Boom times, but many oilmen have gone bust
GIDDINGS, TEXAS — Walking around an oilfield called the "Jenny P.," Ray Holifield examines the 50-foot drilling rig, hears the thrum of mud pumps and the crunch of $8,000 drill bits biting into limestone, and breaks into a broad smile.
Somehow he just knows he'll strike oil. Seismic data tells him there's a fracture just 300 feet away, and where there's a fracture, there's usually oil, especially here in the Austin Chalk. "I think it's going to be wonderful," says the middle-age geologist. "I've been waiting to drill this for a long time."
In oil booms of the past, independent oil men like Mr. Holifield would send up a collective hoot at rising oil prices and scurry off into the fields. But this time, the celebration out in the Oil Patch feels more like a wake. Hundreds of producers, mired in debt after a year of the lowest oil prices in half a century, are unable to start exploring again. Hundreds of thousands of skilled workers, tired of the boom-and-bust cycles of energy, have left the industry for good. The ones who are left are either explorers, eccentrics, or wildcatters with pockets deep enough to have survived the downturn.
In towns like Giddings, Texas, and Lafayette, La., it's the independent oil producers, and not major oil companies like Exxon and Arco, who are heading back into the fields to explore, keeping the US the world's third-largest producer of oil, behind Saudi Arabia and Russia.
"Independent producers are producing 60 percent of the onshore oil in this country, and a growing stake of the offshore exploration," says George Yates, former chairman of the Independent Producers Association of America, and owner of an oil company in Roswell, N.M. "I'd say that's very significant."
Like many in his industry, Mr. Yates realizes he may view high oil prices differently than, say, the driver of a Ford Excursion. But he argues that what is good for the oil industry tends to benefit the larger economy. "Oil amounts to 2 percent of the GDP[gross domestic product], but it drives 100 percent of GDP," he says. "We have forgotten about having an adequate supply of oil because we focus on the lowest price, and it's coming back to haunt us."
After a brief mid-winter rocket ride up to $30 a barrel, oil prices have leveled off at a relatively high $25 a barrel. Some analysts predict that if supplies don't increase, prices might spike upward again.
As a result, those independent producers who can afford it are pumping their money into exploration. According to a new survey by the Arthur Andersen Consulting firm, 77 percent of large independents say they plan to boost exploration spending in the US. By contrast, only 29 percent of major oil companies plan to increase domestic exploration.
In Giddings, Holifield has glommed onto the best technology money can buy. It's called short-radius horizontal drilling, and he's convinced it's going to spark the next drilling boom in the upper Austin Chalk. At the Jenny P., Holifield's crew is drilling straight down 8,200 feet, before slowly changing direction until the drill bit runs parallel to the surface of the earth. With short-radius drilling, the crew can make that turn much closer to the surface, allowing pumps to slake up pockets of oil that might have been missed. Pulling the bent pipe along is a motorized drill bit that technicians can direct from above ground.
Holifield gushes about this technology the way some guys talk about trucks.
"Geologists are technology guys," says Holifield, picking up a new drill bit made of an expensive metallurgical alloy. "Tungsten carbide will eat anything."
His taste for technology has led him around the world, from Iran in the 1970s to Russia in the early 1990s. There, he planned to rebuild wells that once had produced 4,000 barrels a day, but were then down to 50 to 100 barrels per day.
To help, he brought along "bugs," microbes that eat paraffin wax that builds up in pipes and rock formations and impedes the flow of oil. The bugs worked, and Holifield boosted production to 400 b/d at one well. But Russian bureaucratic rules prevented him from selling any oil. Holifield, who invested his own money, lost millions.
"If we'd stayed in the Austin Chalk and not gone to Russia, we'd be a lot better off," says Karl Lievense, a partner in Holifield's Russia project. "But oil people go where the opportunities are. That's what makes us tick."
One thing is for certain, Holifield does not fit the stereotype of a Texas oilman. His taste in clothes, for instance, tends toward the professorial. His car, a 1988 Cadillac El Dorado, has packing tape holding the trunk closed.
Up on the rig, a few technicians are crowded around a monitor to gauge how deep the drill bit has bored underground. The days when uncontrolled gushers would cover the crew with oil are long past, says foreman Richard Wieder. But with 10-ton pulleys overhead and motors twisting a steep pipe downward just feet away, rig work still has its risks.
"You and me are just seconds away from being killed," he says, pointing to a yellow hoisting block directly overhead. With grim humor, workers call it "the big yellow school bus." "You've got to know when you come up here that this might be your last day."
Even with all the risks, physical and financial, Holifield shows no interest in giving up the oil business. The reason has as much to do with the thrill as it does with profit. "Everything I do is fun," he says. "People don't understand that a job can be like a hobby."
(c) Copyright 2000. The Christian Science Publishing Society