New Frontiers

By Maurice Barnfather, Editor, Insider Moves

In 1859, Colonel Edwin Drake struck oil in Pennsylvania by drilling rather than digging, adapting the old Chinese trick of drilling for salt. That prompted the world’s first oil boom, which inevitably led to bust as oil flooded the market and prices collapsed.

Another set of unlikely innovators struck oil in unpromising terrain at Spindletop, Texas, in 1901. They used novel drill bits that rotated through the earth rather than merely pounding it, enabling them to reach far greater depths. This started up a ferocious gusher that spewed out nearly 1 million barrels of oil in ten days. It marked the birth of the modern oil industry. Inevitably, this boom once again led to bust as oil grew ever more plentiful.

And yet, despite this history of innovation and abundance, concerns about depletion are once again clouding the industry’s future. This time round, argue the doomsayers, depletion really is looming, and technology will not come to the rescue, as it has done in the past. If they are right, today’s oil prices are but a harbinger of much, much worse to come.

To be sure, a little over a century after the industry’s first gusher tapped Spindletop, discovering new oil-fields and trying to suck them dry remains more miss than hit. However, the arrival of 3D seismic imaging in the late 1980s and 1990s is transforming the industry. By helping to make sense of what is going on inside the rocks below the surface of the earth and the sea, this has made the process of finding oil much less a hit-and-miss affair.

Veterans of the oil industry recall that not many years ago the notion of finding oil under thousands of feet of water was ridiculed. However, thanks to advances such as seismic imaging – plus some lucky strikes by a few intrepid deep-water pioneers – that view has been debunked. Oil majors are now betting that enormous amounts of oil are trapped under the ocean off Brazil, West Africa and the Gulf of Mexico.

There is no question that accurate seismic data will lead to better placement and drilling of wells. Today’s drillers are already using techniques that were unimaginable by roughnecks in the 1970s. Nearly all the dangerous work is now mechanized, and the supervision is done not at the drill but in a comfortable control room that is well out of harm’s way.

The shift in innovation has been a boon to smaller companies in the oil business. Insider Moves profiles an independent oil services company where six insiders have been sizeable buyers of stock.

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