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Experts Differ on Industry’s Ability to Service Drilling Upturn

July 27, 1987

HOUSTON (AP) _ Even though the price of oil has topped $22 per barrel, experts disagree over how well America’s energy industry is prepared to handle an upturn in drilling and exploration as the economic slump lingers in the nation’s oil and gas fields.

″There is no map for where we are and where we are going,″ said Stephen Larkin, spokesman for the Petroleum Equipment Suppliers Association, an industry trade group. ″It’s anybody’s guess.″

Thousands of workers have left the oil industry and even the number of college students studying petroleum engineering has dropped dramatically. Millions of dollars’ worth of equipment is idled by lower prices that have made domestic drilling less attractive.

From a 1981 peak of 4,530 active drilling rigs in the United States, the count dropped to a low of 663 in July 1986, according to the Baker Hughes Rotary Rig Count, a widely followed index of domestic drilling activity.

The count has recovered somewhat, hitting 922 in mid-July.

If and when drilling activity rises significantly, the industry must replace thousands of laid-off workers and determine whether idled oilfield equipment cn be put back to work efficiently, experts say.

″I think we have created tremendous problems for ourselves,″ said John Lollar, president of Transco Exploration Co., a subsidiary of Transco Energy Co.

″I think you are going to hear with increasing frequency stories about shortages,″ Lollar said, adding particularly severe shortfalls could occur with scientific crews and certain types of equipment.

From 1981 to 1986, employment in oil and gas exploration in Texas fell 30.6 percent, from 285,500 to 198,100 workers, according to the Texas Employment Commission.

The drop in employment in the machinery and manufacturing industry was even more severe, registering a 64 percent loss, from 80,700 to 28,900, the commission figures show.

″The professionals who have been laid off have, in many cases, left the industry,″ said William E. Bradford, senior vice president of Dresser Industries, a leading oil services firm.

″Experience has shown that they are unlikely to come back, even when the market does eventually turn around,″ Bradford told a U.S. Senate Finance Subcommittee earlier this year.

The industry’s predicament apparently hasn’t been lost on college students, either.

The number of freshmen entering Texas A&M University to major in petroleum engineering dropped from a peak of 600 in 1981 to 50 in the fall of 1986, said Douglas Von Gonten, head of the Department of Petroleum Engineering.

At the University of Texas, total enrollment in the Department of Petroleum Engineering plummeted from 1,112 in 1982-83 to 341 in 1985-86, according to Mark Miller, assistant professor of petroleum engineering. ″Most people think that in a couple of years they’ll see a shortage of engineers,″ Miller said. ″The outlook is excellent for someone coming in as a freshman, because there will be so few of them competing for the jobs that are out there.″

In addition, many companies in the oil and gas industry have trimmed management ranks through layoffs and retirements, said Lee Hunt, spokesman for the International Association of Drilling Contractors.

″They are in line with today’s overhead and operations,″ said Hunt. ″Most management functions are of a size now that is not going to let them sufficiently manage a doubling of activity.″

Since the drilling slide began in 1981, millions of dollars of drilling equipment has been idled, according to analysts.

″We are starting to see some inventory being taken permanently out of the industry,″ said Barney White, spokesman for Zapata Corp., an offshore drilling contractor. ″A lot of people just aren’t putting money into keeping it up.″

Other oilfield equipment has been rendered unusable through age, obsolescence, exposure to the elements or cannibalization to keep other equipment functioning, White said.

″If there is a boom, not everybody is going to be prepared to service it in the short term,″ said James Smith, Houston-based spokesman for Schlumberger Ltd., an oilfield services company.

″If it comes back slow and gradual, we’ll have the time to build back our capability, both people and equipment,″ he said.

Von Gonten agrees. ″I don’t think the boom that’s coming is going to come as fast as the downturn that came in the last five years,″ said Von Gonten. ″I think industry will increase gradually and companies will exploit opportunities as they come.″

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