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A charge is made on all overdue books. U. of I. Library 8057-S LYMAN STEWART 1840-1923 Pioneer of the California oil industry; born near Titusville, Pa., July 22, 1840; died September 28, 1923. He preceded Mr. Rockefeller two years in entering oildom, and at the time of his death was chairman of the board of directors of the Union Oil Co., of California, which he founded and with which the author was once connected. Among his. more notable beneficiaries is the extensive Bible. Institute of Los Angeles. a ee — oh | OILDOM ITS TREASURES AND TRAGEDIES ; A PROFUSELY ILLUSTRATED BOOK OF LATE AND BASIC FACTS ABOUT PETROLEUM AND THE DEPENDENT OIL AND AUTOMOTIVE INDUSTRIES POPULARLY PRESENTED FOR THE BENEFIT OF INVESTORS, MOTORISTS AND OPERATORS By Oscark H. REINHOLT, B. S. Engineer and Geologist; Specialist in Mineral Resources; Fuel Explorer in the Philippines for the War Dept., 1903-4; Co-Editor, Revised “Manual for the Oil and Gas Industry,” U. S. Treasury Department, 1921; Chief, Depart- ment of Mines and Metallurgy, Sesquicentennial Exposition, 1926; Professor of Chemistry and Geology, Hartwick College, 1929-30 ) 25 (93 A a) PARWONE Covering International Phases, Natural History, Commercial Geology, Mechanism, and Economic Relations of Crude Oil, Gasoline and the Automotive Industry David McKay Co., Publishers South Washington Square, Philadelphia Part Ones 1519, = Part Two, 1927 a pea Re Tid uly a ; Sr pp OUTLINE OF CONTENTS—PART ONE p-! I. THE PETROLEUM PANORAMA—International Treasures and Tragedies, Turkish Petroleum and the Open Door, Averting Another Tragedy, Advantage of Latin America, Engineers as Diplomats, Restrictions on American Enterprise Abroad, World Reserves and Present Sources, American Dominance, Why Other Nations Seek Own Supplies, Domestic Position of Mineral Oil. Il. The NATURAL RESOURCE—Nature, Origin of Oil, Surface Signs of Deposits, Geologic Occurrence and Distribution, Geologic Treasures and Tragedies. Il. COMMERCIAL GEOLOGY—Description of the Major American Fields: “Mid-Continent, California, Gulf Coast, Appalachian, Rocky Mountains, Illinois and Lima-Indiana, Canadian Occurrence and Development, Summary of Salient Facts. IV. MECHANISM OF THE INDUSTRY — Technologic Foundations and Dearth of Petroleum Engineers, Conservation of Underground Reserves, Three Great. Problems, The Tragedy of Poor Recovery, Conservation of Capital Through Core Drilling, Developing, Producing, Transporting and Refining; Technologic Treasures, V. ECONOMIC ASPECTS—Inmportance and History, Problems and Prelimin- aries, Production ‘of Crude Oil, Peak and Economic Limit, Yield Per Acre and Per Well, Overproduction from Deep Wells, Tragic Consequences. VI. ECONOMIC ASPECTS (continued)—Price Changes and Market Panics, Premiums, Causes and Cures for Overproduction, Storage and Stabilization, Manu- facturing and the Refined Products, Costs and the ‘‘Soup-bone” Tragedy, Rate of Refining, Transportation by Tank Cars, Pipe Lines and Tankers, Distribution and Utilization, Tragic Loss of Lubricants, Coal versus Fuel Oil, Conservation. VII. GASOLINE AND THE AUTOMOTIVE INDUSTRY — Three Sources, Growth in Yield, Use and Stocks; Alcohol, Benzol and Other Substitutes; Conserva- tion of Motor Fuel; Practical Economics for Auto Owners; Treasures and Tragedies. PUBLISHER’S STATEMENT—PART TWo - /9 7 Lovers of truth like a book of this type which is both entertaining and instruc- tive. Part One is aimed at the man with the car; Part Two, at the man with the money; both parts, at the man within the oil industry who wants to advance in the field, in the refinery or from the filling station. How well and widely Part One was received is clearly indicated by the comments abstracted at the end of the 12-page index. Not only is the complete book readable and serviceable as a text but it is particularly useful for reference because of its wide range of subjects and the minute division of its content. It is easier to list its omissions—largely legal and technical—than its inclusions since it is so encyclopedic and takes the place of half-a-dozen separate volumes on petroleum. This annual should have a place on the shelf of every banker, bond dealer and other investment adviser. It should interest all intelligent Americans wanting important facts about one of the world’s international problems. It is also commended to all law-makers who may have to consider petroleum legislation. Philadelphia, Sept. 1, 1927. PROVISIONAL SUPPLEMENT TO PARTS ONE AND TWO * A truce has been declared in the world struggle for oil. But the third oil producer, Russia, is still reluctant as to indemnifying British investors: and Venezuela, now the second nation since Mexico’s decline, has discouraged new development to the point that one American operator (Gulf Oil) has withdrawn therefrom. Persia is now pressing Mexico for fourth place and Colombia is com- ing up, having now about twice the output of Peru, or about the same as the * PART TWO, of 270 pages and 150 illustrations, covered Finance, Geography, Govern- mental Relations, the Human Element, Latin America and the Prevention of Frauds and Failures. Crowded out of it was the humorous chapter entitled “Laughing Gas and Lubri- cations” which will appear in the forthcoming PART THREE. That supplement will more completely present the important facts about mineral oil and the petroleum industry as they pertain to the years 1927, 1928 and 1929. V4L719 Dutch East Indies, or almost as much as Rumania. The billion-barrel yield in the United States boosted world production to 1,450 million barrels in 1929. RECENT GROWTH IN THE PRODUCTION OF PETROLEUM IN THE UNITED STATES Year Million BblIs. Mil. Dols. Ist State Year Million Bbls. Mil. Dols. 1st State 1924 714 1,023 Calif. 1927 901 yb Okla. 1925 764 1,285 Calif. 1928 902 1,100 s Texas 1926 igi 1,448 Calif. 1929 1,000 1,250 Texas Stocks of all kinds reached a new record of about 680 million barrels at the end of the year. Gasoline production approximated 440 million barrels, of which 56 per cent was from straight run or ordinary refining, 33 per cent from cracking, and 11 per cent from vapors of oil wells and natural gas. If the 52 million barrels of such natural gasoline be added to the quantity of crude oil, the total liquid mineral fuel produced in 1929 makes 1,058 mil. bbls., 70 per cent of the world’s. RANK OF 18 STATES IN OUTPUT OF CRUDE OIL IN 1929 AND TO DATE (Millions of barrels of 42 gallons) State 1929 Total State 1929 Total State 1929 Total TEXAS Ate ase 299 2,075 Wyoming ..... 19.2 315 Michigan ..... 4.4 5.0 California -.... 293 3210 Pennsylvania . 11.8 825 New York Be: 75. Oklahoma .... 254 ‘2,770 Kentucky 7.8 105 Montana ..... 3.2 30. FEA TSAS Ove crite oe 43 510 ODIO er ee 6.7 555 Colorado... 2:3 23: ATKANSAS) ii hs 25 340 Illinois vaMeOco 385 New Mexico .. 1.7 8. Lowlsianay, yi. 20 425 Wee VIL eine e. a eos 370 Indian ae wees 1.0 117. Early in 1930, the three leading oil areas were the Los Angeles basin, the West Texas (Permian) basin and the Seminole (Okla) district. The daily rates of these ranged from 300,000 to over 400,000 barrels. Curtailments, notably in the first of these, have reduced the daily yield in the United States from nearly 3,000,000 barrels about Sept. 1, 1929, to less than 2,650,000 barrels on Jan. 1, 1930, or an average rate of almost 8 barrels per well per day. Remarkable are the new records established in deep drilling and in production. Wells are now being bored in the Los Angeles basin to depths beyond 9,500 feet, using electric power and rotary tools. The deepest producer in the Mid-Continent field was drilled with cable tools to 8,532 feeet in Reagan County, West Texas. It came in at Thanksgiving, 1928, flowing 80 bbls. daily. In two months it paid for itself and increased to 2,000 bbls. and to 55 per cent gasoline. California’s 7,000-foot wells at Santa Fe Springs, Long Beach, Ventura (page 151), and especi- ally in the Kettleman Hills (San Joaquin Valley), are likewise yielding light oil. The last named field promises to produce more oil than any other field in the world. As a result of all this deep development, the weighted average depth (page 105) of production has “risen” to about % of a mile. The aggregate depth of our 1-3 million wells approximates the distance to the Moon. The cost of drilling and lifting has increased enormously and now exceeds $1,200,000,000 per annum. Rela- tively shallow wells in West Texas, some with over 130,000 bbls. initial per day, have proven bonanzas to their owners and have broken the records of the Lucas (page 41) and the Lakeview (151) gushers. If allowed to flow to capacity, they could have boosted the daily average in 1928 to more than 20 bbls. per