With little attention or sympathy from the American public, much of the U.S. oil industry is packing it in and moving overseas.
Few sectors of the economy have faced a more wrenching adjustment during a period of fundamental economic change than the domestic oil business. Some statistics from the American Petroleum Institute tell the story:
* More than half the 754,500 jobs in U.S. exploration and production that existed in 1982 are now gone.
* Almost a third of 165,800 jobs in U.S refineries have disappeared.
* More than 3,300 of the roughly 4,000 drilling rigs that were working in the country in 1981 are no longer operating.
* Profits for 20 major U.S. oil companies dropped 57% in the first quarter of 1992, compared to the same period last year.
Most oil industry executives blame this state of affairs on low oil and natural gas prices and a lack of promising new energy fields to explore in the United States.
Most industry leaders agree that efforts to preserve the Arctic National Wildlife Refuge (ANWR) and various offshore tracts from exploration are pushing the industry overseas.
And exploration is the key to growth, says Unocal Corp. Chairman Richard J. Stegemeier.
"The hunting grounds have largely disappeared," Stegemeier says, "while at the same time the hunting grounds overseas are opening up as Eastern Europe is emerging. . . . And they are begging for the same oil companies to come into their countries and help them in their economic growth while the American oil companies in the United States are being essentially told to leave."
As a result, big oil companies will spend 12.4% less for U.S. exploration and production in 1992. Meanwhile, a group of 36 U.S. oil companies have increased their exploration and production spending outside North America by more than 20% in the past two years, according to the Oil & Gas Journal.
Yet there is another side to the domestic oil exploration story. Most oil planners believe that many of the best discoveries have already been made in the intensely explored United States. The big strikes are likely to come in new areas overseas anyway.
"I think that's something that's just beginning and will continue for a long period of time, even if we relent and let the oil companies into ANWR," said William D. Hermann, Chevron's chief economist. "We've poked a lot of holes in the United States."
The hottest area of interest is Russia and other former Soviet states.
In a breakthrough joint venture, Chevron recently signed an agreement with the Republic of Kazakhstan to develop the Tengiz field near the Caspian Sea. Tengiz is known in the oil industry as a super giant, or elephant field, and is estimated to be roughly the size of Prudhoe Bay, the largest U.S. oil tract.
The big multinational oil companies have so far moved cautiously in the politically unsettled former Soviet republics.
"But they didn't get this way by being cautious," says Philip K. Verleger Jr., an economist at the Institute for International Economics in Washington, D.C. "They got this way by exploring for oil, which is inherently a very risky business. . . . And Chevron, to its credit, is doing what made these companies big and successful."
Meanwhile, U.S. companies have also had a rough time in recent years in the areas of refining and marketing. And the worst may be yet to come.
"The margins on oil--the difference between the price of gasoline and price of crude oil--are extremely narrow right now," says Charles J. DiBona, president of the American Petroleum Institute. But how to meet increasingly stringent environmental regulations is of far greater concern.
DiBona and others predict that many U.S. refineries will close--either because they cannot afford to control refinery emissions or because they cannot afford to produce the new low-emission petroleum products being mandated by state and federal air pollution laws.
"Some refineries are quite modern," DiBona notes, "and the amount of investment you would have to make to let them make reformulated gasoline is reasonable." But others, DiBona says, would take too much money and would likely close.
In California, Unocal announced last week that it would withdraw from the California market for diesel fuel because the company did not believe it could economically, or technologically, meet the state's fall 1993 deadline for lower-emission fuel. A day later, however, Chevron Corp. and the state Air Resources Board announced that Chevron's plan for reformulated diesel product met the standard.
On the international scene, the most attractive markets for finished petroleum products are in the Far East--China, Japan, Indonesia, the Philippines, Taiwan, Korea and Malaysia. But it remains to be seen how well U.S. companies can penetrate these markets.
Some, like Unocal, do not plan to try.
With a steady U.S. demand, and refineries closing at a rate that Stegemeier estimates to be a million barrels of production capacity a day, he sees Unocal's product future closer to home.
"I think there's plenty of market here for any gasoline we can make in the United States," he says.
Declining Domestic Oil Industry
Two barometers of petroleum exploration activity--employment and number of drilling companies--show dramatic decreases in the United States over the past decade. Most U.S.-based oil companies are switching their exploration and production efforts overseas.
Source: Grace Energy Corp.