Trend to Foreign Sources Signals More Oil Imports
For the first time, major oil companies operating in the United States last year spent more money outside the country to find oil than they spent in it and owned more oil reserves abroad than here, a survey by the accounting firm of Arthur Andersen & Co. showed Tuesday.
The survey, which also showed that the companies produced slightly more oil abroad than in this country in 1989 for the first time, was seen as further confirmation that the United States is rapidly becoming a permanent net importer of oil.
“We’re looking at a level of imports that’s becoming a structural problem that we’ll have to learn to live with on a long-term basis,” said Patrick Connolly, a senior consultant at Cambridge Energy Research Associates in Massachusetts.
The disclosures were contained in Andersen’s 11th annual survey of information filed with the Securities and Exchange Commission detailing the finances and oil and natural gas reserves of 236 public oil companies with more than 1 million barrels of reserves. The survey included the major U.S. oil firms, some Canadian companies and three other big foreign producers: British Petroleum, Royal Dutch Shell and Broken Hill Proprietary of Australia.
In presenting the findings at a news conference in Houston, Victor A. Burk, managing director of Andersen’s Oil & Gas Industry Services unit, said: “This year’s study revealed that in the past year, the U.S., as an industry and a nation, has passed several thresholds that point toward both increasing future dependence on foreign energy sources and expanding opportunities (overseas) for domestic energy companies.”
The trend was attributed in part to increasing environmental restrictions on U.S. oil production, such as President Bush’s decision last week to delay offshore drilling.
“It’s not surprising, in view of what Congress and the Administration are doing to opportunities for drilling in U.S. waters and lands,” said R. G. Ensz, a spokesman for the American Petroleum Institute, the industry’s main trade group. “I think the facts speak rather eloquently.”
Philip K. Verleger Jr., a visiting fellow at the Washington-based Institute for International Economics, put it another way: “I guess it means that politicians feel that Americans would rather wait in an occasional gas line and have clean beaches.”
Industry fears notwithstanding, it is not clear whether the shift to imports makes the United States more vulnerable to 1970s-style oil embargoes and price shocks.
“I think we’re in a different environment than we were in the 1970s,” Burk said in a telephone interview. “Exporting countries are just as concerned about price stability and a secure market for their oil as we are about price stability and secure supplies.”
Unlike the 1970s, when U.S. imports came primarily from the Persian Gulf, oil now comes to the United States from sources as diverse as Pakistan, Angola, Argentina and Syria.
“It’s not so much foreign dependency, but the number of people on whom you’re dependent that is the worrisome question,” said industry analyst Bernard J. Picchi at the Salomon Bros. investment firm in New York. “As the U.S. has a very large, culturally, geographically and politically diversified portfolio of supply sources, that needn’t in itself be worrisome from a national security point of view.”
Moreover, the Organization of Petroleum Exporting Countries, the cartel that controls much of the world’s oil production, is less likely to disrupt oil supplies now that it has stronger financial ties with consuming nations than in the 1970s, analysts say.
At the same time, however, “It is not the case that U.S. oil companies’ equity ownership of oil overseas makes them more secure,” Verleger said. “Political revolutions do not skip over U.S.-owned assets; in fact, they pick on them. If there were a politically motivated embargo again--though it might fail--U.S. companies could still be ordered not to ship oil to the U.S., and they would have to comply just as they did in 1973.”
Among the Andersen survey’s findings:
The companies surveyed spent $21.9 billion on oil exploration and development outside the United States in 1989, an increase of $3.7 billion over 1988. That compares with the $17.3 billion they spent in this country in 1989, a decrease of $1.1 billion.
The companies’ proved oil reserves outside the United States in 1989 were 22.1 billion barrels, compared with U.S. reserves of 22.0 billion. In 1988, non-U.S. reserves stood at 21.6 billion barrels; U.S. reserves were 22.3 billion.
Oil production by the companies in the United States was 2.103 billion barrels in 1989, slightly below their total non-U.S. production of 2.132 billion. In 1988, U.S. production was 2.223 billion barrels, and production outside this country was 2.174 billion.
The companies account for about 60% of the total proved oil and gas reserves in the United States and roughly the same percentage of total oil and gas production in the country, the survey said. The federal government, privately held companies and individuals hold much of the rest.
Overall, total domestic oil production has dropped 17%, or 1.8 million barrels a day, since 1986, the survey found. It is expected to fall another 400,000 barrels a day in 1990, and 1 million barrels a day by 1995.
At the same time, U.S. demand for oil will rise by 1% a year, or 1 million barrels a day, through 1995, the survey said.
The supply shortfall will be made up through imports, which now cost the United States about $50 billion a year. At current prices, each 1 million barrels a day of new imports will add about $6 billion to the U.S. trade deficit and require as many as 40 new oil tankers at a cost of $80 million to $90 million each, the survey said.
Daniel Yergin, president of Cambridge Energy Research, said the survey “reflects the fact that capital is abandoning American oil fields. The general view in the industry is that prospects for commercial discoveries are better almost everywhere else than in the U.S.”
With offshore and Alaskan drilling unlikely in the near future, there are few other prospects for large, new discoveries of oil left in the United States, analysts said. Those projects that have been built, such as the production platforms off Point Arguello in Santa Barbara County, have been stalled by regulatory delays and environmental concerns at great expense to sponsoring oil companies.
At the same time, there are greater opportunities than ever for oil companies to develop overseas prospects. The Soviet Union, the world’s largest oil producer, has been opening the door for possible oil production partnerships with Western oil companies in recent months.
In addition, some members of OPEC are showing signs that they may consider similar ventures with Western partners for the first time since many private oil fields in OPEC nations were nationalized in the 1970s. Some OPEC countries need help expanding production capacity to forestall possible supply shortages in the mid-1990s.
Notwithstanding the shift to foreign oil, the survey said the energy industry is showing continuing signs of good health. The findings “also represent opportunities for U.S. oil and gas companies and U.S. oil field services companies--not just the majors, but the independents as well,” Burk said.
