Natural Gas to Buoy U.S. Energy Industry
Fears, Rhonda, THE JOURNAL RECORD
Short term, the U.S. oil and gas industry does not have a lot to be excited about, but long term _ three or four years down the road _ the outlook will improve, buoyed chiefly by natural gas, an industry expert said Thursday.
Vagaries of the oil and gas industry are not a revelation to those in the industry, though. That is the nature of the business.
"I wish I had an exciting forecast for this year. I don't," said Ike Kerridge, vice president of Baker Hughes Inc. of Houston, guest speaker at the Central Oklahoma Chapter of the American Petroleum Institute.
"We are negative for a couple of reasons. Natural gas remains in a condition of oversupply and low prices. Secondly, there's the lack of oil field elephants in the United States." But, by 1995, Kerridge surmised, impacts of the Clean Air Act will kick in and boost demand for natural gas. By the turn of the century, he added, natural gas should get another shot in the arm due to increased use of compressed natural gas in the transportation sector.
The trend of domestic oil companies _confined to the majors and large independents _ curtailing operations at home and doing more drilling overseas will continue, Kerridge speculated. Other experts agree.
For example, a recent Salomon Brothers survey of 82 large oil and gas firms showed that foreign exploration and production operations are expected to rise by 23 percent for 1991 while domestic operations are projected to edge up only 2.1 percent.
"If you follow our rig count, you will suspect that (2.1 percent increase in domestic drilling activity) is too high," Kerridge said. Baker Hughes, a major tool supply company, has tracked the rig count since 1940.
Any uptick in the domestic rig count will be spurred by drilling for natural gas, he said. Baker Hughes forecasts the rig count for 1992 to be flat and only a slight improvement for 1993.
Factors driving the exodus from U.S. oil exploration, Kerridge said, are the reality that most of the oil reserves in the United States have been found and that those reserves worth going after are off limits due to environmental barriers.
Moreover, environmental costs associated with the oil and gas industry will hamper earnings abilities, he said. Increasingly, the industry is improving its earning power, he said, through technological advances, such as three- dimensional seismic studies and horizontal drilling, that lower drilling costs. …