Insurance and Economy and Environment and Government and Manufacturing & Technology

A 'little' oil boom: More drilling expected in state as prices stay near record

June 6, 2005

"There is increased drilling. There's a lot of broke-ass oil producers down here that are experiencing a little boom," said Andrews, president of Vincennes-based Andrews Oil Properties.

Oil producers like Andrews, "still driving the same Cadillac I had 15 years ago," know bet- ter than to entertain fantasies of striking it rich, however.

Indiana oil production has been on the wane since a 12.6-million-barrel peak in 1956. Last year, only 1.75 million barrels were extracted from Indiana's sedimentary rock, according to the Division of Oil and Gas at the Indiana Department of Natural Resources.

Indeed, oil/gas drilling permits issued in the first two months of this year are virtually tied with the 106 issued for the period in 2004. But with oil prices rising, "I still fully anticipate somewhat of an increase" in 2005, said Jim AmRhein, assistant director of permitting and compliance at the DNR division.

One of the most aggressive prospectors lately is Indianapolis-based Citizens Gas & Coke Utility. Its crews first struck oil in 1969 as they were drilling an underground natural gas storage well in Greene County. "It was a great bonus. We weren't looking for oil," said Dan Considine, spokesman for the Marion County gas utility.

This year, Citizens sunk five new oil wells and began reworking five existing ones using new horizontal drilling techniques that can free trapped pockets of oil.

"With oil prices going up, we did actually accelerate some plans we had for drilling," Considine said.

The Plummer oil field, the name of Citizens' Greene County find, has yielded more than 6 million barrels so far and is the longest-producing field in state history, according to Citizens.

The Plummer field "has been a very prolific and unique oil field," said Brian D. Keith, a senior scientist at Indiana Geological Survey at Indiana University.

Last year, the utility tapped 104,843 barrels from the site, a little less than in 2003. But there's plenty of incentive to produce this year, with the price of a barrel of oil about double that of 2004, when Citizens earned $1.1 million on oil revenue of $2.3 million. Oil income is used to help reduce the price Citizens customers pay for natural gas.

"We're hopeful that [oil income] could be more than that from last year with prices being higher," Considine added.

Some smaller firms-Indiana's oil industry consists of "little guys" and big "promoters," as Andrews sees it-are working hard to squeeze oil out of existing wells, for now.

"Our equipment is wore out," said Andrews, whose forefathers started the family drilling business in Titusville, Pa., site of the nation's first big oil discovery.

With low oil prices in the last decade, there's been little incentive for Andrews to invest in new rigs. Add to that the rising costs of insurance and environmental liability, he said. "Expenses are just eating us up."

Besides, drilling a well isn't cheap. Andrews figures it costs about $40 a foot, or $50,000 to $60,000 for the average well.

He and some other oil firms say it would take a sustained oil price above $50 a barrel to coax them to invest in drilling again. As it is, prices have been falling in recent weeks.

"I don't think the price of oil is going to last," Andrews said. "I took $5 less this week [per barrel] than I got last week."

Neither are oil producers in Indiana getting government incentives to drill-as farmers do for planting or not planting crops. If anything, the oil industry gets in the way of more lucrative strip coal mines, Andrews said. "We're an ugly, dirty business and we don't amount to that much for the state economy."

The roots of the petroleum industry in Indiana go back to the survival of early settlers. They drilled for salt water that, once evaporated, was used as a food preservative, according to research by John A. Rupp, senior research scientist at the Indiana Geological Survey.

Some of those who drilled farm fields for salt kept going deeper after 1859, when Edwin Drake hit oil in Titusville.

Oil was found in the 1860s in Vigo County in southwestern Indiana and in Pulaski County, in the north, according to Rupp.

In 1876, gas was found in Delaware County and both oil and gas in a region known as the Trenton Field that runs from north and east of Indianapolis up to Fort Wayne. According to Rupp's accounting of history, thousands of wells were drilled, resulting in "America's first giant oil field," which has produced more than 100 million barrels of oil.

And gas discovered in the region fueled a number of industries. Anderson, Kokomo, Marion and Muncie became manufacturing centers largely because of the Trenton Field, Rupp said.

Closer to home, state records show at least 70 oil wells were drilled in the Broad Ripple area.

The gas and oil boom in east central Indiana went bust in the early part of the 20th century. Some blamed wasteful practices, such as burning off gas at the surface.

Production shifted to southern Indiana. Much of the gas is found in shale in the southeastern part of the state; oil's more prevalent in the southwest.

These days, production tends to move in correlation with the price of oil-less when oil prices are low and more when high. An otherwise steady decline in production was interrupted during the 1972-1973 OPEC oil embargo and Iranian hostage crisis of 1979-1981

The IGS said there is potential for significant new oil finds in southwest Indiana at greater depths. Of course, the deeper drillers go, the more expensive-and less lucrative-it becomes.

Andrews said world events could drive a boom in Indiana oil production. For example, demand for oil should rise along with China's meteoric industrial growth and as more of its workers are able to afford cars, Andrews said.

"I'd say 10 years down the road we're going to see $100-a-barrel oil."

But don' t look for oil derricks to again pop up in Broad Ripple, said IGS' Keith.

"That pretty much played out by the early 1900s," he said. "Unless people can find new fields I don't see [how] that would ever be economically viable."
Source: XMLAr00101.xml
ADVERTISEMENT

Recent Articles by Chris O\'malley

Comments powered by Disqus