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Archive for Friday, November 11, 2005

Oil prices ignite state boom

As industry revs up again, workers harder to come by

November 11, 2005

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Mike Town drills oil for a living, but he doesn't live the life of a dang cartoon character.

When his family's business, Paola-based Town Oil Co., drills a successful well, crude doesn't gush 30 feet in the air like it does in the cartoons. And Town and his crew don't toss off their cowboy hats and dance a jig either.

"We have been doing this for years," Town said. "We've all seen it before."

Fewer and fewer men can say that these days. The number of drilling crews operating in the state has dropped to about 80, down from about 300 in the early 1980s, said Dave Williams, supervisor of production for the Kansas Corporation Commission.

"Pretty much everybody who knows anything about drilling has gone to do something else, thanks to Mr. Clinton letting oil get down to $7.50 a barrel," Town said.

Boom times

But as every motorist knows, oil isn't at $7.50 a barrel anymore. It is closer to $60 a barrel and that has made oil exploration a hot industry once again in Kansas, regardless of a shortage of drillers.

"We could run two rigs all the time if we had them, and if we could find the people to work them," Town said.

Williams said the number of permits being issued to drill oil and gas wells in the state was up nearly five times what it was in the late 1990s. The KCC currently is averaging 366 drilling permits per month, up from 88 in 1999. The numbers are running steady from 2004 totals but are up from 219 per month in 2003.

Tim Carr, senior scientist at the Lawrence-based Kansas Geological Survey, said the roughly 40,000 oil wells in the state were pumping about 400,000 more barrels per month than was produced in the state in 1998, the low point of the last downturn in oil prices.

"You take 400,000 per month times 60 bucks per barrel, that's a lot of new money," Carr said.

A good chunk of it stays in the state, Carr said. The state collects a 4.3 percent severance tax on the value of all oil produced in the state. With Kansas' oil value expected to rise from $1.3 billion in 2004 to $1.8 billion this year, Carr anticipates the state to rake in an additional $21.5 million in severance taxes.

Plus, landowners, who normally don't own the oil wells on their property, receive 12.5 percent of the value of oil that is pumped from their ground.

"If you have a section of ground in southeast Kansas with oil wells on it, you're doing pretty well these days," Carr said. "The good thing is it pumps money into places that need it. The Russells, the Garden Cities of the world. It brings some prosperity to the hinterlands."

Tough and dirty

But none of this helps drilling companies find more able-bodied employees. Susie Glaze, whose family operates Glaze Drilling in Spring Hill, said she understood why job seekers aren't busting down her door.

"Yeah, it's real glamorous," Glaze said of the work. "There are days you are up to your (rear) in mud. There are other days we've had guys drilling wells where their gloves freeze to the production pipe.

"When kids lay in bed thinking about what they want to do when they grow up, this isn't it."

Tough and dirty would be a good job description for an oil driller, Town said. He said a normal day involves lots of dirt, sifting through limestone shavings looking for signs of oil sand - with names like Peru, Bartlesville and Cattleman - that serve as signs that oil is nearby. And then there's the heavy lifting, everything from blocks to secure the drilling rig to a pipe that weighs six to seven pounds per foot.

"You're talking about a lot of heavy iron," Town said. "It is probably tougher than all those union jobs they have in the city."

A worker shortage isn't the only issue holding the drilling industry back from expansion. Williams said getting new drilling rigs into the field is a tough chore, too. During the down years, it was easy to find good used parts to outfit drilling rigs. But now Williams has talked to drillers who tell how a $4,000 used part now has to be bought new for $30,000 because demand has increased and the supply of steel has become tighter.

"What you're seeing is the aftermath of a 20-year layoff of the domestic drilling industry," Williams said.

Still cautious

The boom in business, though profitable, hasn't been enough to cause oil company operators in eastern Kansas to go crazy with new exploration.

