Houston barrels on as world's service center for energy
When word of a possible offshore oil bonanza hit Newfoundland a few years ago , cowboy boots began to show up under restaurant tables and Texas drawls filled hotels.
As much as a supplier of crude oil for American furnaces and cars, Texas is a source of drill bits, pipelines, and engineers for global energy explorers. The state, especially in the jack-rabbit growth city of Houston, has emerged the past few decades as an energy toolbox for the Western world.
But the well-established energy servicing and equipment industry, which should help undergird the economy long after Texas crude becomes part of the country's folklore, is now caught in the vise of world recession and soft oil prices.
After a decade of booming prosperity, the energy industry is falling from its lofty perch. Drilling activity in the US this year has slowed more than 40 percent from its peak last year - marking one of the steepest declines in history.
Worse, what has been one of the few bright spots in the industry, drilling for oil and natural gas overseas, is now slackening as well. After a 7 percent increase in foreign drilling the first half of 1982, analysts now predict a tapering off for the remainder of the year. ''I don't look for a big change in 1983 one way or the other,'' adds Isaac Kerridge Jr., chief economist for Hughes Tool Company, the big Houston-based oil-service company.
The downturn has sent reverberations throughout the ''oil patch,'' from Calgary, Alberta, to Tulsa, Okla., to Denver. But perhaps nowhere are the shockwaves felt more than in Texas. Thousands of energy-equipment and -servicing workers have been idled across the state, from platform builders to pipeline welders.
Out in the dusty plains of west Texas, where just a few months ago a boom was still sweeping towns dotting the Permian Basin, one of the world's oldest and richest oil formations, the mood has turned somber. Oil-field hands from around the country who had risked meager savings to chase big riches are now jobless.
In the ''petropolis'' of Houston, the sting is being felt by the dozens of firms. Close to one-third of the oil-field equipment used in the US comes from the Houston area. Many of the state's big suppliers - such as Hughes Tool and Cameron Iron Works Inc. - have idled hundreds of workers.
The industry's woes can be traced to the world oil glut, high interest rates, and recent changes in federal laws regarding tax shelters in oil exploration. Hardest hit among many of the servicing firms are those who jumped in to take advantage of the oil boom the past couple of years. Throughout the '70s, drilling activity in the US rose steadily, except for slack periods in 1975 and 1978. Then, three years ago, the number of rigs in operation around the country spurted upward, peaking last December.
This year's sudden drop-off has left a lot of companies with back rooms full of oil valves and pipeline. ''What you're seeing now is a shakeout at a peak period,'' says Nat Eisenberg, a Houston-based economic consultant.
If there is a silver lining, it's that many of the inexperienced roughnecks and servicing companies that have sprouted like goldenrod the past couple years have been weeded out. Drilling crews, as a result, are boring deeper holes in shorter times for the first time in years.
''There was a tremendous influx of green personnel the past few years,'' says Howard Bonham, a senior energy analyst at Rauscher Pierce Refsnes Inc., the Dallas-based brokerage firm.
By most accounts, a turnaround for the industry should come by the mid-80s. But the strength of any rebound will depend partly on the world economy, future decisions on the deregulation of natural gas in the US, the pace of federal leasing of offshore lands, and world oil prices.
For Texas, the oil boom that began more than 80 years ago with the Spindletop gusher in the town of Beaumont will go on, in varying intensity, long after its own wells are siphoned dry. The energy manufacturing and service industry, for one, will continue to supply other national and overseas exploration and production areas. ''Satellite'' servicing areas are popping up around the world - in Perth, Australia, and Denver, for instance - but much of the industry remains anchored in Houston. New generations of exploration technologies will come out of some of the research labs in the state. Many oil companies will also be shifting to coal, solar, and other energy forms when the oil era is over.
''Houston will continue to be a servicing center, but many companies may have to change their focus from oil and gas to the broader area of energy in the future,'' says Mr. Kerridge of Hughes Tool.