"While jobs are being eliminated in North America, we will be
adding new positions in international" operations, Charles L.
Blackburn, chairman and chief executive of Maxus, said at the time.
The natural-gas supply glut was caused by many factors. Many
big oil companies have kept gas flowing at high rates in the last
two years to generate cash from domestic gas fields to invest into
more promising fields abroad.
Tax incentives approved by Congress in recent years have also
Companies producing gas from underground coal layers, mainly in
northwestern New Mexico and northern Alabama, and from dense rock
formations called tight sands in West Texas and other sites, are
eligible for big tax credits that make gas sales profitable even if
prices fall below $1. The credits amount to as much as 90 cents per
1,000 cubic feet of gas produced through the year 2002 from wells
drilled before the end of 1992.
In addition, a Reagan administration policy that opened
hundreds of government-owned blocks in the Gulf of Mexico to
drillers in 1984 and 1985 has led to rising sales of offshore gas
in the last few years. Hundreds of wells developed after those
lease sales in the mid-1980s are now in full production.
Leaps in drilling technology have lowered exploration costs and
sharpened the eye of oil and gas explorers. High-speed computers
are charting three-dimensional maps of drilling prospects by
tracking sound waves reflected from rock layers thousands of feet
While the diversified oil giants and most major independent
producers have adjusted to the drop in natural-gas revenues,
smaller independents are struggling. Freedenthal said that small
producers were ripe for a shakeout in an industry that he said had
become bloated during its last boom, and has since been gradually
The Independent Petroleum Association now has about 8,000
members, down from 20,000 in the early 1980s. As natural gas
operators are shunned by Wall Street, banks and other sources of
financing, the independents must pay for drilling programs mainly
from their shrinking revenues. The price collapse has caused many
to sharply curtail or halt their drilling efforts.
Eugene L. Ames, a small producer based in San Antonio and
chairman of the independent producers group, warned Congress at a
hearing last month that the exploration and drilling capabilities
of domestic oil-and-gas producers were "nearing a state of economic
collapse and few outside the industry know it."
A few big independents that have low debt and adequate cash
reserves have restricted a portion of their gas sales. …