Town said that's because they know all too well that $60 a barrel oil can become $10 a barrel oil in a hurry. He said price concerns have meant that most people looking to drill wells are established operators looking to expand known fields. Town said that in Kansas, wildcatters, the term used for people looking to find new fields of oil, were rare.

"People are real leery of that right now because they don't know what the price will do," Town said. "People don't want to get a half million dollars invested in 10 to 15 rigs and then have oil go back to $7.50 a barrel."

Glaze agreed. She said media reports that oil prices will never become cheap again, don't hold much water with her. She said that's not the way it has ever worked before, so she doesn't figure that's the way it will start working now.

"It's no different than the last 50 years," Glaze said. "It's either chicken or feathers."

Comments

just_another_bozo_on_this_bus 9 years, 1 month ago

"Pretty much everybody who knows anything about drilling has gone to do something else, thanks to Mr. Clinton letting oil get down to $7.50 a barrel," Town said.

I guess that pretty much sums up this guy's "expertise." I'm not sure how much credence should be placed in anything else he said, either.

audvisartist 9 years, 1 month ago

Yeah, I'd rather have $60/barrel oil and make these guys rich! Who needs $7.50/barrel oil?!

KsTwister 9 years, 1 month ago

I will be the first in line to buy a hydrogen fueled vehicle. Kansas used to be covered with the oil rigs(pre 1970) -it was not a pretty sight or was it cheaper or did it smell good.

just_another_bozo_on_this_bus 9 years, 1 month ago

I guess we all would. The president can do a lot to affect oil prices, but the major pressures that would put the price at $7.50 a barrel wouldn't originate in the White House.

Raider 9 years, 1 month ago

Twister,

Why would you be in line to buy a hydrogen vehicle if you're so against the oil companies? Why do you think that Bush and Co. are pushing hydrogen cell technology? Because in order to produce the hydrogen, they need oil. The optimism over hyrdogen cells is just what Bush and big oil are hoping for.

Liberty 9 years, 1 month ago

How about magnetics? It is the clean energy of the future and renewable.

Liberty 9 years, 1 month ago

Prosector,

Yes, with more development I believe they can. Look at:

http://www.cycclone.com

Liberty 9 years, 1 month ago

Whoops I had typo... I mean prospector.

KsTwister 9 years, 1 month ago

Raider: When hydrogen burns, the only by-product is water not the polluting cocktail given off by burning petrol and other fossil fuels. The advantages of hydrogen are enormous: no more smog-forming exhaust gases, no more carbon dioxide emissions that contribute to global warming, no more worries about diminishing oil supplies and rising prices. Research has indicated that the airship's fabric, not hydrogen, was the culprit in the Hindenburg disaster. Properly handled, there's no reason to think hydrogen is any more dangerous as a fuel than petrol, the explosive liquid now carried safely in the tanks of untold millions of motor vehicles. There's no risk that we'll ever run out of hydrogen, it's by far the most plentiful element in the universe. Look it up. If they make it from algae I highly doubt the oil companies will benefit which is why they are getting our billions of dollars now.

mseybold 9 years, 1 month ago

http://www.lifeaftertheoilcrash.net

You need more energy to create hydrogen fuel than you will ever get out of it.

Centrist 9 years, 1 month ago

If oil really was $7.50 during the Clinton years, i.e BETWEEN 1992 AND 2000, then why wasn't gas at about 20 cents a gallon to the consumer? Hmmm .................

james bush 9 years, 1 month ago

T Boone Pickens was on cable news--fox or somebody. He's changed his tune from last i saw him---more humble and less sure that $100/barrel was practically a sure thing. The oil cartel is among us!! If the republicans keep screwing up, the dems are going to win then nationalize the oil industry here along with socializing all other industry so we all depend on the government.

james bush 9 years, 1 month ago

Larry Kudlow, conservative economist and advisor to Pres Reagan, now a program on Fox cable just said an oil "guy" (analyst) said troday that oil could/will go back to $35/40 per barrel!

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