well. Exports of refined products, notably gasoline, are advancing in volume and value. But because of the enormous expansion in world demand for American automobiles, mineral oils no longer rank next to cotton among our exports, meas- ured in money. They average about $500,000,000 worth per annum and make about 10 per cent of total exports. Los Angeles and New York are the two leading oil ports, considering both coastwise and foreign trade. At all the other six or seven. leading sea~ports, petroleum remains preeminent as to tonnage in all trade. Despite continued domestic competition, evidenced by the overbuilding of filling stations and the extension of household heating with oil, the operators are prosperous and are gradually agreeing on unit development of new pools in line with what Henry L. Doherty has advocated for years. The U. S. Oil Conservation Board, appointed by President Coolidge on Dec. 19, 1924, is harmonizing Federal activities in cooperation with state authorities and the leaders in the industry itself. Water-drive in New York and Pennsylvania and air-lift elsewhere are. increasing the recovery of oil per acre and per well. Hartwick College, Oneonta, N. Y., Feb. 10, 1930. PREFACE “Conservation of Capital’ is the key-note of this little contribution to petroleum literature. The conservation of the natural resources in oil and gas has already received proper consideration in various publications. As a result of the co-operation of the United States Geological Survey and the Bureau of Mines with wide-awake operators the former woeful waste of these natural treasures has been remarkably reduced. With the rapid growth of the oil industry during the last decade redoubled efforts have been exerted by other Government agencies to discourage the evil prac- tices of oil promoters and pseudo-geologists. Uncle Sam, however, neither can nor will take away the personal liberty of being humbugged. During the past five years an average of almost 150 million dollars has been annually lost more or less honestly, but not always unavoidably, in unsuccessful drilling for petroleum. No one presumes to know exactly how much additional good money has gone overboard in the storms of stock and lease speculations; but very likely at least twice that sum was thus lost during the boom year of 1919. Three dollars for each man, woman and child in the United States does not seem so appalling as it would be if the loss were distributed at the rate of $300 each among one million “investors.” This estimate in the aggregate was actually under 10 per cent of the 3 3-4 billion dollars total authorized capital of the 1629 oil companies organized throughout our country in 1919; but it actually approximated the entire output of all the world’s gold mines in any recent year. The Treasures and Tragedies of Petroleum are numerous, notable, and varied. The famous asphalt deposits of Rancho La Brea near Los Angeles have proven a veritable treasure vault to science. The embalmed bones of camels, elephants, lions, and saber-tooth tigers found there represent a geologically recent tragedy of rare occurrence in nature. As a treasured commodity of international trade, petroleum would not yet have yielded its comforts and conveniences to man were it not for the treasure seekers, intrepid geologists, and patient technologists, who, in their various ways have pioneered and improved the greatest branch of the American mining industry. Treasures in the form of income to royalty owners, stockholders, and employes are all self-evident. Not to be overlooked, however, are the many public improvements and benefac- tions that have helped to advance civilization and have derived their funds from the oil industry. Suffice it here to mention one—the Rockefeller Institute for Medical Research which has reached even to China with its helping hand. Two great tragedies are “‘portrayed in oil,” respectively in the picture of a motorless America a hundred years hence and in the real- ization that human parasites steal millions each year and drive many in- vestors to suicide. How to avert the one of these tragedies by providing intelligent in- vestors with means for their own protection against misadventure in oil, (5) has been the main motive in preparing this book. The latest and most re- liable information on mineral oil and the dependent industries has been collected, classified, and condensed for the benefit of both the investor and the general reader. Some money-saving advice is given to the many in- vestors and other readers who are also motorists. This, together with late statistics of the automotive industry supplement the chapters on Eco- nomics. The economic and other treasures of the motor car are quite obvious but facts about avertible tragedies must needs be told effectively. The attempt has been made to present the serious facts in a brief and popular form; just a little has been added in a lighter vein for entertain- ment and good measure. Practically all the topics taken up have been treated more deeply in publications to which references have been made. Interested readers are invited to suggest improvements for future editions. They may be mailed to the author, in care of the Chamber of Mines and Oil, Los Angeles, California, or the Technical Research Institute, 601-5 Star Building, Washington. OSCAR HALVORSEN REINHOLT. Washington, D. C., Jan. 16, 1924. ACKNOWLEDGMENTS The principal inspiration truthfully to portray the oil business as it is today has come from contact with scientific workers in Washington and with Natural Resources cases of the Income Tax Unit that imply a ridiculously low percentage of success among the many American oil companies that have been organized. The surcharging of the atmosphere at the Capital, not with factory fumes, but with unburned carbon, carbon-monoxide and gasoline vapor from the exhaust of automobiles in the down- town district, has led the author to devote special space to the subject of gasoline and its waste in an effort to help save hundreds of millions yearly misspent. Individual thanks are herewith extended to those men who have contributed material or otherwise encouraged the writer: Mr. P. EH. Barbour, Assistant Secretary, American Institute of Mining Engineers; Commissioner Burke and Mr. T. B. Boone, an attorney, of the Indian Bureau; Major W. DuB. Brookings, of the U. S. Chamber of Commerce; Secretary J. F. Callbreath, of the American Mining Congress; Mr. A. H. Fay, former associate of the author in the Oil and Gas Section and for two years head of the Natural Resources division in the Bureau of Internal Revenue; Mr. J. C. Fitzsimmons, sales manager of the leading producer on the Pacific coast; Mr. J. O. Jenson, banker and former oil operator, of Clifton, Texas; Mr. G. E. Mitchell, mem- ber of the U. S. Geological Survey and writer for the Scientific American; Messrs. H. C. Morris, chief, and A. T. Coumbe, Jr., assistant chief, Petroleum division of the Department of Commerce; Dr. W. H. Raymenton, naturalist, of Worcester. Mass., and San Diego, Calif.; Mr. W. A. Reid, foreign trade adviser, Pan American Union; Mr. A. H. Redfield, of the Foreign division of the Survey; Mr. G. B. Richardson, chief of the Petroleum division of the survey; Mr. W. W. Orcutt, vice-president of the Union Oil Company, of California; Secretary G. M. Swindell, of the California Chamber of Mines and Oil, Mr. H. T. Walsh, vice-president of the Sullivan Machin- ery Co., Chicago; Mr. David White of the Survey; and also the publishers of the various books and periodicals who have been specially credited for illustrations or quotations reproduced. (6) OIL DOM: ITS TREASURES AND TRAGEDIES By Oscar H. REINHOLT Pre Rela OINsE CHAPTER I. THE PETROLEUM PANORAMA “While our Government has been trying to organize a model state of society, other great states have been looking about for the means to dominate the petroleum production of the world, because of their conviction that in the control of petroleum they might find the power to control the commerce, the trade, amd the industry of the twentieth century world.”—Warren G. Harding, 1920. International Treasures and Tragedies. The very great and growing importance of petroleum throughout the world is being emphasized by cur- rent events. The year 1923 has been full of happenings that prove how essential mineral oil has become to our industrial life and how involved it is with international commerce and politics. Not only have the daily newspapers been deluged with long news items, but certain popular magazines have devoted page upon page to reviews of various oil situa- tions.