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to swell the ranks of the importers whom their fellow independents oppose in traditional fashion-until they, too, have foreign oil to import.

Two or three years ago there were hardly more than 2 dozen independent United States oil producers operating outside the North American Continent. Today the picture is far different. Some 9 months ago we compiled and published a list of 223 independent American oil operators engaged in exploration and development programs in 51 countries outside the United States (exhibit IV, Trends survey, "How the Rapid Spread of Independents Into Foreign Operations Affects the Global Oil Industry-And Who Are the New International Operators"). Already this number has grown well past the 250 mark, and there is no letup in sight.

This sudden enthusiasm for overseas operations has stemmed directly from the poor discovery potential in the United States. As yet there is no survey as to just how much these companies are spending abroad-but, I assure you, foreign operations are far more costly than domestic. But, since the risks are far less in virgin and semiproven territory than in our lands that have been worked over and over again, these operators have concluded that they stand to get a much better return on their risk-capital abroad than they will if they restrict themselves to prospecting at home in depleted areas. As stated before, profitable foreign operations will enable them to do more at home, paradoxical as it may seem.

This thought is a sound one, and there is a measure of proof that it works out. Traditionally most of our drilling has been done by the independent producer and most of the production, too. But the major companies have been assuming an increased burden in this regard. They are doing most of the geophysical exploration in this country today--and by major companies, I mean the principal importers. As is traditional, a large part of their exploration acreage they farm out to independents for prospecting with the drill, but even so their own share of the drilling activity is rising. According to an esteemed contemporary, the 22 largest producing companies (15 of which are important importers) drilled 11,709 wells in 1955, or 21 percent of the total that year, were credited with 21.7 percent of the 1956 holes, and last year they accounted for 12,028 wells, or 22.5 percent of the Nation's total. So much for the argument that growing imports result in the importers drilling fewer wells in the United States. Instead, their economies with imported oil to supplement their domestic sources has enabled them to do a better job at home.

So it should prove to be with regard to the two hundred-fifty-odd independent domestic producers who now have branched out into the field of foreign operations.

Not only is the development of United States-operated petroleum resources abroad good business, but it is a sound step for the United States national economy. Our resources have been depleted at a pace that could not, and should not, be maintained. Something must be kept by for abnormal conditions, such as when hostilities or political factors might cut off some other sources of supply.

You have, of course, been told with great intensity of conviction that "There is no defense in foreign oil," and how so many tankers carrying oil were sunk off our shores during World War II. Perhaps you were not told, however, that most of those oil-carrying ships were not bound for the United States--they were carrying oil to our fighting forces overseas. Yes, the traffic was in the other direction! Nine out of every ten tons of supplies sent to our Armed Forces in Europe during the war comprised petroleum products. With the stupendous consumption of jet aircraft, this ratio may be worse in the event of World War III-which nobody but a defeatist would expect to fight on our own shores.

Fleet Adm. Chester W. Nimitz said that World War II was won with "bullets, beans, and oil." Who would deny that this will be even truer of the next war? In this connection, we observed in an editorial commentary in the February issue of our journal that-

"Defense of our shores is now extended to a widespread perimeter which will require enormous oil resources to maintain, all of which must be moved by tanker. The slogan 'there is no defense in foreign oil,' based on the vulnerability of tankers bringing oil to our shores in time of war, loses its validity when it is realized that oil will have to be shipped by tanker in any event to maintain our foreign military bases. Whether the tanker is headed north, south, east or

2 World Oil.

west, whether to this country or from this country, it is still liable to attack from the enemy. This fact makes it all the more important that our foreign oil interests are maintained in good shape, for in many cases they will be closer to the scene of operations, shortening the tanker haul, and so decreasing their vulnerability."

And we referred to the already imposed voluntary imports curbs sacrificing the national interest and the wider interests of defense and our responsibilities to NATO, to the sectional interest of the domestic oil producer.

