Washington, DC 20005-4070 • www.api.org

Potential Upstream Oil and Natural Gas Job Openings by Occupation, 2010-2030

*Includes baseline projected growth and replacement requirements Source: IHS Global Insight, “Employment Outlook for African Americans and Latinos in the Upstream Oil and Natural Gas Industry,” November 2012.

14 1220 L Street, NW • Washington, DC 20005-4070 • www.api.org

Oil and gas industry jobs pay well (average annual wages)

Source: U.S. Quarterly Census of Employment and Wages, 2011.

Outer Continental Shelf Lands Act • Data Collection • 5-Year Leasing Program • Lease Sales • Safety and Environmental Regulation • Revenue System

• Bonus Bids • Rentals • Royalties

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5-year OCS Leasing Plan Development

January 2015 – Department of the Interior released the Draft Proposed Program for 2017-2022.

2015-2016: Opportunities for public comment Written Comment in the Record Hearings Throughout the Country

Safe and Environmentally Responsible Operations

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Government Regulations BSEE Final Drilling Safety Rule

• Establishes new casing installation requirements; • Establishes new cementing requirements; • Requires independent third party verification of blind-shear ram

capability; • Requires independent third party verification of subsea BOP stack

compatibility; • Requires new casing and cementing integrity tests; • Establishes new requirements for subsea secondary BOP

intervention; • Requires function testing for subsea secondary BOP intervention; • Requires documentation for BOP inspections and maintenance; • Requires a Registered Professional Engineer to certify casing and

cementing requirements; and • Establishes new requirements for specific well control training to

include deepwater operations. Safety and Environmental Management Systems

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Government Regulations The United States Coast Guard Rulemaking on operations and equipment on MODUs Voluntary Incident reporting for MODU dynamic

positioning systems Rulemaking on testing and training requirements for

lifesaving and firefighting equipment on MODUS and floating production facilities.

Memorandum of Agreement with BSEE on MODUs and SEMS/SMS

Proposed reorganization of its management of offshore inspections to provide for a single point of responsibility

New proposed SEMS Rule for entities under USCG jurisdiction

Center for Offshore Safety

Our Mission... Promote the highest level of safety for offshore drilling, completions, & operations by effective leadership, communication, teamwork, utilization of disciplined safety management systems & independent third-party auditing & certification.

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Industry Standards

4th Edition Std 53 Blowout Prevention Equipment Systems for Drilling Operations 2nd Edition Std 65-2 Isolating Potential Flow Zones During Well Construction 1st Edition RP 96 Deepwater Well Design and Construction 1st Edition Bul 97 Well Construction Interface Document Guidelines 1st Edition RP 17W Recommended Practice for Subsea Capping Stacks 1st Edition API Spec Q2 Specification for Quality Management System Requirements for Service Supply Organizations for the Petroleum and Natural Gas Industries 4th Edition API Spec 16A Specification for Drill-through Equipment 2nd Edition API RP 17H Remotely Operated Tools and Interfaces on Subsea Production Systems

Subsea Well Control & Containment

Containment Companies

(MWCC/HWCG)

Must provide flexible & adaptable systems to contain the

well subsea & provide subsea production capability via subsea equipment, risers, & containment vessels that will safely capture,

store and offload the oil

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Oil Spill Response Organizations (OSROs) Oil Spill Response Tools:

•Oil spill response plans •Oil sensing and tracking •Dispersant use and application •In situ burning •Mechanical recovery capabilities •Shoreline protection and cleanup

Oil Spill Preparedness and Response

Coexistence of Military and Oil and Gas

Long history of collaboration between government agencies and industry

Memorandum of Agreement in place

Drilling Window Program in place

Previous activity in military training areas

Lease stipulations and hold harmless clauses

Next Steps Needed

Department of the Interior • Approval of Seismic Surveys • 2017-2022 Leasing Program that Includes the Atlantic

and the Eastern Gulf of Mexico Congress • Pass Revenue Sharing Legislation • Pass Legislation That Creates Opportunities for the

Atlantic and Eastern Gulf of Mexico

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National Security

General Martin Dempsey, Chairman of the Joint Chiefs of Staff:

“An energy independent [U.S.] and net exporter of energy as a nation has the potential to change the security environment around the world – notably in Europe and in the Middle East. And so, as we look at our strategies for the future, I think we’ve got to pay more and particular attention to energy as an instrument of national power. And because it will very soon in the next few years potentially become one of our more prominent tools.”

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Veterans and Offshore Drilling

Capt. James McCormick, USA (ret.) Program Director, Vets4Energy

www.Vets4Energy.com Facebook.com/Vets4Energy