Unocal to Boost Oil Drilling; Firm Cites Higher Revenue

Unocal Corp., citing higher crude oil revenue as a result of the Middle East crisis, said Monday that it would speed up plans for drilling in North America, joining a handful of other companies that have boosted oil spending since the Iraqi invasion.

Unocal said it would increase its 1990 North American development drilling budget by 12%, or $33 million, to drill 93 new development oil wells in the United States and Canada that were originally scheduled to be drilled in 1991.

With the announcement, Los Angeles-based Unocal joins companies such as Conoco Inc. and Chevron Corp., who earlier announced plans to speed up some drilling to take advantage of a windfall resulting from higher oil prices.

But analysts said the projects do not signal a widespread increase in U.S. oil drilling activity as a result of the Middle East crisis. That’s mainly because most oil executives are reluctant to change long-term spending plans based on what is perceived as a momentary run-up of crude prices.

“It’s the anticipation of prices that focuses exploration (planning),” said Robert Megill, a petroleum economist and former Exxon Corp. executive in Houston. That means “prices five years down the road,” he said.

Most industry executives expect crude oil prices to fall from their current high levels once the crisis is resolved, removing the long-term financial incentive for dramatic increases in U.S. drilling.

Unocal’s stepped-up drilling plans “reflect the use of additional cash that’s coming into the upstream (exploration and development) part of the company because of higher oil prices,” said John F. Imle Jr., a Unocal senior vice president.

But, he added, these are projects that were planned all along based on oil price projections made before the Middle East crisis began. They are not marginal projects that suddenly appear more attractive simply because prices have jumped for now.

The 93 new wells, including 20 in California, are expected to increase the company’s net production of oil and liquids by 5,700 barrels a day by 1991.

Last week, Unocal Corp. reported that third-quarter earnings had risen 53% to $121 million from $79 million in the like period a year earlier.

Other companies that have recently stepped up drilling include:

* Chevron, which in August said it would spend an additional $100 million in 1990 on domestic oil and natural gas production, an increase of about 10% over its total U.S. exploration and production budget. The money would be used to drill about 130 development wells in major existing oil fields in California, Colorado, Texas and the Gulf of Mexico.

* Conoco Inc., which said it would increase its 1990 exploration and production budget by $10 million, to $540 million, to drill five new exploration wells in the Gulf of Mexico that had been originally scheduled in 1991.

* British Petroleum and Atlantic Richfield Co., which, since the Middle East crisis began, have stepped up a program of well stimulation on Alaska’s North Slope, helping to boost production. Separately, they announced plans to spend $1.1 billion on a long-term gas handling project designed to arrest the decline of Alaskan oil production.

Elsewhere, there are signs that oil drillers have increased their activity since Iraq invaded Kuwait.

This week, the number of active oil and natural gas rigs increased to 1,107 from 1,010 a year ago, according to the widely consulted rig count report released Monday by oil services company Baker Hughes Inc.

The rig count, which is a measure of the number of rigs exploring for oil, has risen in eight of the last 10 weeks and is at its highest level in about 2 1/2 years, said Baker Hughes spokesman Ron Turner in Houston.

Overall, the oil industry had planned to increase upstream spending in 1990 independent of the Middle East crisis, expecting oil prices to rise gradually on their own. But there remain real impediments to dramatic increases in domestic oil drilling, and most oil companies have been shifting their efforts overseas.

The oil industry argues that the likeliest sources of large, new oil discoveries in the United States are off limits, including offshore areas and the Arctic National Wildlife Refuge.

In addition, the number of available drilling rigs and rig crews has dropped dramatically since the oil boom of the early 1980s. In December, 1981, the rig count peaked at 4,500. After oil prices crashed in the summer of 1986, the rig count plummeted to 663.