Far more highly trained logistical minds than our own believe this same thing, for shortly we received a letter from Admiral Nimitz saying:

"I have read your editorial, and agree with your thesis that it is highly important to our national defense and security that our allies abroad and neutrals-who, if not on our side, are, at least, not against us-maintain a healthy petroleum industry. Oil purchases from abroad which will accomplish this objective are fully justified."

It is my sincere belief that your committee's conclusion, after reviewing all the facts and evidence presented to it during these hearings, will be that imposition of legislative controls on oil imports, by quota or tariff, not only is unnecessary but would be a potential threat to our national welfare.

The petroleum industry has been bred on free enterprise. Federal control of imports with a view to affecting the development of the producing industry could backfire. A bureaucratic organization resulting therefrom could end by dictating terms to the entire industry, including the domestic producer. Continued recognition of the dictates of the market place is the soundest approach. The oil business has proven its resiliency, and its ability to absorb current levels of imperts without harm to domestic enterprise. The addition of restrictions on oil imports beyond those already imposed under the voluntary system currently in effect would deal a severe blow to the United States economy and to our rich international trade.

Factors of national defense, too, indicate the importance of maintaining of freedom of imports. Our defense rests not solely upon the healthy domestic oil industry we enjoy, despite its handicaps, but also upon the retention of our strong hold on overseas petroleum supplies at a growing number of strategic points abroad where they will be most needed in the event of a global conflict. Relative market position of oil and natural gas showing percentage relationships of oil and gas demand, crude production, and imports

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1 Preliminary estimates based upon 11 months.

2 At 6,000 cubic feet per barrel of oil.

Source: U. S. Bureau of Mines Petroleum and Natural Gas Reports.

EXHIBIT IV

TRENDS: HOW THE RAPID SPREAD OF INDEPENDENTS INTO FOREIGN OPERATIONS AFFECTS THE GLOBAL OIL INDUSTRY-AND WHO ARE THE NEW INTERNATIONAL OPERATORS

Traditionally, the field of foreign oil operations has been considered the preA serve of a relatively limited group of large international oil companies. fairly substantial number of small concerns, both American and British, endeavored to compete in the search for and development of oil abroad-especially during the first 30 years of the century. But most of them floundered for lack Some became of adequate capitalization to meet the exorbitant costs involved. discouraged in the face of unexpected and difficult problems. Others had their properties expropriated, or just tired of trying to cope with unreasonable political and legal handicaps. They chose to return to the less spectacular but more profitable profits obtainable from development of domestic United States reserves. Even the successful few subsequently sold their holdings to the majors. Today, however, there is an entirely unprecedented interest and activity abroad by independent American operators-and, to a lesser extent, by others from such countries as Belgium, France, Germany, Italy, and even Japan. In each instance, the stimulation has been the relatively poor discovery rates at home and the prospect of strengthening their competitive status by discovery and development of relatively low-cost crude supplies in more prolific foreign oil lands. While the cost of overseas operations today is greater than ever, the relative risk has been reduced substantially by improved oil exploration technology. Furthermore, the investment has been made more attractive by the faster rate at which positive results are obtained with modern survey techniques and high-speed portable drilling equipment. This reduces the time factor on dead-rent payments. The economy of house-trailer camps and mobile workshops is another redeeming feature of the new era, whereas in the old days little could be salvaged from an unsuccessful venture.

This entry of new blood into the international oil fraternity is becoming recognized as a healthy trend by traditionalists as well as the more liberal-minded, although some have viewed the development with trepidation. There is little need for undue alarm on the part of the vested interests, however, because predictable growth of oil consumption indicates the future demand for petroleum will be so great as to leave plenty of scope for expansion by all.

A British Petroleum Co., Ltd., official, D. C. Ion (exploration manager of BP's Canadian subsidiary, Triad Oil Co., Ltd.), not long ago called the attention of the Institute of Petroleum in England to the important expansion of American oil interests outside of the United States, not only by majors but by many independents. He said that the activity is important because—

(1) These independents do not carry the cartel stigma by which the majors have been labeled.

