Roughneck City Blog

2015-09-21
By: Roughneck City
Posted in: PERSONAL

Ouija Boards, Oil Booms and Commodity Cheese


Drilling Rigs Stacked in Midland TexasMany of you are too young to remember the oil bust of the 1980s in fact many of you were yet to be born BUT there was another time when drilling for oil and gas came to a screeching halt overnight in the United States.

In week 49 of 1981 there were 4505 active drilling rigs in the United States. By week 28 of 1986 that number had plummeted to just 663 over 5 years. We lost 3842 rigs with their crews and service company employees to the bust. The effect on our local economies was devastating. (1)

Drilling rigs that once littered rural evening skies disappeared overnight, banks failed faster than the engine of an Oldsmobile Cutlass Diesel running on rig fuel. We were all left to survive on dwindling unemployment checks and words from 'higher ups" that the rigs would be going back up soon. They never did.

 Those lucky enough to get a job "Dry-Watching" a stacked rig fared better while still able to draw a paycheck to protect the disassembled rig from theft were also able sell off what diesel remained in the rigs fuel tank to local farmers at a discounted price- but soon even that ran out.

 Unemployed oilfield workers arriving hours before opening at their local employment offices found the lines already numbering in the hundreds running down the sidewalks in the early morning darkness as local churches set up to serve coffee, donuts and hope to the befallen American Oil Worker.

 Money loaned by local banks to any oilfield worker who could sign his name quickly dried up. The payments on that 1982 short bed Chevy 4X4 pick up that came with a factory sticker price of $13,000 could no longer be made. Neither could the payments on the Harleys, the Three Wheelers and the Jet Boats. Few workers saved much money, electing to finance everything long term in what proved to be a short term boom.Oldsmobile Diesel Rig Car

Many held on as long as possible drawing unemployment benefits and rejoicing when they received a "Federal Extension" of their benefits while they worked low paying local jobs for cash on the side. The "rebound" everyone predicted that would make this bump in the road short term, never came.

Without the advances of the internet and "Bloggers" today who seem to have all the answers, we were left with "Ouija Boards" and that big black "Magic 8 Ball" to summon knowledge from the demons on the other side. After time and lost hope our questions to the other worldly spirits often turned from "when will my rig go back up" to silliness like "when will I die..." Even those questions faded as bank after bank failed and homes were repossessed or abandoned. Hope of prospering was lost. We all went into survival mode.

Commodity or Government Cheese We all learned to live on "Commodity" or "Government Cheese" which was part of the 1982 Temporary Food Assistance Program that provided various surplus commodities to the needy public through county agencies. These commodities included blocks of cheese and butter in generic wrappings (which were most sought after). Often included in your box were Peanut Butter, Flour, Powdered Milk, Canned Pork and sometimes Canned Salmon. No matter how much cheese you put on that canned pork it still tasted like ass. I can't begin count all the Peanut Butter and Syrup sandwiches I must have ate!

  I never really understood the purpose of the program because those with money and means stood in line with the rest of us to get this free cheese, filling their box with a smile same as the rest of us, but still, it was welcomed relief to the jobless at the time. I really miss that cheese!

Many workers left the oil and gas industry for good seeking employment in construction, trucking and other areas with vows  never to return. Some did return over the years, wiser from the experience, saving money and avoiding debt during the long slow recovery. New workers, young men who never experienced the earlier busts also joined ranks, financing all the toys that make a life of hard work fun, needing to experience their own BUST before they could heed the words of those who came before them.

George Mitchell credited with unlocking the secrets of fracking horiziontal tight gas wellsSlowly and with years  the oilfield work returned sponsored by our nation's growing need for fuel as the economy eventually recovered and then prospered. Technoligical advances in drill bit design brought us the PDC bit which enabled ripping through shale formations in a fraction of the conventional time dramatically reducing costs to drill a well.

Directional/Horizontal drilling was perfected with the use of downhole motors and MWD tools while George Mitchell was unlocking the Barnett Shale with his experimental hydraulic fracturing techniques, opening vast reserves in oil plays across the nation. Through new technology we were able to drill farther, faster and cheaper than ever before unlocking previously unrecoverable reserves of oil and gas.

Today, in 2015 we have come full circle from the  boom and bust of the 1980's. The technological advances that brought us out of the last bust and into prosperity have now created an over abundance of world oil. As world economies falter world consumption of oil decreases and supply has quickly out paced demand. Companies and even countries compete for market share offering their oil at lower and lower prices in attempts to maintain cash flow and put their competitors out of business.

 Today's recovery is likely to be similar to the recovery from the 1980's in that it's slow and will require technology and innovation on the part of producers to compete with costs associated with OPEC oil. Already it's started as companies experiment with "Refracking" a process of fracking older wells using the newer technology associated with todays hydrofracturing in hopes that it increases production from existing wells at the fraction of the cost of drilling/producing a new well.

Future technology that could be a game changer already exists in the form of LNG export facilities. (2)The ability to liquify natural gas for the purpose of exporting/shipping on tankers has been around for a long time but the cost for such a facility runs into the billions of dollars and takes years to build. Still a few companies like Cheniere Energy have an LNG export facility in the works. When natural gas produced in the USA is no longer land locked and can be shipped abroad we should see an increase in prices of natural gas as we export the surplus while receiving a global price for the commodity. We could accept less for oil produced from our wells if the value of the natural gas were to increase. 

Other technology is in the works I am sure as I read daily on advances in drilling trying to keep myself up to speed-but until the metrics of oil and gas production improve, I am sure going to miss that government cheese!

Good luck to all of you-Hang in there!

 

(1)

North America Rotary Rig Counts through 2014.pdf Historical Rig Counts
North America Rotary Rig Counts through 2014.pdf, 350KB
 

(2)

lng-proposed-export.pdf Proposed LNG Export Facilities
lng-proposed-export.pdf, 80KB
 

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