The Louisiana Splash

Like pond-scrimming beetles, hundreds of speedboats and scows criss crossed the Gulf of Mexico last week carrying men and material to 88 rigs perched off the Louisiana coast. Helicopters whirred overhead, and field offices set up by 20 major oil companies bulged with engineers and geological surveyors. Arcing from the Mississippi Delta westward to the Sabine River and extending seaward 75 miles, Louisiana's 47 offshore oilfields cover a pool of more than 10 billion bbl. Coastal Louisiana, as a result, has become the world's busiest offshore oil site.

Most Generous. Domestic-oil exploration has changed drastically since the 1956 Suez crisis touched off an any-thing-goes search for more Stateside oil. Renewed imports, tightened state restrictions to guard reserves, and marginal returns from shallow drilling are forcing today's oilmen to drill deeper and to move into states where allowables--the monthly production quotas imposed by the state--are more generous. Louisiana is not only among the most liberal in quotas, but has the best deep-drill prospects. Though Texas still leads all oil-producing states (35.5% of U.S. production), its oil output has declined steadily since 1951. Louisiana four years ago bumped California from second place, last year raised its production another 13% to 521.1 million bbl.--25% of it in offshore oil.

The oil companies that have flocked offshore have to drill down through as much as 300 ft. of water and 16,000 ft. of mud and shale. A single successful well costs as much as $3,000,000, about six times the cost of a similar dry-land operation. The lease on a giant three-legged drilling platform, such as Kerr-McGee's Kermac 54, now jack-legged this week into 180 ft. of water 80 miles from shore, runs to $8,000 a day. Oil companies so far have invested $4.25 billion in offshore operations, recovered $1.75 billion of it. Under such conditions, all but a handful of independents have been frozen out of the play.

Even the major companies have found it wise to syndicate offshore. Shell, Humble and Standard of California are the three biggest offshore explorers, but each has entered partnerships besides maintaining a solo operation. The fourth-biggest operation, C.A.T.C., is a syndicate formed by Continental, Atlantic, Tidewater and Cities Service; since 1953 it has had 300 successful completions in 600 attempts. But C.A.T.C. has also spent $497 million, climbed out of a sea of red only in 1962.

Contested Claims. Both the U.S. Government and the state of Louisiana will profit from the offshore boom, but no one yet knows to what extent. Congress set out to settle the tidelands oil controversy in 1953 by extending state ownership of coastal waters to three miles, beyond which the Government takes the lease and royalty profits. But it neglected to designate a base point for the measurement (low-tide mark, land mass, mud flats?), and jurisdictional claims are being contested on 20% of the Louisiana tracts. Until the point is determined, contested royalties go into escrow. But the question of ownership scarcely bothers the oil companies, which have settled down for a long haul. To eliminate barge hauling, they have already laid a whole network of pipes on the Gulf floor to carry oil and natural gas to onshore refineries.

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