* Pessimistic writers have even prophesied that the next world war will be fought for the posses- sion of oil deposits as the last one was instigated by Germany’s greed for greater resources in coal and iron ore. The Chester concession,** relat- ing in part to the Mosul region of Kurdestan, is a late affair to re- ceive public attention. Interest therein has been aroused because of the spreading realization that from foreign sources must be taken more and more of the future supply of pe- troleum to meet the varied and To whom the Turkish Government has : : erauied areal, iconcéssionsy in. Asia voracious demands of America for Minor. (See map, page 9.) lubricants and liquid fuels. Other International Petroleum Problems. Among other affairs with an oily flavor may be mentioned the recognition of Russia’s misgovernment REAR ADM. COLBY M. CHESTER, U.S, N: 4 Minee: especially, “World Race for Oil,’”’ The Literary Digest, January, 1923, and “Civilization and Oil,” by Leo Pasvolsky, Atlantic Monthly, February, 1923. **Seventeen years after meeting the Admiral at the 8th International Geographic Congress, the author heard him describe the Kurdestanian fields. In the course of his lecture he credited David White of the Geological Survey with broadcasting the facts which explain why our country must seek foreign supplies. See ‘The Import- ance of Mosul in the Oil World,’’ Current Opinion, June, 1923; and “Berlin to Bag- dad and the Chester Plan,” J'he Nation’s Business, July, 1923. (7) 8 OILDOM: ITS TREASURES AND TRAGEDIES which depends so much upon the restoration of petroleum rights to foreign — interests that have developed Baku and lesser fields. The recent recogni- tion of the Obregon government was deferred by the United States until the dark clouds of confiscation had been dissipated to the satisfaction of American owners of Mexican oil lands. Perhaps it is providential, for the good of civilization, that two fair- minded nations together so largely monopolize the earth’s resources, pro- duction and commerce not only in petroleum but also in gold, iron, coal, copper, cotton, wheat and wool. According to Barron’s* “England has the lines of world communication and dominion in colonial administration and upbuilding. English capital and credit is being allied with American capital and management in a world’s steel development. Foundations are being put under the peace of the world that mean much for world de- velopment. Whatever may be the appearance of local friction, Great Britain, the United States, France and Italy are moving forward in closer co-operation than is locally realized. ‘The Mediterranean is a pivotal point in that co-operation and that future development.’’ Americans and Turkish Petroleum. The long diplomatic contest between France and England for the petroleum of the Mosul area in the upper Tigris region, which has been one of the dominating though underlying factors in various conferences, from Rapallo to Lausanne, be- came further complicated when Turkey by force of arms established her right to be recognized and dealt with politely. Upon this happening, Turkey herself protested against the tapping from her ancient territories of the Mosul petroleum, and this obstinate wish was one of the reasons why the Lausanne conference broke up, although even the American repre- sentative advised her to yield. Now Turkey has cleverly drawn a new element into the situation by ratifying the Chester concession, which gives an American syndicate the right to develop petroleum in this region and cancels an earlier permission secured by France. The move was clearly political on Turkey’s part, for the Chester concession is an ancient one, dating back to Abdul Hamid.+ It is interesting to note that no foreign oil interest has been posi- tively mentioned as being behind the French and British protests. Never- theless, it may well be that it is but another phase of the old struggle be- tween the Dutch-Shell and the Standard interests. In this respect it is interesting also to note, in so far as the British protest is concerned, a state- ment by Admiral Chester: “Counting the world war, Great Britain has sacrificed 100,000 men in her determination to monopolize Turkish oil. We are in Turkey to stay. Great Britain and France would not let us thru the front door so we have effected a rear entrance. The door will stay open for all time. The world may as well become reconciled to giving up part of its oil. In our country we have not enough, yet our automobiles and machines are multiplying so fast that we are facing a fatal shortage. Our commercial life depends upon an adequate supply of oil. “Geography and history will help our people to understand why this fight has been made in such intensity. It must be remembered that the *Issue of April 16, 1923, in article on ‘‘Mediterranean Issues—Airplanes and Mesopotamian Oil’’ by C. W. Barron, President of Dow, Jones & Co., publishers of The Wall Street Journal. ¢Kditorial in Hngineering and Mining Journal, April 28, 1928, J. E. Spurr, Hd. ITS TREASURES AND TRAGEDIES OILDOM: (ez6L ‘02 ‘20d ‘SEW ‘A “N 04} Woody JORIISqy) ‘UOTSSe9DU0D 19}seq4D [BUIS[IO 94} JO JuBvd [[VUMS Sty} Adojfaaep 0} Aplavutid pemdoy useq seq ‘smI09S JI ‘ayvoIpuAS UOpUOT B&B puB ‘petopuBqe seq SBy eSoq} JO vuO A[UQ “JUSTE -dojaaep Jo sesodind a0J ssety}JIOM oq 0} ‘AVAINS Suldo9ursue pus Apnys Joye ‘punoj Jt sjyooford eT oy} Jo Auv uopuevqge 0} WSII 94} Wie Ady, ‘“poyjnuue useq pey BI[oJVuY UT SpuUR, [IO puB [BIZUTM JO JUsTIdO[eAVP VY} AOF UOTSSad.U0d 1ajseyQ 94} By} e[douTURJsUOD Wor Juodel 9Yy} poluep “OD jJusUIdOTIAVd UvBolIouUlV-UBUI0I}O 94} JO S[LVIOMO ‘[BuINoLF epvit, TIO ey} Jo Asozan0jQ— "TOSOW GNNOUV NOIDA TIO GOIOHO AHL JO AWAISNTIONI AYOL -IUUAL NVISACUAM AO LNO LUVd NI dO LAS OL ONIAUL SI YAMOd ANO HOIHM ‘OVUI JO ALVIS SSW ooZ 29! 9 eo a 6) © B3L3W01y 00 002 01 a eo “spodsoig 110 © ip ee (SO yo uoIsssou05D Ane —| a JO SEUOZ 424,9W0]!) Op |= = a oe == ot Vp OXe "@KEM|ICy BUISIXT tear = = - i WANK fe uorssar Log JO 241 Vy TLuvorss arog thf JO HIS y 2) CASIO SI (3 » wnat , ey O vt WLLBUGNVXITY Z Z > oafhe 3 PZ: Oo . VORP = WIHSI NIN rf vinvay & ji ith i i Viuvds i = a UVSSINVUVH WHOIS F NE LivsVHS IrdVH WOw3Zy by ao ma x So NVAIUAO 4 OdOYOHWS ATTY Ze a : : 4 i i : oe . veh \: NS é ? O ° s : SOREN Y 4 OY ais } . ; : i. = 4 4 1? Jn05 10 OILDOM: ITS TREASURES AND TRAGEDIES world war was fought over oil. Britain invaded Turkish territory, in the ~ oil region (according to official reports) two weeks before war was declared between those countries. Averting Another International Tragedy. In recommending the crea- tion of a council of 25 experts, elected at large and independent of Con- gress, to handle our foreign affairs, Mr. Frank A. Vanderlip said, at Washington, May 12, 19238: “We are admonished not to covet our neighbor’s house. But what about his territory, his oil fields, his ports? There wasa coveting of terri- tory in Europe which resulted in 25 million refugees driven from their homes. * * * There was in Europe a coveting of oil wells which has set the whole Mohammedan world afire and brought a fresh threat to civilization.” Passing the question of political dominion over the Mosul region, France and Great Britain must admit that, if either of them should under- take through her nationals to develop that petroleum territory, she would eventually call upon the United States to supply some, if not all, of the capital, equipment and skilled labor essential to economic success. Know- ing that astute Turkey realizes their semi-dependence upon the United States in this respect, France and Great Britain may become content to leave the responsibility of the petroleum development to Americans and amicably to arrange, on equitable basis for the procural of the crude oil which they may require. While more embittered politically against Great Britain, Turkey, at the same time, has not forgotten the French fiasco of the Panama Canal; she must have greeted with glee the announcement that General Goethals, the canal builder, would direct the half-billion dol- lar enterprise if the Chester concession be brought to fruition.