DECLINING SEARCH FOR U. S. OIL AND GAS RESERVES The discovery of new reserves, to replace those being consumed, is the foremost and all-important function of the producing industry. Development wells, pipelines, refineries and distribution facilities depend on sufficient new petroleum discoveries to meet increasing requirements. First Chart The three sections of the first chart portray essential elements in the search for new reserves: first, the scientific techniques used as guides to possible future producing provinces (as indicated on the chart by the activity of geophysical crews); second, the leasing of acreage not yet productive; and third, the final drilling of wildcat tests, which is the only known method of actually determining whether or not a productive deposit of oil or gas exists. Obviously, there has been a persistent and sizeable decline in all these exploratory activities which has been offset, but only in part, by advances in scientific and technological methods and increased expenditures in such new highcost provinces as the continental shelf. Geophysical work, expressed in terms of crew months, has dropped from 7,846 in 1956 to 3,479 in 1967 (the latest year for which data are available). This is a decline of more than 50 percent. The decrease in advance scientific testing has been followed by a 22 percent decrease in the total non-productive acres under lease in the United States. 80,000,000 fewer acres were under lease in 1968 as compared with 1956. Almost The effect of declining geophysical activity and reduced leasing are shown in the third section of the chart. The number of wildcat tests drilled in the United States fell from over 8,700 in 1956 to 5,200 in 1968, a drastic reduction of 40 percent. DECLINING ACTIVITY IN DOMESTIC PRODUCING INDUSTRY The deteriorating economic conditions responsible for the declining search for new reserves have also been a factor in the shrinkage in the overall activities of the domestic producing industry, as pictured on the next chart. Second Chart half The total number of active rotary drilling rigs has been more than cut in from 2,600 in 1956 to less than 1,200 in 1968. These figures tell only a part of the story. More important than the statistics, equipment has been cannibalized and highly trained employees have left the industry for better opportunities. Today, there is a very critical manpower shortage in the drilling segment of the industry. It is real, and it must be corrected. drilled The decrease in active rotary rigs has been accompanied by fewer total wells a drop of more than 25,000 wells, or over 40 percent since 1956. Reference has already been made to the critical manpower shortage in trained employees operating drilling rigs. For the producing industry as a whole, total employment has suffered a decrease of more than 60,000 workers, or almost 20 percent since 1956. It should be recognized that part of these decreases can be attributed to wider well spacing and increased efficiencies in all phases of drilling and producing operations. DECLINING INCENTIVES FOR DOMESTIC PRODUCERS Third Chart The declining search for U. S. oil and gas reserves and the declining overall activities of the domestic producing industry, set forth in the first two charts, can be attributed to decreasing attractiveness of capital investments in these unusually high-risk ventures. To re-emphasize the degree of risk, only 2 |