U.S. Oil Production Falls as Firms Look to Foreign Sources

Confirming the trend toward increasing oil imports, energy companies spent more money in 1990 to find and develop oil resources overseas than at home, according to a national oil and gas survey released Thursday.

Also last year, U.S. oil production fell for the fifth straight year, dropping 5% to 2 billion barrels, its lowest point since 1986, according to a survey by the accounting and consulting firm Arthur Andersen & Co. in Houston.

At the same time, companies continued to expand their foreign oil holdings. For the second consecutive year, more than half of total reserves were found overseas.

Independent oil companies in particular increased their foreign holdings. They were up 39% last year, more than double their level in 1986.

In the wake of the Persian Gulf War, the findings underscored the country’s increasing reliance on foreign oil and the nation’s vulnerability to the political and economic upheavals in places where that oil is to be found, analysts said.

“It’s bad because it reduces our flexibility as a country, both on geopolitical grounds as well as on our own security . . . and economic grounds,” said Bruce Pasternack, manager of the energy consulting business at Booz, Allen & Hamilton in San Francisco. “It certainly makes us more concerned about developments in the Middle East and elsewhere than we would be if we were much less dependent on (such) oil.”

On the other hand, increasing exploration of resources in non-OPEC and non-Middle East areas--such as those in West Africa, the North Sea and Southeast Asia--diversifies the U.S. oil supply and reduces the threat to security, others argued.

“To the extent that new reserves are found generally anywhere in the world, except in Iraq, that means there’s greater security for the U.S. and all countries that import oil,” said Victor A. Burk, managing director of Andersen’s oil and gas industry services unit. “That’s not to say, though, that we should not be concerned about declining U.S. production.”

Andersen surveyed financial and other data filed with the Securities and Exchange Commission by 239 public companies from 1986 through 1990. Among its findings:

* Spending to explore for and develop crude oil and natural gas resources outside the United States increased to a record $20.9 billion in 1990 and accounted for 53% of total spending.

* In the last five years, foreign exploration and development spending has grown by 58%. By contrast, spending on U.S. exploration and development increased only 8% in the same period. Spending in the United States rose 15% in 1990 to $2.4 billion, the highest level since 1985.

* U.S. natural gas production increased for the fifth straight year, to 10.3 trillion cubic feet. That jump was spurred in part by expectations of higher natural gas prices--expectations that failed to become reality. Prices are now at their lowest levels ever.

The decline in U.S. oil production results from a combination of factors, analysts said. Oil fields in the lower 48 states have already been heavily developed.

Oil prices are relatively low--in many cases, too low to provide an economic incentive to drill in the United States.

More important--at least in the industry’s view--is that the most promising areas for oil exploration are off limits, including the continental shelf and the Arctic National Wildlife Refuge.

Edwin Rothschild, director of energy policy for the consumer group Citizen Action, argued that the trend to greater oil imports could be offset by greater conservation and energy efficiency, as well as greater reliance on alternative or renewable energy sources.