* On the subject of international cooperation as opposed to tragic competition, A. C. Bedford** has recently expressed himself as follows: “No one can regard the petroleum situation in the world today in:a com- prehensive manner without being convinced that a clear vision of all the elements in that problem leads to but one conclusion, and that is the supreme importance of co-operation on the part of the peoples of the world both in exploiting and utilizing the oil resources which nature so sump- tuously provided.” Convenient Location of Latin-American Oil Fields. None of the Asiatic fields awaiting development are near enough to the United States to prove very attractive to either the American investor or the American consumer. Beyond any doubt it will cost us much less to bring our future supplies from South America than, for instance, from Mesopotomia, the main difficulty being the dubious attitude of the various Latin-American states toward foreign enterprises essential in the development of their petroleum deposits. As a matter of fact, Columbia, Venezuela, and Trin- idad are all about as close to the Atlantic ports of the United States as are the Tampico oil fields of Mexico. American interests, present or prospec- tive, in Armenia, Mesopotamia and Asia Minor, should therefore not be opposed to a mutually profitable apportionment of foreign mineral oil that * Early in September, 1923, it was reported that Admiral Chester and his asso- ciates had sold out to the Kennedy interests for $300,000 all but 10% of their share of the profits of the Ottoman Development Co. But this report has been proven erroneous. ** Chairman, Board of Directors, Standard Oil Co., of N. J., writing in Foreign Affairs, March, 1923. OILDOM: ITS TREASURES AND TRAGEDIES 11 might some day be produced in Asiatic territory now claimed by Turkey”; nor should American investors at large become disappointed if they be not permitted to share in the Asiatic developments except so far as they are, or may become, stock- holders in the American com- panies mentioned below. Late in 1922, the Standard Oil Co., of N. J., acquired a 25 per cent equity in the Meso- potamian properties of the old Turkish Petroleum Co., by agreement with the Shell-An- glo-Persian companies and the French interests, of which the latter represent the German pre-war share.** It is ques- tioned if the Barnsdall con- cessions in the Caucasus or the Sinclair concessions in Sakhalin will ever prove profitable in view of the various restrictions imposed by the Soviet Govern- ment. Engineers Become Diplomats in International Disputes. Sir John Cadman, a leading engi- neer in British oildom, lately outlined the empire’s policy in these wordst: “A weird picture has been drawn about Meso- potamia. The fact is, that the ownership of oil deposits there- in will be secured to the Arab state as a part of the adminis- trative arrangements under the treaty mandate. Great Britain is denying the chance to all nationals, her own included, to examine these areas for com-. A VENEZUELAN GUSHER Sensational developments in petroleum produc- tion in Venezuela within the next year are ; , expected by experienced oil men. Above mercial purposes until she has view is from BE. 8. Durward, of the Caribbean been charged as a mandate. Petroleum Co., Maracaibo, and shows a well “One is led to believe that they recently got in the La Rosa district, rh HAE Z flowing 12,000 barrels a day.—Mining and the British Government is a Oil Bulletin, Aug., 1923. great oil company, and that it *In March, 1923, the New York Times declared, “The time may yet come when oil will have to be distributed according to the need of each country by international agreement.” : ** London dispatch to the New York World, dated Oct. 26, 1922. American par- ticipation was said to be due to the demand of the State Department for equal rights in Palestine and Mesopotamian oil lands. tIn the February (1922) issue of Mining and Metallurgy, quoted by the Mining Congress Journal of April, 1922. 12 OILDOM: ITS TREASURES AND TRAGEDIES has subsidiaries such as the Royal Dutch Shellf and the Anglo-Persian companies. Rumor asks you whether you can afford to become dependent for even a part of your crude petroleum upon such a British combination. You are asked to believe that soon your own internal source of supply will be exhausted. Emphatically, the British Government is not in the oil business. She does not control the Royal Dutch shell—she does not have a single share in that corporationt—-and with the exception of shar- ing in the Anglo-Persian Oil Company, over which it has no control, the British Government is not interested in oil companies.”’ In framing a foreign petroleum policy for our own Government American engineers and engineer-geologists have been called upon by Congress and the State Department to gather fundamental data. Promi- nent have been Secretary Hoover of the Department of Commerce; his petroleum aid, Mr. H. C. Morris, Dr. David White of the Geological Sur- vey, and Dr. C. K. Leith* as chairman of a committee of the Mining and Metallurgical Society. The question is held to involve more than petroleum. While nature distributed petroleum unequally throughout the world§ it pursued the same course with other minerals. In some of these, such as copper and iron, the world must depend heavily upon the United States. All agree that restrictions on the international movement of essential minerals should be subject to the minimum amount of control. Nevertheless, there is certain to be more or less trading on the strength of mineral advantages as a result of the acuteness of the oil situation. It is the hope of the Leith committee to be able to furnish information which will make possible a more intelligent consideration of this general subject, when placed at the disposal of the Government. || The United States should distinguish between immediate economic needs and remote and perhaps unnecessary diplomatic ambitions. It is most legitimate and desirable that for a time we should supplement our American oil with whatever we can get from abroad at a cost which will represent a national saving. Our ultimate native fuel resources are so vast and their extent so continuously enlarged by scientific research that there would seem little reason why we should ever feel obliged to incur any risks of war in distant parts of the earth on behalf of an imported supply of liquid fuel for our country.** Restrictions on American Development of Foreign Fields. Secretary Hoover of the Department of Commerce said in his annual report, 1922: Early in the administration consideration was given by this Department jointly with the Department of Interior to the serious situation confront- ing our country in its supply of oil. As a result of a survey of our own 7This foreign concern, largely through the Long Beach discovery made by its California subsidiary, controlled over 4% of the oil output of the United States in 1922. ¢ Sixty % Royal Dutch or foreign controlled; only 40% Shell or British. See Federal Trade Commission’s report on Foreign ownership in the (United States) Petroleum Industry, made to the Senate, February 12, 1923. *Adviser to the United States Shipping Board, 1917-18; author of ‘“‘The Strategy of Minerals’’. §See table and map of petroleum reserves. ||Paul Wooton, correspondent of Engineering and Mining Journal Press. **Joseph EH. Pogue, quoted in The Oil and Gas Journal, May 3, 1923. * OILDOM: ITS TREASURES AND TRAGEDIES 13 and the world situation, it was concluded that our domestic sources of oil would at the present rate of exhaustion last only a generation, and that foreign nations were rapidly pre-empting the available foreign oil-bearing territory. Therefore, unless our nationals could reinforce our holdings abroad, we should be dependent upon other nationals for the supply of this vital commodity in a measurable number of years. As a result of these conclusions, conferences were called with the representatives of the oil industry, and voluntary steps were taken by them to extend their holdings AMERICAN ENTERPRISE ABROAD Despite the notorious neglect of our nationals in foreign fields, at least one country—Mexico—owes its modern development of mineral resources to men, money and material from the United States. Here is shown a steel derrick and a diamond core drill made by an American company and used in extend- ing the producing area of an oil field near Tampico. —Courtesy of Sullivan Mchy. Co. abroad. Departmental reports show a rapid expansion of the foreign interests of our different companies, and they have now reached an extent which should measurably assure to us future supplies under American con- trol. It has developed from these investigations that while our oil-bear- ing lands are free to the exploitation by foreign corporations, some of the principal countries whose nationals are thus engaged here at the same time prohibit our nationals from similar free access to their territories. Retaliatory action was taken by Secretary Fall just before vacating his office as Secretary of the Interior early in 1923. In the opinion of the New York World:* Nobody is going to solve the international oil prob- lem by making reprisals in Oklahoma against the British and Dutch com- panies. To shut out capital from the small fraction of the American sup- *Quoted by The Literary Digest of March 31, 1923, page 13. 