(2) There will inevitably result an added awareness of the responsible role of the petroleum industry in underdeveloped nations.

(3) The necessary role of wildcatters will progressively be taken over by independents (as is the case in the United States of America) while the majors will develop their concessions.

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Mr. Ion foresees a virtual doubling of free world demand in 1965 at 26 million barrels per day (11,400,000 barrels per day in the United States alone) — outstripping last year's optimistic forecast of Chase Manhattan Bank by 1,200,000 barrels per day. He sees demand climbing to 40,700,000 barrels per day (15 million barrels per day in the United States) by 1975.

Assuming political conditions are no less stable in the future than they have been in recent years, his forecast as to the geographical pattern that production growth is likely to follow in coming decades conforms to the general concensus of industry economists. Mr. Ion anticipates that by 1975 Middle Eastern output will reach almost 3 times the present United States rate of production, compared currently with little more than half the American level. This would require the drilling of 3,200 to 7,000 additional wells in that area during the next 20 years, at the rate of perhaps about 2 million feet of hole yearly. Second most-important area for expansion would be the Caribbean region of South America, while Canada would continue to play a part of growing significance. He anticipated United States output would level off in 1965 at a plateau of 9 million barrels per day, less than 50 percent more than current levels.

223 UNITED STATES OPERATORS NOW ACTIVE IN 51 COUNTRIES

A new worldwide survey being developed by International Oilman reveals an astoundingly active and broadened interest in overseas oil operations by a lengthening list of United States independent oilmen. Returns, which are still coming in, reveal already that some 223 independent oil operators are engaged in, or actively launching, exploration and development programs in 51 countries outside of the United States.

Latin American countries are attracting the largest following among the independents, followed by the Middle East, other North America, West Europe and the Far East. Approximately 88 percent of all independents represented in these worldwide operations are relatively small operators, while 12 percent are in the category of semimajor companies. The survey does not include the major, integrated companies.

Until a few years ago, international oil operations were confined primarily to a handful of large, integrated oil companies. Today, however, the capital risks involved in the search for oil and gas in every part of the world are eagerly being shared by the independents as well as the so-called majors. Underlying this anomaly is the growing conviction of many governments that the encouragement of private capital offers the most satisfactory means of converting untapped natural resources into tangible assets.

Revisions of petroleum laws, which previously discouraged investments of outside, private capital, are opening new international horizons that spell economic and social progress for millions of people in many parts of the world. The entry of United States independent oilmen into many other countries may perhaps be a golden key that will open many more doors to improved international relationships. Furthermore, these changing developments may bring about a more universal understanding of the fundamental principles of democracy and freedom in the pursuit of private initiative and individual enterprise. The accompanying list of United States oil operators, and the respective countries in which they are active, is presented here to show how extensively independent oilmen are engaging in international operations. Names of far-off countries, that were legendary a few years ago, are today becoming as familiar to independent oil operators as Texas, Louisiana, and California. Prospective oil lands in the frozen wastes of Alaska, the deserts of the Middle East, or the steaming jungles of Central and South America, are identified with names of United States oil operators. United States independents are no longer strangers in the capitals of Europe, South America, the Middle East, or even in the Far East. As new concessions are offered in various countries, more and more independent oil operators are reportedly successful in obtaining such rights.

Canada has at least 62 representative United States independents, followed by Venezuela with 55, Cuba with 24, Guatemala and Panama with 18 each, Honduras and Iran with 17 each, Bolivia with 13, and Colombia and the neutral Zone with 11 each. Independent oil operators are also reported active in Alaska and Mexico, and have entered 19 Central and South American countries, 22 countries of the Middle East and Africa, 4 west European countries and 3 Far Eastern areas. Quite a few small as well as large independents have extended

their interests and investments to embrace several countries, some of which are widely separated geographically.

