The Lower 48

Almost totally unnoticed amid the debate over Alaskan oil and the Administration's energy program has been some encouraging news. Spurred on by the prospect of higher prices, oilmen have sharply stepped up the pace of exploration in the Lower 48 states. New wells are being sunk at the highest rate in nearly two decades. More than 2,000 drilling rigs--meaning just about every one available--are now boring for gas and oil on shore, v. an average of only 975 six years ago.

More important, one in six wildcat wells (wells drilled where there has been no previous exploration) has been striking oil or gas--a very high success rate. "We are finding big gas fields in Oklahoma, western Wyoming and even Nevada, of all places!" says Marvin Davis. head of Denver's Davis Oil Co a big independent driller. "There is so much baloney coming out of Washington that we are running out of oil and gas."

In the long run, of course, Washington is right: U.S. supplies are definitely being depleted. Still, the upsurge in drilling suggests that oilmen have a point in maintaining that more reserves can be found--provided the price is right. In the 1950s, when oil and gas prices were relatively high, drilling activity was intense. But then Government imposed tight ceilings on the cost of oil and so-called interstate gas, with the now familiar result: the major oil companies began to import cheaper fuel from the Middle East, and domestic exploration declined. What convinced many oilmen that domestic exploration would again be worthwhile was the explosion in world oil prices and the campaign promises by both Gerald Ford and Jimmy Carter to deregulate natural-gas prices.

Up to 90% of the new drilling is the work of independent operators Their names--Houston Oil & Minerals Mesa Petroleum; Sanchez-O'Brien and Denver's Davis Oil are some of the "hot" outfits--are unknown to the public. But last year Davis, for example, discovered more onshore gas and oil wells in the U.S. than Exxon. Lately the big firms have begun to drill more too. So far this year Shell has sunk 59 wells in the U.S., compared with only 51 for all of 1976.

Step-Out Wells. Though new fields are being developed in the Rockies, Wyoming and Montana, the most activity right now is in such heavily drilled-over states as Texas, Louisiana, Oklahoma and Kansas. Operators are squeezing more oil out of those areas through "step-out" drilling--boring wells just beyond old ones or sinking them deeper In central Oklahoma's heavily drilled East Guthrie field, eleven new step-out wells now produce more than 10,000 bbl of oil a day.

Offshore exploration is picking up too, though at a slower tempo. The offshore operators (generally big oil companies) complain that federal courts and Washington inertia are holding up the exploration of promising areas on the continental shelf. Carter's energy program promises that newly discovered oil will be sold at the current world price (now $12.70 per bbl.). The onshore operators object that they still face disadvantages because of price ceilings on oil from wells already in production and continued federal controls on natural gas. (Carter has decided to back away from his pledge for gas deregulation.) Yet exploration on land is becoming expensive too. In the past, drillers rarely went deeper than 4,000 ft. to find gas or oil. Nowadays, the job of bringing in new oil from an old field frequently means going down as far as 20,000 ft. Cost per well at that depth: $2 million, or nearly 30 times the cost for shallower old wells.

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