Wildcatters' Lament

In the U.S., rising oil prices have already touched off what is building up to be the biggest oilfield rush since the 1950s. Oilmen, particularly the independent operators, who do more than 80% of the exploratory drilling in the U.S. and off its shores, have been swarming across the country in search of promising new deposits and even returning to old oil hunting grounds in Texas, New Mexico and other states. More and more, however, they are making a painful discovery: it can be a lot easier to strike oil nowadays than get the pumps, piping and other paraphernalia needed to bring it to the surface.

So far, in fact, Project Independence has mainly yielded a barrel of complaints about equipment shortages that are delaying new production. Driller George Mitchell, head of a large Houston exploration company, voices a typical wildcatter's lament: "We've got six good prospects offshore Texas that we've had to defer for six to eight months already for lack of equipment." Another independent oilman, A.V. Jones of Albany, Texas, estimates that he could increase his company's new drilling by 50% if he had the necessary material. As it is, he says, "if all the wells I've got going now come in, I don't have enough pipe in the yard to furnish them."

Doubled Prices. The shortages are especially irksome to drillers because Washington has made domestic-oil exploration more attractive than it has been at any tune in years. Under the two-tier oil price system inaugurated in September 1973, "new" oil--production in excess of a 1972 base period--can be sold at the world price, now about $11 per bbl. That is more than double the limit of $5.25 per bbl. allowed on "old" oil produced within the base level.

Piping, drilling rigs and other items are in short supply now largely because they have not been in much demand in recent years. At the $3.81-per-bbl. price that prevailed when the two-tier system arrived, many drillers abandoned oil exploration as unprofitable. During the past 20 years, the number of independent oil companies shrank from about 20,000 to 10,000, and manufacturers of drilling equipment cut back on their production accordingly. With demand on the upswing again, the manufacturers are struggling with order backlogs of up to three years. The smaller independents have been hardest hit by delivery delays, since they are unable to buy in the quantity that makes the major oil companies more attractive customers.

As a result, second-hand equipment, once regarded as throwaway junk, is now attracting premium prices. New drilling pipe sells for $10.50 per ft. when available; when it is not, wildcatters often settle for used pipe supplied by oilfield hustlers at $20 per ft. "They charge an arm and a leg," complains Walter Bates, owner of a well-service firm in Odessa, Texas. "But I'm happy to pay any price to get the equipment I need." Sometimes, the equipment is not only high-priced but hot as well. Says Sheriff Elwood Hill of Odessa: "They are stealing just about everything in the oil patch that isn't tied down." Hill adds that an experienced team of oilfield thieves can dismantle and cart off $20,000 worth of gear within two hours.

Trained People. Equipment is not all that is in short supply. Manpower capable of working with the increasingly complex drilling rigs is scarce as well. "You just can't go down to the corner any more and pick up some roughnecks and roustabouts," points out Michel Halbouty, an independent producer. "This is sophisticated machinery, and it needs trained people to operate it." Even so, West Texas oil companies are now paying as much as $1,200 a month for unskilled labor. Some producers want Government help in training new oilfield workers, plus federal intervention in the steel industry to increase production of pipe and other scarce hardware.

The shortages will surely work themselves out in time, of course, but time can cost billions. The National Petroleum Council estimates that, were it not for equipment shortages, 2,200 more new wells would have been drilled during 1974. Within two years, those missing wells might have increased U.S. production by as much as 700,000 bbl. a day--enough to replace 70% of the oil that President Ford wants to cut out of the country's imports.

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