More than 65 percent of the world's oil production is presently controlled by United States oil interests, both major companies and independent operators. As the benefits of oil discovery and development are realized by a growing number of nations, there appears to be more universal approval of the American system of free enterprise and the encouragement of private capital investments. This is indeed a hopeful sign, which must ultimately improve the economic and social welfare of a growing number of the world's underprivileged people.

INDEPENDENT OIL COMPANIES

J. S. Abercrombie, Houston, Tex-Mexico, Iran, neutral zone
Aluminum Corporation of America, Pittsburgh, Pa.-Panama
American Greek Oil Co., St. Louis, Mo.--Greece.

American Independent Oil Co., San Francisco, Calif.-Mexico, Venezuela, Iran, neutral zone

American Maracaibo Oil Co., New York, N. Y.-Canada, Colombia, Honduras, Venezuela

American Northland Oil Co., San Francisco, Calif-Canada

Americuba Corp.-Cuba

Amurex Oil Co., El Dorado, Ark.-Canada

Anchorage Oil & Gas Co., Houston, Tex.-Alaska

Mark E. Andrews, Houston, Tex.-Haiti

An-Son Petroleum Corp., Oklahoma City, Okla.-Colombia

Argus Petroleum Corp., Cody, Wyo.-Guatemala

Atlas Corp., New York, N. Y.-Dominican Republic
Bahama National Oil Co., Los Angeles, Calif.--Bahamas

Bandini Petroleum Corp., Los Angeles, Calif.--Guatemala
Barium Steel Co.-Bolivia

Barnwell Offshore, Inc., Shreveport, La.-Honduras

Barry & Reiner, Inc., Tulsa, Okla.-Bolivia

Bay Petroleum Corp., Houston, Tex.-Canada

Bear Sterns & Co., New York, N. Y.-Spain

Benedum & Trees, Pittsburgh, Pa.-Canada, Colombia, Cuba

Bishop Oil Co., San Francisco, Calif.-Canada

John H. Blaffer, Houston, Tex.-Haiti

Boger Oil Co., Houston, Tex.--Venezuela

Bolsa Chica Oil Co., Los Angeles, Calif.-Turkey
Britalta Petroleum, Ltd., New York, N. Y.-Canada

Brooks-Scanlon Oil Co.-Alaska

J. T. Buckley Estate, Houston, Tex.-Canada, Ecuador, Guatemala
D. Harold Byrd, Dallas, Tex.-Honduras

Caracas Petroleum Co., New York, N. Y.-Venezuela

Caribbean American Petroleum Corp. of Panama, Midland, Tex.-Panama
Cataract Mining Corp., New York, N. Y.-Panama

Central American Oil and Mining Co.--Guatemala

Champlin Oil & Refining Co., Fort Worth, Tex.-Canada

Ernest Cockrell, Houston, Tex.-Honduras

Colorado Oil & Gas Corp., Colorado Springs, Colo.--Alaska, Canada

Columbus Texall Co., Long Beach, Calif.-Panama, Venezuela

Commerce Corp., New York, N. Y.--Panama

Cia Petrolera del Golfo del Darien, New York, N. Y.-Panama

W. B. Cleary, Inc.-Canada

Climax Molybdenum Co., New York, N. Y.-Canada

Cole, Howard S., Houston, Tex.-Dominican Republic

Commonwealth Oil Co., Houston, Tex.-Haiti

Consolidated American Industries, Inc.-Panama

Consolidated Cuban Oil Co.-Cuba

Coro Petroleum Co.-Venezuela

Frank H. Crerie, Houston, Tex.-Puerto Rico
Crosby Oil Corp.-Canada

Cuban American Oil Co., Dallas, Tex.-Cuba
Cuban Canadian Oil Co.-Cuba

Dade Petroleum Co., Houston, Tex.-Venezuela

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