Crossroads oil and gas industry on rise but slower than anticipated


March 24, 2010 at midnight
Updated April 2, 2010 at 11:03 p.m.

The Crossroads' oil and gas industry is not recovering as quickly as hoped, but a slight increase in activity offers hope, said Melvin Klotzman, engineer and owner of Melvin Klotzman Petroleum.

The nation's rig count increased, predominantly because of Eagle Ford Shale drilling in the area and deep shale gas activity in other areas, he said.

The year kicked off with an average of 29 oil and gas rigs in the region, according to data from Halliburton. That's up from even the month before - when the rig count was 19.

"The weather conditions have been extremely wet and a lot of work that could not be done is now being done for remedial work," Klotzman explained, adding that shallow drilling also enters into the mix.

Oil and gas companies wouldn't stay in the business if they didn't expect some success, but times are shaky for many, said Diane Griffin, vice president of Pegasus Operating Inc.

Companies grapple with decisions such as whether it's smart to re-enter wells, she explained. While it could mean added money, it could also bring hardship if oil prices drop.

And it isn't only production companies that are affected, Griffin said. Perforators, cement companies, water haulers and others all feel the industry's effects.

"We just don't know," she said. "We just have to stay in survival mode."

Nationally, the country experienced a heightened demand for crude oil in 2008, said John Felmy, chief economist with the American Petroleum institute.

China purchased large quantities of oil as it prepared for the Olympics and, later, the country used even more during recovery and reconstruction from the 2008 earthquake, he said.

Then demand collapsed. The collapse decreased by a few million barrels per day. Prices then dropped and OPEC stopped the fall by cutting output.

"Subsequent to that, we started seeing a turnaround in economic growth," Felmy said. "Most forecasts for world demand this year have it going up to more than what it was before the recession."

All in all, the industry continues on through both the good and bad, Klotzman said.

It doesn't look like prices will improve much in late spring or early summer, but the oil and gas industry is like the cattle business, he said with a laugh.

"You've got to keep drilling just like you have to sell your cows occasionally, regardless of the price," Klotzman said.



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