Oil and Water

Yes, they do mix in the Gulf of Mexico, where new technology has transformed a dead sea during the bust years into the site of a new oil boom.
Oil and Water
A semi-submersible rig
Photograph by Philip Goulde

LAST NOVEMBER A GROUP OF GEOLOGISTS and engineers from Pennzoil’s headquarters in Houston were heading into the Gulf of Mexico to visit several sites where the company was drilling for oil. I met them in Lafayette, Louisiana, where Pennzoil has a branch office that oversees its offshore operations. We boarded a Sikorsky S-76 helicopter and flew over fields where farmers were burning sugar-cane (it was harvest time), over spongy marshlands, and then over the reddish-brown water of the shallow Gulf. The water near the coast was full of sediment dumped in by the Mississippi River, which is the great muddy secret behind the region’s oil-rich geology, but after a while, the water turned a semi-translucent green, the color of jade or marble, as the ocean floor dropped away and the sediment settled out. Then came the oil rigs, perched on the water like mammoth steel herons.

For the past 25 years Pennzoil has owned a handful of oil production platforms in the heart of a prolific oil field in the Eugene Island area, ninety miles from shore. We spent the night on one of them, the C platform, which serves as a kind of central facility for Pennzoil’s operations there—oil and gas from the other platforms are piped over, processed, measured, and sent to shore in pipelines that run along the bottom of the seafloor. That night, we climbed a flight of metal stairs up to the heliport pad, the highest place on the platform, to look around. The view was breathtaking: All the rigs and platforms had their lights on, and the busy Eugene Island field twinkled like a sprawling little city. The next morning, I went back up to the heliport to see how many structures were visible in the surrounding water. I counted 92, give or take a few things of indeterminate outline. We were in the middle of something that looked a lot like a boom.

In the past several years a combination of events has resulted in a surge in the amount of drilling in the Gulf. This is an unexpected reversal. Since offshore drilling began in the thirties, oil companies have drilled an estimated 35,000 wells in the Gulf and pumped out 12 billion barrels of oil and 130 trillion cubic feet of gas. But ten years ago, the oil industry collapsed overnight when the price of a barrel of oil plunged to $11, down from a high of about $40, sending the economies of Texas, Louisiana, and Mississippi into a tailspin. Locally, further contraction occurred when many industry geologists decided that the Gulf of Mexico was finished—it seemed as if all the sizable fields in shallow water had been found, causing one newspaper to call it “the dead sea.” Oil companies began pulling out, the price of leases dropped, and by 1992 only 497 wells were drilled in federal waters, down from 1,352 eight years before. Since the bust, the number of people working in the oil industry has been cut in half.

Things began to turn around in the late eighties. In part, the Gulf became more attractive as the alternatives proved disappointing: Years of exploration off the coast of Alaska yielded nothing of commercial size other than the giant field at Prudhoe Bay; new drilling in the waters off California was outlawed as a result of environmental concerns (ever since the Union Oil Company lost control of a well off Santa Barbara in 1969, which dumped 21,000 gallons of oil a day into the Pacific for twelve days, Californians have been leery of offshore drilling); some companies tried deep-water plays off the East Coast, but as Jim Funk, a general manager at Shell Oil, dryly recalled, “We successfully drilled some dry holes.” The main reason the Gulf became more attractive was that geologists began to understand it better after advances in technology solved some of the murky riddles hidden under the seafloor. Using 3-D seismic technology, geologists have discovered that many of the mature oil fields on the continental shelf contain an abundance of small reservoirs that had been overlooked. Pennzoil, for example, has tripled the amount of oil it produces from wells in the Eugene Island field, which are now flowing at the highest rate in twelve years.

As geologists continued to study the Gulf, they discovered that vast quantities of oil lay undisturbed beneath subterranean sheets of salt. In 1993, after drilling through more than half a mile of salt, Phillips Petroleum struck oil at a site called Mahogany and became the first company to begin development of a subsalt oil field. As much as 15 billion barrels of oil may lie below salt formations in the Gulf, and after the Mahogany discovery, other companies rushed back into the area. Meanwhile, Shell ventured out into the deep water, despite predictions that there was no money to be made there. Shell’s voluminous Auger discovery proved that large quantities of oil exist hundreds of miles from shore; it is estimated that the Gulf’s deep water may contain as much oil as two Prudhoe Bays, making the area viable for the few companies that can afford to spend $1 billion on a production platform and then wait years to recoup the investment. These three different plays—combing old fields for additional reserves, drilling below salt, and drilling in deep water—have made the Gulf once again the place where most oil companies are investing the bulk of their domestic-exploration budgets. The average number of rigs drilling new wells in the Gulf in a given week had dropped to 45 in 1992, but last year the figure climbed to more than 100, causing the day rates for rigs to soar. Some rigs now cost twice what they did twelve months ago. The prices of leases have rocketed upward, and drilling companies can’t satisfy the demand for their rigs because they can’t find enough experienced oil-field hands to man them.

You could almost say that oil is back. Yet this is not a boom in the 1981 sense of the word.

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