14 OILDOM: ITS TREASURES AND TRAGEDIES ply that remains untaken will not open the door in the Near East or in the East Indies. The American interest in the oil policy of Europe and Asia is twofold, first to see available at home a cheap and abundant oil supply and next to insure the sharing of American oil companies in the develop- “ment of the Eurasian fields. In these oil-fields we have no strategic inter- est. The oil problem (with us) is a peace problem. It is a question of feeding autos, tractors, gas-engines, locomotives and merchant ships in time of peace rather than of warships in time of war.f TABLE OF THE WORLD’S PETROLEUM PRODUCTION in 1912 and in 1922 Showing the Quantity and Percentage Contributed by Countries and Grand Divisions. Thousands of Barrels World’s Per cent Countries 1912 1922 1912 1922 Unitedwe States==== eee 223,000 551,200 63.4 — 64.8 Meéxi¢o (02225 2s eee eee 16,600 185,050 4.7 21.7 Canada. 22 S24 Se eee ee ee 240 180 soe Spies, Per 3222 eee ee ee ae 150. 5,330 0.5 0.6 Argentingieee* e SA ee 50 2,670 0 0.3 TTI RIA dha 2 ee ee ene es 440 2,450 vas! 0.3 Venezielaac see ae 0 2,340 AO) 0.3 > Colomblas22 222-222-220 — 0 320 AO) ae Hey pti te oe os See eer ens 200 1,190 0 OA: Algeria RD Ne St Se a gD 0 10 ae poh UMA aes ee ee eee 13,000 9,820 3.0 12 ‘Poland eee ee eer eee 8,500 5,100 2.4 0.6 UPA COs ett EO eae ean aie 0 500 0.0 0.0 Germany ee 2 Sees eee 200 1,030 0 mal RUSS Ree Seg, See 68,000 35,100 19.3 4.1 IPOS a, oe ee Sees ae aes 600* 21,200 sik 2.0 Dutch ehast indies === 10,850 16,000 oul 1.9 ATT Gl ie gee en pas ya ama 7,120 7,980 2.0 0.9 British bores. = ss meas 6£ 2,920 nae ‘3 Japan wand Hormosas === 1,670 2,000 9) 3 Summary by Grand Divisions. NOTE AM Cri Ca ee ee 239,840 736,430 68.2 86.5 South “America 22 a2 aes 2,240 13,110 6 15 TNocaleeA MET Caeser ee 242,080 749,540 68.8 88.0 BESS ire ese eke ey ee ee 20,246 50,100 Sali 5.9 PATRI C ates tet See ee he ae ae se 1,200 0.0 ll EERULTSO J) Care es sence eae gee 89,700 51,550 25.5 6.0 AUWISGRATT A Ste ne ose ee O$ O§ 0.0 0.0 352,226 852,390 100.0 100.0 1OMY CATA Cai sence 500,164 = 142 per cent. Revised statistics of the U. S. Geol. Survey gives the yield of the United States in 1922 as 557,531,000 bbls.; but the share in the world’s yield remains practically 65 per cent. yIn reversing his predecessor’s decision, Secretary Work announced May 16, 1923, that corporations controlled by foreign interests are again permitted to obtain oil and gas leases on restricted Indian lands. *Campbell M. Hunter, of London, quoted in (United States) Mining and Metal- . lurgy of February, 1920. tSarawak, from the An. Rep. of the Royal Dutch-Shell Co., quoted by A. H. Red- field in Economic Geology, August, 1922. §As in Seotland the only mineral oil obtained in Australia is shale oil. OILDOM: ITS TREASURES AND TRAGEDIES 15 Present Dominance of the United States in the Oil Industry. Allow- ing for 4% foreign ownership at home, and for 80% control of Mexico’s oil industry, the United States, through its nationals, last year controlled about 78% of the world’s output of petroleum. Including the 23 million barrels produced by foreign corporations, the 551.2 million barrels of domestic oil obtained in our country in 1922 constituted a direct con- tribution of 65% to the world’s output. Our gain of 79 million barrels, or 16.7 per cent over 1921 made up more than nine-tenths of the 86.5 million barrels increase for the whole world. Not in copper, cotton, or corn is our present world supremacy so marked as in petroleum although we export relatively much more of our domestic production of the first two. Our per capita yield of petroleum has been steadily increasing. It rose from 4 1/3 barrels in 1921 to 5.0 in 1922, promising to become nearly 7 barrels in 1923. No nation except Mexico surpasses us in this respect. Mexico’s maximum per capita yield of 13 barrels was attained in 1921, but dropped to 12 barrels in 1922. However, along this line of com- parison Mexico, in turn, is excelled by six of our individual states, namely Oklahoma, California, Wyoming, Texas, Kansas and Arkansas. In consumption, our leadership is more pronounced and is not, on a per capita basis, approached even by Mexico which usually retains and uses less than 5% of her production. With only 7.5% of the earth’s land area and with only 6% of its population we are consuming 70% of its crude mineral oil. and fully 80% of one refined product, namely gasoline. The Bureau of Mines* has published statistics of the quantity of petroleum used in 1921 by certain countries. The units have been con- verted from gallons to barrels of 42 gallons each and are given herewith in millions: mined Sates: see ee} BS eee e2D: Cita See Sen Oe en eee Arete Se 4.8 inte dies in od oni =.= Sea. epee tes Abeworzwe, are “lionm cavers pep A he Bh CRNDEKO I 9 a, Ss SiR Sle ee ee ee 9.5 C1] Ge re ea ees ayes ea Be Ps 3.0 [SNR MAVCYS). ox, Davies Aled 5 JIM Oe ee ae 8.9 IVEGSC Opec = Sea On een tere) Petey ie ied ayy Ditch Hast Indies: -2ses 225 5.4 SMG Hi ofa ea SD Sere ia aS Ti RS Sem 2 These figures for 1921 become significant if expressed in consumption per person, as shown below: (GIN GS CER SCS Cl le. a 4.8 Chinato oe ste Pe Ot ee oe 0.011 Remit Cie IM OMe fg 8 ne ko 0.7 JVADOMSAnO RP OTmOsies i =a. ere a 0.053 Mee eet pee eee pee ea: Ub PRA eae Rt ee. eee See ee Cee 0.80 Eg a ey SE RIS el 0.2 MECKICO ere ee ee 0.10 Pt ememaste ln glee: ss 0.11 ANISErS amie oe ee ee 0.22 From the above it appears that we consume 4.4 times as much per capita as Canada. The latter relatively uses 10 times as much as the Dutch East Indies and they in turn, use 10 times as much as China de- spite its huge consumption of kerosene. Thus our consumption of petrol- eum per man, woman and child appears to be, roughly, 400 times that of China. It may be truly said that the per capita consumption of mineral oil is fast becoming an index’ to the ae SOE if not the extrava- gance, of civilized nations. — -*Hstimates by W. C. Hill, published in the Qi] and Gas Journal, November 4, 1922. £2 -! OILDOM: ITS TREASURES AND TRAGEDIES Efforts of Some Countries to Find or Open Domestic Deposits. Four instances are cited of activities in coal producing countries seeking do- mestic supplies of mineral oil. England, during the past eight years, has expended over $2,000,000 in drilling almost 31,000 feet of test wells within her boundaries without discovering oil of any commercial consequence. The value of the petroleum produced has been estimated at less than $100,000.* In South Africa the Northwestern Cape Colony Prospecting syndicate has for 20 years been boring for oil near Carnarvon. Efforts in that immediate locality were lately abandoned after an English expert reported adversely. The Government of Australia has a standing offer of nearly one-quarter million dollars reward for the discovery of mineral oil in paying quantities within that commonwealth. So far only two likely structures have been found and a trial bore is being sunk on one of them.{ After spending about $150,000 the Government has given up its own test at Roma, owing to an excessive inflow of water.§ However, British oil companies, operating outside of the Empire, have met with more success, particularly in Mexico, Persia, the United States, and Rumania. The total amount has been estimated at 52.6 million bar- rels by a London authority but the published list appears to be incomplete. After allowing 40% of the Royal Dutch-Shell Company’s output in the United States (23 million barrels in 1922) and say 60% of the entire Persian output (21.2 million barrels in 1922), the British oil companies controlled, in 1922, at least 75 million barrels of petroleum or approxi- mately 9% of the world’s production.