Oil and Water

Ten years ago I guess you could call yourself a Texan if you hadn’t been to the Offshore Technology Conference in Houston, but an easy conversance with the OTC and its ways certainly bolstered your credentials. Back then the OTC was, like riding a horse or drinking a beer in a honky-tonk, one of the defining experiences of the old Texas. The conference is still the largest gathering of oil patch folks in the world, but this year’s OTC, with just 35,000 people attending, was a mere shadow of the 1982 conference, which had 108,000 attendees and 2,500 company exhibitors. That was the last year that Texas seemed in control of both its own destiny and that of the world. The price of oil was supposed to rise forever, and no one knew how to find oil and pump oil and transport oil and refine oil and, for that matter, consume oil like Texans did.

The excesses of the Texas character dominated the 1982 conference. The proper way for any self-respecting oil executive to arrive was by helicopter, landing at one of the several helipads marked out on the Astrodome parking lot. During the day, models with large breasts and tiny skirts stood smiling by heavy pieces of industrial equipment in the exhibition hall. Some booths featured chorus lines or voluptuous shoeshine girls. By late afternoon the parties started. Every hotel in town, particularly the Shamrock, became a collection of hospitality suites. By the giant Shamrock pool, there were luaus and barbecues and open bars. In the middle of the revelry, floodlights came on, the covers were torn off a large mass that had been floating in the pool, and suddenly, with a roar of engines, a speedboat was pulling winsome and acrobatic water-skiers around and around. But that was the last debauch. The price of oil collapsed, and the next year, 1983, attendance fell by almost half, to 58,000. By 1987 it had fallen by more than half again, to just under 26,000.

As attendance at the OTC waned, the excesses disappeared and the tone of the conference became serious in the extreme. It remains so today. The Shamrock has been razed; hospitality suites are almost extinct; and despite a determined and exhaustive investigation, this reporter could find no evidence of shoeshine girls, chorus lines, models, or water-skiers. Instead, businessmen in coats and ties and—far fewer—businesswomen in conservative dresses were there to buy, sell, and learn. American companies still dominated the exhibits, and most of the American companies were Texan. But this year about a third of the exhibitors—423 out of just over 1,200—were foreign. One hundred were British. The exhibitors with the most pizzazz were … Norwegian. They created an ersatz Norwegian village and, rakes that they were, sponsored a free breakfast buffet. Most of the American companies were there, not to trade with each other but to find foreign customers. As domestic production has declined and drilling has practically stopped, American companies have turned to international trade to replace their lost revenues. The president of a technical company headquartered in Houston told me that in five years, foreign trade had increased from 20 percent of his revenues to 80 percent. He was a sophisticated and worldly man, but even a ham-fisted Cajun from deep in the swamps of Louisiana told me a similar story about his small equipment-manufacturing company. The foreign companies were there to convince customers that their products and technology have become, in many cases, better than ours. The galling thing was that often they were right. The British in particular have developed the leading technology in certain aspects of offshore drilling and recovery.

Our dominance of the oil and gas industry is not over, but it is definitely threatened, and all the momentum is against us. The experience of helplessly losing ground has left American oilmen angry and exasperated. The president of Chevron Production USA said he would rather deal with any foreign government than our own. Although it is true that American oil and gas cost more to find and develop than reserves in other parts of the world, the morass of regulatory agencies at the federal, state, and even county levels and the virtual certainty of protracted lawsuits add considerably to the already high costs or prevent drilling entirely. The United States is now the only country in the world that has moratoriums on drilling off its coasts. We are restricting our drilling in the name of the environment. Yet Britain, Norway, and Australia—all of them countries that encourage drilling—are as concerned about the environment as we are; they require strict controls and exact harsh penalties for accidents or malfeasance. The difference is that in the U.S. we seem to think we have won a victory when we stop a project, no matter how safe or necessary it may be. Everywhere else, the people and the government think they have won a victory when a project is completed, producing both energy and jobs.

A panel the second day of the conference debated whether exploration and development should be allowed on public lands. Michael Matz, a director for the Sierra Club in Washington, D.C., said, “Why not turn our expertise to foreign markets where they would be eager to have it?” The remark was almost stupefying in its ignorance and condescension, since even a short walk around the conference would have revealed to him that that is exactly what oil companies have been forced to do. But the notion behind the comment—Why not let everyone else put rigs in their back yards so we don’t have to risk getting our back yard dirty?—seems to be the prevailing mood of the country. At best it reflects an elite snobbery, that all the rest should sacrifice for us. But at worst, as a national energy policy, which Congress and a succession of presidents have by default allowed it to become, the notion is a disaster that threatens our economy, our schools, our social services, and our environment. 

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