This will appear in the Bernice Banner, Bernice, Louisiana, USA the week of 1/5/2015

In the late 1970s and early 1980s the oil and gas industry had come to maturity and supply of oil and gas outstripped demand. The world was growing and this growth was fueled by fossil fuels; oil and gas. In 1979 we watched with held breath as the 3-mile Island Nuclear Plant was slowly brought under control and a major nuclear accident was prevented. This had the effect of killing the nuclear electrical power industry in the United States and oil, gas and coal filled the void for electrical production.
Saudi Arabia was the leading producer of crude oil in the world. At its’ peak the country was supplying ten and a half million barrels of crude oil to the free world. The hatred for communism was so great that oil only flowed to non-communist countries. A partnership between Saudi Arabia and America was strong and the bonds ran back to the time that oil was first discovered in Arabia. America depended on the crude to fuel our growing industry. At the same time Saudi Arabia looked to America for oil and gas expertise, construction services and material and equipment. Much to the surprise of most Americans, this bond was so strong that Saudi Arabia ran a trade deficit with the United States and more money was flowing to America for goods and services than was flowing to Arabia for oil.
I was living and working in Arabia during this boom period. I witnessed narrow roads winding through the desert being replaced with six lane highways. A country that had to import cement for its’ massive construction projects developed its’ own cement industry that eventually threatened to flood the world market with cheap cement produced from its’ vast supply of limestone. Oil and gas projects were under construction both onshore and offshore in the mid-1980s. Construction companies from around the free world were everywhere in the oil patch. Then everything changed.
Ninety-eight percent of Saudi Arabia’s gross domestic product came from oil when I arrived in Arabia in 1978. In the mid-80s oil was selling in the mid thirty dollar range and then the price began to slide. The price was not due to speculation but a realization that there was too much oil available in the world. Rigs began to stack in America and the drilling in Arabia slowed. I had attended a class once that was put on by the Facilities Development organization. They told us that you don’t look at costs that have been sunk into a project to determine to continue a project if the financials are looking bad. This proved to be correct.
It was recognized that the oil market was about to crater. The King of Saudi Arabia took the unprecedented move to address the country and stated that due to the drop in oil prices that the country’s budget was no longer valid and the country would run on current revenue. It was reported that Ali Naimi, the first Saudi president and chairman of the board of Aramco was flying over Arabia and contacted the company and had the huge refinery near Riyadh immediately stopped and Bechtel corporation was to be off site in thirty days. I had inherited an offshore project and we were on the last of eight platforms to be installed. I received a call to cancel the remainder of the work and have the barge return to port where the pipe spools on board the barge would be cut into scrap.
Eventually the pendulum swung and Americans returned to Arabia. The country had an explosion of oil and gas expansion and the country has really done their development correctly. Oil and gas facilities were built and the environmental impact considerations has been a major part of the development. Ali Naimi, a highly respected American educated petroleum engineer was named as the Oil Minister and became one of the most powerful men in the world. Unfortunately just when it looked like it would never end, the pendulum has swung again and a slowing economy coupled with over supply is leading to a downturn in the oil industry.
The major oil companies will be the first to delay major developments. A large overhead and tight profit margins will require large capital projects to be shelved. Exxon/Mobil, Shell and Total are all slowing down development to allow for continued unabated dividends to the investors and remain profitable. Drilling will be slowing down and especially in the oil sands projects where expensive processes will make some development cost prohibitive. This is what the development within our own parish is certainly under scrutiny. It is hoped that the smaller producing companies are looking at the long term oil and gas strategy and are making economic evaluations based on three to five years out. In the near future there will not be a better time in years to drill for oil as drilling prices drop.
The one major question to ask is how long will the down-turn last. If short then we are in a good economic position within America. The economy will get a shot in the arm from lower fuel prices. Then if oil and gas comes back quickly with a slow price rise, the economy will have time to absorb the increases and continue its’ growth. If the upturn takes a long time, then it will be years before the industry recovers. The one thing that we do not need is a knee jerk reaction from Washington that will lead to suppressive regulations within the oil and gas industry.


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