|| Aeronautical France, which has been getting most of her gasoline, illuminating and lubricating oil from America and paying a seemingly high price for the first named, has bestirred herself since recovering from Germany the Pechelbronn oil ‘“‘mines’” in Alsace. Even with new shafts over 1000 feet deep compared with the earlier diggings of 40 to 300 feet, the annual output is not expected to exceed half million barrels, or no - more than the daily rate of Oklahoma alone at the middle of 1923. To supplement this seemingly small amount of domestic production the Freneh people are now normally importing in a year nearly 9 million barrels of petroleum products. Various steps have therefore been taken to reduce the requirements from foreign sources. These include encouragement to further prospecting in France, Algeria and Madagascar and the legal obligation of importers, beginning August 28, 1923, to buy of the Govern- ment 1-10 as much motor alcohol as the volume of gasoline imported. In October, a liquid fuel congress and exposition were held in Paris. Both *Wall Street Journal, December 4, 1922. According to Trade Information Bulletin. No. 80 of the Bur. of For. & Dom. Com. January 29, 1923, the English discovery was made at Hardstoft in Derbyshire. Similar high grade oil was found 300 miles away and 1,800 feet deep near Edinburgh, Scotland, in May, 1921. See also chapter on Commercial Geography. +United States Commerce Reports February 5, 1923. ¢The Oil and Gas Journal, January 25, 1923, Page 136. §The Mining Journal, London, December 30, 1922. |In September, 1923, the Royal Dutch-Shell Co., was getting %4-million barrels of oil daily; 80,000 in California, 40,000 in Mid-Continent, 100,000 in Mexico and 30,000 in other fields—R.Airey of the Asiatic Petroleum Co., quoted in The Oil and Gas Journal, September 6, 1923. OILDOM: ITS TREASURES AND TRAGEDIES li] proved disappointing as to the expected attendance of foreign producers, refiners and marketers who might have valuable trade or technologic sec- rets to reveal. Why Nations Seek Own Sources of Oil Supply. In general, the more civilized foreign nations are ambitious to have their citizens own or con- trol petroleum deposits—colonial, domestig or foreign—sufficient for two purposes: (1) Industrial independence from the United States with special reference to the refining of the crude oil; and (2) military de- mands which, for countries like Germany with negligible domestic deposits, involve reserve storage of large quantities of lubricants and gasoline. Some authorities say that the Central Powers were defeated as much through their shortage in these supplies as through any privations and propaganda that influenced their folks at home. Special reasons impel some nations, notably Great Britain, Nether- lands and Norway, to encourage their nationals in the quest of petroleum deposits. The countries mentioned are to a great degree dependent upon shipping as a source of national income, and it is but a question of time be- fore fuel oil will entirely displace coal for marine motive power, particularly if the Diesel engine should be universally adopted. As a matter of fact, the mer- chant marine of the world consisted of oil-burning vessels to the extent of 26 per cent in 1922 compared with only 3 per cent eight years earlier. Lord Curzon* has stated that whereas Great Britain imported nearly 3°4 million tons, or over CAPT. ROALD AMUNDSEN’S SCHOONER “MAUD” 28 million barrels,} of oil at Seattle, taking on petroleum supplies for its ; ie O- Arctic cruise, June 4, 1922. Note the Norwegian Se 1920, her domestic tes flag and crowd on dock and roof. Gasoline will duction (presumably from again be needed for the next attempt of the South g h. shal Pole’s discoverer to find the North Pole. cotch shales) was only —Courtesy Union Oil Co. of Calif. 166,000 tons, or a little more than 1 million bar- rels. Of the oil imported, 61% then came from the United States, 37% from other countries, and only 2% from the British possessions. Yet 90% of the British navy is now oil-fired, and the use of oil is increasing in the mercantile marine, so that the urgency of a supply of oil is manifest. bine iS Be ts *Quoted in an editorial of the Mining and Scientific Press, July 16, 1922. tIncreased 67% to 34.3 million barrels in 1922. ITS TREASURES AND TRAGEDIES OILDOM 18. ‘6I6L ‘Jequejdeg ‘puvlsuq “~ousnor s,uyjuady Ul ABVspy ABYOR ‘A— : ,“SO9AIOSOI BINJNJ IOJ PvVoIge YOO, 0} pesiy~qo SI puew [IO JTJSeMIOP JorSeI10}S Joy YSnoiy} suluunNI ST BolIomMy * * * “Jonpoid epnid 3Y} JO vIVYS I9y IOJ SotzJUNOD I9yIO YIM 919009 01 JABY TIIM JOYS PTIOM OY} JO JoYAVU [IO VY} SUI[NA JO PvI4SUL UOYM SuIyqovoidde eull? B puBw dn Aap 0} Supuutseq ATddns d1]seuIOp Jo VvdINOS Jory Joy SpUy SoIVIG P2eqTUQ 94}—SUIY SBA [9091S JVY} OS SIBvOA AJB} SBM FT SB ,SUIS[ SI [10, 384} Surdvs B oni}? 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ny aw? NV¥ZIO OIATIVdA HLYO SHLVLS agLINA fotuen 40 HOD) 7 TS OILDOM: ITS TREASURES AND TRAGEDIES 19 WORLD’S KNOWN RESERVES, PRESENT PRODUCTION RATE AND REMAINING YEARS OF LIFE, JAN. 1, 1924. Life Left Remaining* Yield At 1923 Country and Reserves 1923. Rate Grand Division Millions of Barrels RRS LC eS ote ee kL eae 12,000 735 16 Pere t MexiCg. uo tS 4,000 142 28 Rea TUOMAS <0 ot et et ee fr 7 -2,.000 ye a Northwestern a Sa oc ile maa aman mia 6 Sotth Wiest Zl CLS um ee ee a ee Ce oe PPT ates ter ee She A 9,000 3 500 ee (OAS TA), ae A ee DORE 2 : ap hapnios Pemarron ing tee er 6,000 5 850 South Bolivi t 2 rr erinn RIM eeEO LT ee eee a Pemanig- © Polatdertee 2a io fe ee 2,000 17 120 Snr pen eerie eee ko A ce 7,000 35 200 AE Wate EEE SEE ee ne 4,000 0 -- Rerdin-std Mesopotamia... 7,500 25 300 SO OMIEMIII MR OrniNaH ou 2 8 2 ee 2,200 2.2 -- nee Ce ree We re or ee 1,500 ma -- Rt ee Ee oe Pe ger eS 2,800 8.2 350 WERE eee ee ee ee a 3,000 20 150 mer nementertin sw ctes id we en 1,000 1.2 800 SUMMARY INGrIN AA INeE i eS ee ey a Pee ane LS O00 878 20.5 South America________ 4D: 28 eRe Sie” eae 15,000 25 600 BOURODG cea ot 3 Pees ey bee oe ee OD OOO 52 160 AOS lee a Sedaiee eee e S o Sea a ene oe 21,000 55.5 380 MimtierumArricn ste ao ee 1,000 1.2 800 Total quantities, average life________________ 64,000 1,011.7 63 Position and Importance of Petroleum in the United States. Nowhere in the world does petroleum and its dependent industries present so many important phases and effect, as in this country. In only one other nation is it more significant in any respect, namely in Mexico where of late it has, through taxation, furnished nearly all the funds needed to support the Federal government. While making but one per cent of the entire revenue received by Uncle Sam in the form of income tax for 1919, the total of 38.6 million dollars derived from the oil and gas industry proved no mean amount that year. It then made up 51 per cent of the income tax levied on the American mining industry, compared with 23.6 per cent to the credit of coal mining. The most vital relation of petroleum is not, after all, toward trans- portation—aerial, terrestial and submarine—but towards the basic food- producing branch of industry, ancient and honorable agriculture and stock- *These estimates represent the author’s modifications for January 1, 1923, of the White-Stebinger approximations appearing in Oildom, October, 1922. David White, in The Mid-Pacific Magazine, June, 1923, wrote that wild estimates are better than none and that the obligation of the geologist is to make them as good as possible; but that they will be often revised during the next half-century with advances in geologic explorations, drilling tests, commercial production, and technical discovery. S. K. Hornbeck, of the U. S. Department of State, in addressing the “Raw Material’ con- ference at Williamstown, Mass., August 11, 1923, mentioned 70,000 million barrels as the latest measure of the world’s petroleum resources. 20 OILDOM: ITS TREASURES AND TRAGEDIES raising. ‘The general employment of the tractor and oil-driven equip- ment in this field suggests great possibilities to follow in saving labor on the farm and increasing production not only of food but also of fiber. Julius H. Barnes, president of the Chamber of Commerce of the United States and an international authority on grain, recently said that while the agricultural industry was not generally considered to be highly mechanized, the wheat crop of today, if the same crop were produced by the methods in vogue before the invention of the reaper and other mechan- ical devices, would require 130,000,000 working days’ labor. The American worker produces yearly an average of 12 tons of cereal per worker, com- pared with an average of only 1% tons per farm worker of the world at large. The tractor and oil-driven equipment will more than make up for the 1,700,000 fewer workers on the farm in 1920, compared with 1910. They will help solve the problem of labor and production costs which now engross the minds of our farmers.’’* In some states as in Oklahoma, the economic sitiaGon of the oil industry must be considered in weighing the condition of the farmers. Many hundreds are getting an annual revenue from leases of land not yet developed and large numbers are drawing royalties. But oil is not yield- ing direct revenue for the great majority of farmers. i = Onb an Gas Journal. GRAIN FIELDS AND ORANGE GROVES GIVE WAY TO GOLDEN OIL. Discovery well at Compton, latest new field in Southern California, 1923 One does not think of New York as an oil town, yet nearly a quarter of its total trade as a port is in petroleum and petroleum products. Most astonishing is the fact that in 1922, in point of tonnage, mineral oil made first place in the total traffic of each of the six leading sea-ports of the United States, namely New York (19,000,000 tons total traffic), New Orleans (6,700,000), Baltimore (5,200,000), Philadelphia (5,150,000), Port Arthur, Texas (4,800,000), and Galveston.