In the energy industry the past decade has seen wild price swings, with oil ranging from near $20 per barrel in the year 2000 to as high as $140 a barrel in 2008.
It was not an unusual decade in regard to volatility, however, said Lew Ward, chairman of Ward Petroleum Corp.
“I’d say that the last decade has been fairly normal when compared to the highs and lows of previous decades,” Ward said. “We’re price takers, not price makers. We take whatever price is there and then we make our plans on what we anticipate cash flow would be.”
The $140 per barrel days would seem to have been golden ones for the oil and gas industry, but Jeff Hume, president and chief operating officer of Continental Petroleum, says it wasn’t necessarily so.
“You would think the high prices are always good, they’re not,” he said. “The volatility of pricing has in-creased. Last summer we hit 140-some dollars a barrel. I never would have imagined that in my life.”
Higher prices, Hume said, lead to more drilling, more production, more hiring. Then when prices fall, as they inevitably will, companies are left with too much manpower and equipment.
“It really hurts the industry,” Hume said. “A nice steady but growing price is the best for any commodity, whether you’re a wheat farmer or a car dealer. That’s what’s needed. Our industry (the price) moves around quite a bit. So we try to answer that. We have to answer that to continue to grow our company.”
In the beginning of the decade there was a fear America might run out of natural gas in the coming years. But thanks to new exploration, drilling and recovery techniques, that shortage has become a surplus, enough to last 100 years, according to experts.
“We’re currently producing natural gas and oil out of shale, which used to be our source and seal and not the reservoir,” said Hume. “It has become the reservoir.”
“Largely be-cause of horizontal drilling and new discoveries, we now have a surplus of natural gas,” Ward said.
Producers have been drilling horizontal wells for decades, drilling along the formation rather than vertically through it. This offers drillers a greater contact area with the productive layer than a vertical well. Now producers have even more tools for extracting oil and gas that was inaccessible previously, including multi-stage fracturing deep under the ground that breaks up rock to free the oil and gas trapped inside.
In the past decade, said Harold Hamm, chief executive officer of Continental Resources, the U.S. has become less dependent on foreign nations for its oil supply, particularly ones not friendly to our interests.
“We were heavily dependent on the Middle East back then,” Hamm said. “Now we’re not so much. We’ve got a lot of oil coming out of Africa and other parts of the world. Only 6 percent of the crude oil we use here today comes from Saudi Arabia, for instance. A great deal of our oil comes from Canada, and Mexico is a large provider.”
In addition, Hamm said, domestic production has increased in the past 10 years.
“The U.S. today is the third-largest producer of crude oil and natural gas liquids in the world,” he said, “only behind Russia and Saudi Arabia.”
Being able to dig down two miles, then sideways two miles, and to fracture oil and gas-bearing rock at various stages along the way, has unlocked new sources of energy for the United States, Hamm said.
“We have a tremendous amount more capability of producing the reserves we have in this country,” he said.
Alternative energy
Alternative forms of energy are a hot topic these days, from wind and solar energy to powering vehicles with compressed natural gas or biofuels such as ethanol. But oil and natural gas will continue to be part of America’s energy picture for decades to come, the experts believe.
“We need it all,” Hume said. “We need all of it to take care of our population. It’s going to require natural gas. It’s going to require oil. Even if we can switch to another form (of energy) it’s going to take multi-decades to get the infrastructure reconstructed to accommodate those type of energies.”
“A lot of people are saying natural gas is the bridge to the future while we bring on alternate sources of energy,” Ward said. “Natural gas will be able to effectively become that bridge.”
Wind energy could prove to be a huge boost for the Enid area in the coming years, said Brent Kisling, executive director of Enid/ Garfield County Development Alliance.
“There is a huge energy boom that has grown beyond oil and natural gas, and that is this idea of wind energy,” Kisling said. “There are several hundred megawatts of energy being produced in northwest Oklahoma. That is a natural resource that we are right on the edge of, here in Enid.”
With wind farms popping up in western Oklahoma, Kisling said, Enid could attract businesses that build and maintain the large wind turbines that are now imported largely from Europe.
“We are the last major work force area leading into where the wind turbines are being erected,” Kisling said. “I think it’s our next big opportunity.”
At present, Kisling said, there are more than 100,000 acres under lease in Garfield County for wind production. Each of the 200 to 300 turbines that could be built on that land, he said, would result in some $20,000 in property taxes.
“It’s not a big job increaser, but it is a huge ad valorem tax issue for our schools,” Kisling said. “The reason why wind is such a positive economic development tool in an area is that it adds revenue to the coffers of county government and schools without adding a big drag on resources.”
Every wind turbine, Kisling said, contains 8,000 parts.
“I think we’ve got a great opportunity to be doing construction either on blades, nose cones, or machining the parts within the turbines,” Kisling said. “We’ve got a great manufacturing base here that could be getting some of those contracts. We’re getting closer and closer every day to making some of those a reality.”