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EnidNews.com --
2005
Oil and gas picking up, helping region
By Robert
Barron
Staff Writer
The 1980s nearly ruined the oil and
gas business, and Oklahoma’s industry has had a hard
time coming back. However, the future looks good thanks
to new technology.
Enid oilman Harold Hamm summed up the
problem in two words, “chronic under-investment.”
“From 1982 until recently we had some
of the cheapest oil and gas in the world. People in this
industry didn’t have the money or the capital to put
back into it,” Hamm said.
As a result, the nearly 20 years of
cheap prices resulted in under- investment which
affected the people, equipment and infrastructure.
Lew Ward, of Ward Petroleum, said
people in the industry have become more “risk averse,”
than in the past.
“Many in the industry have gone on to
other things,” he said.
That trend has begun to turn around
in the last six months to a year, but it takes longer
than that to convince people in the industry the
improving oil and gas economy will stay awhile.
“The survivors, people in the
industry, have to be convinced they can make enough
money to reinvest and get going again and we’re seeing
that happen,” he said.
Oklahoma dropped to a low of 70 rigs,
but has now doubled that to 150 rigs, which primarily
drill for natural gas like the rest of the nation is
doing.
But those companies are plagued with
a manpower shortage. Colleges have not turned out
individuals trained for the oil business. Hamm said
there is a shortage of land men, engineers and
geologists. Those are not professions being chosen by
college students.
Reserves are now harder to find.
Great strides are being made with alternative energy
sources such as methane gas from coal and shale. He
cited the Fort Worth Basin as an example of that.
Some of the energy will come from
alternative sources, like the development of Bakken
Shale formations in the Williston Basin in Montana and
North Dakota.
New technologies like horizontal
drilling and new ways of fracture stimulation will allow
production in commercial quantities, Hamm said.
“We will have to do some things
different. Conventional reservoirs are harder to find,
but there is still a lot of oil and gas. We will have to
change our ways and put money into the business, we have
to overcome the chronic under-investment,” he said.
There is a lot of oil and gas to be
found if the money is there and if the future looks
stable enough to support investment again in the
business.
“There is a lot of unexplored area in
Oklahoma,” Hamm said.
Ward said Oklahoma does not have the
problem faced by the industry in some other areas of the
United States like the Rockies, where there are good
prospects but they cannot drill.
“We can drill just about anywhere in
Oklahoma, but it’s deeper and more expensive,” Ward
said.
People who put up risk capital are
looking for a better return than they have seen in the
past in Oklahoma.
Gas is more valuable than oil now. As
drilling goes deeper there is a higher quantity of gas
than oil, he said.
“In Oklahoma today, most deeper
prospects are supported by new seismic technology which
reduces some risk,” he said.
Producers now wait two or three
months to get on a list for a 1,500 horsepower rig
capable of drilling 18,000 to 19,000 feet.
“Times are pretty good for deeper
drilling,” Ward said.
However, going deeper costs more.
Costs increase exponentially the deeper you go, he said.
The Tax Reform Act of 1986 drove the
passive investors, high income earners out of the
industry. The act made it unattractive to invest in oil
and gas.
Ward said the industry also had an
image problem during those years, heightened by the
television show “Dallas.”
The Oklahoma Environmental Resources
Board (OERB) has helped improve that image.
“New technology gives the risk
takers, i.e. wildcatters, the confidence to take higher
risk opportunities. A lot of drilling will be done below
15,000 feet and some below 20,000 feet The opportunities
at the deeper depths are exciting, but largely unknown,”
he said.
Ward is concerned that fear of high
prices at the pump will cause demand to fall.
“In some cases demand will never come
back,” he said.
High prices underscore a need for
alternative fuels like solar and wind power.
“We look for stable prices for
natural gas not too far below where it is today. The
prospects will meet the economic criteria as set by the
market, he said. “There are so many new technologies
available today that were not available to small
independent producers a few years ago, it makes it
pretty exciting world to wake up to every morning.”
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