+ During the fiscal year of 1921, petroleum and its products were exported to a value exceeding 500 million dollars. In 1922, with a value of almost 350 million dollars and a rank next to cotton and wheat including their manufactures, mineral oil made up nearly 10 per cent of the total value of all domestic mer- chandise exported. Oil traffic through the Panama canal was paying 50 per cent of the Government tolls during 1923, and at one time during the latter part of this year it was moving east at a rate of almost 150 million *Hditorial from The Oil and Gas Journal, May 17, 1928. {The Literary Digest, June 17, 19238, page 70. 21 1923, the 2% S15; ic and Gulf troleum alone for this ing to Sept it from the port ’s greatest export This tremendous has resulted in a 000 dur 1 In Atlant ico. Q 1c ’ 200 h ran from July da year ago. most of ’ in Mex ia pe ific to the Atlant forn ion barrels, ico of Los Angeles, which in 1923 has become the world 1 Tamp ill ic ° tons per annum. being nearly $5 ing . ts, TREASURES AND TRAGEDIES ipts of Cal 1p 10 ITS OILDOM barrels or more than 20 million year will probably total 70 to 75 m center for crude oil, even surpass traffic in petroleum from the Pac doubling in the toll rece months of the fiscal year 1924 wh Coast ports the actual rece compared with the same per ‘eg osed uo ulseq salesuy SOT 94} JO dem 99g ‘“p[IOM 9} Ul 9}]VI SUIPBOT 4Se4SVJ 9G} 9q 0 PTes ‘INOY Ue ‘s—Tqq OONON'OS 1B SIAOyxUBI PROT 0} Aypoedvd B SBY 19qG}9S0q[V YOY ,,[BVUIUII9},, S.AuBdMIO) [T1IO PAvpUB{Y, 94} JO Javed B A[UO DOTQISTA ST pUNOASaIOJ 9Y} UT ‘S£BP PUBISE S}I SULINP UBIO 94} WOAJ IDUISIOMII S]T YIVU 0} SodBI19}] YIM puB YSTY Joosy OOG‘T A[IveU ‘[[IY OIpsg uvg sivedde punorsyoeq 94} UL ‘S}10d [Io Jo usenb oy} SB AT}UIDAI [JUN Ppelndt YOIYM ‘oorxay ‘ooTdwey, ueYy} spley JI0 AIVINGII} S}T 0} AVSO]O ST O1paq UBg ‘sInOT YQ JO SOM ALD WRITIOULY JSeSIV[ 9G} MOU ST YOIGM ,,‘s[asuy 941 JO AVID,, 94} JO 1ajUa. 94} WOAJ SaTIu EZ JnoGe pueB ‘OSeIq UBY }¥ .,UNg 9G} JO 10qIVH,, pojJou puB [eINnjvU 9} JO JSeM -Y}10U SaTIU OG WNOGV pPI}BIOT ST IIT “SeIvIg peu 94} UL JAOdvIS [BIOYIAV JuLJIOdWT Jsom oy} A[qeqoad st sty, "EZEL ‘Aine ‘saajzasung Buowy— ‘€26T ‘LUOd TIO LSALVAUD §$,.CIYOM—SHIEONV ~ ‘ss be SOT JO YOUUVH—OUdAd NVS AO LUV CHAPTER II. THE NATURAL RESOURCE. Nature and Origin of Oil. Crude petroleum is a liquid bitumen— a complex mixture of many compounds, principally those of carbon and hydrogen. It is extremely variable in weight, color, and thickness or Vis- cosity. In general it ranges in specific gravity from 0.75 to 0.99*—that is, it is lighter than water. Some of it has a light color and may be very mobile; some, an almost black color and may be very viscid. Petroleums are commonly divided into two groups, one of oils having a paraffin base. and the other of those having an asphaltic base. Usually the oils that have a paraffin base are lighter and contain more gasoline and more lubricating oil and are therefore worth more than the others. Natural hydrocarbons are present in all sedimentary rocks of marine origin that are not too much altered or metamorphosed. While they are also stored in sediments of fresh-water origin, no valuable deposits in such have so far been found. The ereatest amount occurs in dissemi- nated condition in the shales, es- pecially in the fossiliferous black shales where oil forms as much as 21 per cent of the rock mass. As little as three per cent can be ex- tracted by heating the shales and driving off the crude oil. Impure limestones, notably dark ones, are full of oil, evidenced by the odor on breaking the rock. Even if a series of 1,500 feet thick had but 1 part petroleum in 100,000 parts emCTION Oman eee ' (of bed rock), this amount would By way of cracks or joints the oil mi- yield 750,000 barrels to the square grates from the mother shale up into mile, about equal to the greatest porous ‘‘sands.”’ e : actual production per square mile of any part of the leading Appalachian fields. But if the material is to be commercially valuable, it must be concentrated by natural agencies into limited underground areas. Furthermore, to be of use to man, these in- visible reservoirs must be discovered by drilling. The natural hydrocarbons occur in the sedimentaries in all conditions from natural gas through light oil and heavy oil into asphalt. ‘ Three theories ascribe an inorganic origin to oil, namely the car- bide, the volcanic, and the sedimentary theories. Of six organic theories two claim animal origin. The explanation usually accepted is that oil is formed from the same material as coal, that is, mainly from vegetal matter. Plants, except for the water in them, consist principally of the same elements that go to make up petroleum and natural gas.+ DEL AE Ser sees : *On the Baume light scale the range is from 56 degrees for the lightest to 11 degrees for the heaviest crude, 10 degrees B. corresponding to the specific gravity 1.00, of water. {‘‘World Atlas of Commercial Geology,” U. S. Geological Survey, 1921. w (ez) OILDOM: ITS TREASURES AND TRAGEDIES 23 ra The material from which petroleum originated was first laid down on the floor of the sea; the greater part of it was seaweed, with some animal tissues which become deposited in connection with fragments of coral and broken sea shells forming beds of limestone. In some rocks of this kind the odor may still be noted in freshly-broken pieces; so marked is the smell that they are known as stink stone. Masses of clay washed down opposite river mouths are heavily charged with fibers and tissues which high pressure reduces into oil and gas. Such carries vast amounts of plant remains. When this is deeply buried under the pressure of other deposits Nature distils it slowly into oil which, separating by gravity from the gas and the salt water, accumulates with these in porous beds; with the WATER IS ESSENTIAL TO FLOAT THE OIL TO THE HIGH PART OF CERTAIN STRUC- TURKS. Here is shown a heavy flow of salt water near a large untested Texas struc- ture once leased by the author. This well was drilled 7 or 8 miles from the apparent center or geologic high point and thus missed the oil itself. gas above and the water below. Overlying impervious strata prevent the upward escape of the oil; and the subsequent movements of the earth’s crust, such as bending or breaking, create structures for the natural trap- ping or storage of the oil until the impervious beds have been punctured by the drill. If the pressure of either the water or the gas is great enough gushers or flowing wells will result when the petroliferous stratum has been penetrated.* Briefly, the purely animal theory is now definitely on its defensive, the rival vegetal theory having decidedly gained ground especially among the younger generation of practical geologists and those who are intimately associated with the winning of the precious fluid.+ Occurrence in Geological Structures. The world’s petroleum comes from sedimentary beds, almost entirely from sands, sandstones, conglom- erates, and porous limestones. The deposits are universally held in by coverings of shale, clay, or marl. The bodies of strata most common in oil fields are those in which thick shales, clays, or marls alternate with rel- atively thin sands.# * “Surface Marks of Oil Deposits,’’ P. H. Pearson. + “Oil-Finding,” E. H. Cunningham-Craig, 1920. + “Geology of Petroleum,’’?’ W. H. Emmons, McGraw-Hill Book Co. 24 OILDOM: ITS TREASURES AND TRAGEDIES Any arrangement of the beds to form a trap for the gathering of oil in commercial quantity, is called a “structure.’”’ Some structures completely trap or enclose the oil within a part of the porous bed, i. e., they are more or less closed. They include domes, anticlines (or elongated domes), and lenticular sands. The domes may be formed by the ordinary “‘blistering” of the earth’s crust, by the underground growth of thick salt lenses, or by the upthrust about a volcanic plug. Local structural highs and sealed s > > VF > > 3 VS 3 x a3 Ee ere eer coi ini. 2 A cS S SS 8 8 8 ss OS § -—— i; 2 A Surface Ri iM A RA lee A = bi Nh lS 2 ee = ee oe ee eee Oe ee ee Ee ESS = = S!S=—, ——— on ——— is os ee Sands containing = Fresh water cee ————. Bae fresh water ‘ee SS Bee az SS Enns Ga eee = _———S——————— a Pa = ——— —S<— Shale = .—Limestone = -—_ 5) = ———— SS == SS S— Salt water e GENERALIZED, CROSS SECTION THROUGH AN OIL AND GAS FIELD —Bureau of Mines, Natural Gas Manual. faults may hold the oil along the anticlines. Of less importance are the retardation structures on monoclines of moderate dip, i. e., strata gently in- clined in one direction only. The retardation may be due to local horizon- tality or terracing, to mere change in the rate of dip, or to the development of anticlinal noses. Experience has shown that each oil field has a characteristic and dis- tinctive geological structure. The following classification of American fields is based on structure: 1. Fields with folded structure (anticlines and synclines)—the Ap- palachian f., Illinois, the Mid-Continent f. (Oklahoma—Kansas N. Texas), N. Louisiana, California, Wyoming, Colorado. II. Fields with monoclinal dip (homoclines)—Ohio-Indiana; of minor importance in California and Wyoming. : Ilf. Fields on domes—Wyoming, Ohio, Louisiana-Texas Gulf Coast, Mexico. ; IV. Fields on faults—California and Wyoming (of minor import- ance). V. Fields on unconformities—California, Oklahoma, New York, On- tario, Quebec; of minor importance in Wyoming. * Petroleum occurs in synclines or ‘‘down-folds” only in the absence of (salt) water from the containing stratum. * Ziegler’s “Popular Oil Geology,’ 1920. At Mexia, Powell and Luling, Texas, faulting is admittedly the major factor in trapping the oil. The great pools of Mexico are located in areas with fault systems. OILDOM: ITS TREASURES AND TRAGEDIES 25 TWO EXTREMES IN SURFACE SIGNS. 1. Natural gas discov- ered: in a_ shallow well drilled for water—near and north of the Virgelle struc- ture, 15 miles SW of Big Sandy, Mont. —Photo by the author. 2. Asphaltic residue or “Drea” that remains after the oil exudes from the sandstone and partly evap- orates. Under the Cali- fornia sun the “‘brea’”’ flows in ropy forms and cascades over the edge of a Tertiary bed. —Photo by R. HE. Vandruff. —U. S. Geol. Survey. OIL SEEPAGE NEAR HEAD OF KATALLA SLOUGH, ALASKA. Note the gas bubbles breaking in the surface of the residual gil. 26 OILDOM: ITS TREASURES AND TRAGEDIES The Carbon Ratios of Coals in Relation to Oil Fields. As regards the alteration or metamorphisis of rock originally oil-bearing a discovery of great practical value was made less than a decade ago by David White, of the Geological Survey. Petroleum in reservoirs associated with the coals show differences corresponding to the degree of alterations of the coals. In the few regions where the geographic association of oil with coal exists closely, almost always with the oil beds (stratigraphically) lower, it has been found that the percentage of fixed carbon in the coal amounting to 65 or more precludes the possibility of commercial deposits of either oil or gas. Where the coals range from 60 to 65 per cent gas may be found but no oil of consequence. Where the fixed carbon ratio runs from 55 to 60, both are found in abundance. These rules apparently apply to Arkansas, Oklahoma, Pennsylvania, Texas, Wyoming and several other states that produce both coal and petroleum.* Surface Signs of Oil Deposits. The presence of petroleum in any region may be indicated by oil springs or seepages or by surface deposits of asphalt or paraffin wax, and its location underground may be inferred from visible stratigraphic and structural features favorable to its ac- cumulation. Seepage is the surest evidence of the presence of oil. Most of the Tertiary oil fields of the world are located where seeps occur. Seepage has given the discoverer the first and often the only clue to the oil value of the field. This and structure combined form conditions that delight the heart of the driller, as largely eliminating chances of failure. The fields of Mexico are located in extensive areas of exudation. The great Bibi- Eibat fields of Russia were first operated amidst such visible signs. De- velopment in California mainly followed seepages. In Burma, Galicia, and Roumania, surface marks showed the way. In the Mid-Continent field, however, oil springs are rather rare. The reason is that the beds are so slightly tilted that they remain unbroken and there are no fissures along which the oil can reach the surface in noticeable quantity. Though seepage and asphalt show that oil has been lost we have reason to believe there is more where it came from.t Geological Distribution. Nearly all the oil produced in Europe, Asia, Africa, and Oceanica is obtained from Tertiary strata. In Canada oil is obtained from Silurian and Devonian rocks, and in Mexico, the West Indies, and South America from Cretaceous and Tertiary rocks. In the United States, which alone supplies two-thirds of the world’s output, and in which the scientific quest for it has included the entire stratigraphic column, petroleum is found in the beds of every geologic system above the Cambrian, though the most productive rocks are in the Devonian, Carboniferous, Cretaceous, and Tertiary systems. The Pennsylvanian, * “Geology of Petroleum,’ W. H. Emmons. + Pearson’s ‘Surface Marks of Oil Deposits.” Seepages are most in evidence and strongest in those regions where the folding is most recent, and where stresses are still in operation; regions of early buckling furnish little evidence of seepages such as oil or gas springs or asphalt deposits. Such former deposits may have been eroded. The readiness with which seepages are healed is apt to be underestimated; they tend to stop themselves.—David White, Chief Geologist, U. S. Geological Survey. t World Atlas of Commercial Geology, U.S. G. S., 1921. OILDOM: ITS TREASURES AND TRAGEDIES 27 PRINCIPAL DIVISIONS OF GEOLOGIC TIME, MODIFIED FROM THE LSE Recent. Quaternary] pjeistocene. Cenozoic (recent life). Pliocene. Miocene. Oligocene. Kocene. Tertiary. r “Age of man.”’ S. GEOLOGICAL SURVEY eS LS LS Characteristic life. Animals and plants of modern types during Great Ice Age. “Age of mammals.’’ Possible first ap- pearance of man. Rise and develop- ment of highest orders of plants. Cretaceous. Mesozoic (interme- diate life). Jurassic. Triassic. Permian. Carbonifer-| Pennsylva- ous. nian. Mississip- pian, “Age of reptiles.”” Rise and culmina- tion of huge land reptiles (dinosaurs), of coiled shellfish with complex parti- tions (ammonites) and of great fly- ing reptiles. Appearance (in Juras- sic) of birds and mammals; of cycads, an order of palmlike plants (in Trias- sic); and of angiosperms such as palms and hardwood trees (in creta- ceous). “Age of amphibians.’’ Dominance of club mosses (lycopods) and plants of horsetail and fern types. Primitive flowering plants and earliest cone- bearing trees. Beginnings of back- boned land animals. Insects. An- imals with nautilus-like coiled shells (ammonites) and sharks abundant. Devonian. Paleozoic (old life). Silurian. Ordovician. Shellfish (mollusks) Rise of amphibians “Age of fishes.’ also abundant. and land plants. Shell-forming sea animals ruling, not- ably relatives of the nautilus (ceph- alopods). Rise and culmination of the animals known as sea lilies (crinoids) and of giant scorpion-like crustaceans. Rise of fishes and of reef-building corals. Shell-forming sea animals abound, not- ably cephalopods Culmination of buglike crustaceans, the trilobites. First trace of insects. Cambrian. Trilobites and brachiopods most charac- teristic. Seaweeds (alge) abundant. No trace of land animals found. and brachiopods. Duration variously estimated. toe million years. 4 to 10 million years. hia to. 20 million years. Algonkian. Protero- zoic, (pri- mordial life). Archean. rocks Virst life that has left distinct record. Crustaceans, brachiopods, and _ sea- weeds. Crystalline | No fossils found. 28 OILDOM: ITS TREASURES AND TRAGEDIES the upper division of the Carboniferous system, has proven to be the most prolific series of oil-bearing formations in the Mid-Continent field; while the Mississippian, the lower division, prevails east of the Mississippi. The following summary of stratigraphic distribution of oil (and gas fields) in North America covers the important systems of strata accord- ing to past production and is brought up-to-date. Where several systems are represented in one state the name of the state is capitalized to show the leading occurrences. (Modified from Ziegler’s ‘Popular Oil Geology’’.) Tertiary: CALIFORNIA, Gulf Coast of TEXAS, Louisiana, and MEX- ICO. Cretaceous: California (COLORADO), LOUISIANA (Haynesville, Homer, Caddo, Bull Bayou), Mexico, MONTANA, TEXAS (Mexia, Cor- sicana-Powell), WYOMING (Salt Creek). (Permian): Oklahoma, North Texas (Burkburnett in. part). Pennsylvania: Illinois (in all parts), Indiana, KANSAS, Kentucky, Ohio, Oklahoma, Pennsylvania, North and Central TEXAS (Burkbur- nett, Stephens Co., Ranger, Pioneer, Electra), Wyoming (Lander). Mississippian: ILLINOIS, INDIANA, KENTUCKY, OHIO, PENNSYL- VANIA, WEST VIRGINIA. Devonian: OHIO, (ONTARIO, CAN.), NEW YORK, PENNSYLVANIA, WEST VIRGINIA. Silurian: New York, (Ontario, Can.). Ordovician: OHIO-INDIANA (Lima-Ind. field), Kentucky, New York (Ontario). Of relative unimportance are the Cambrian below the Ordovician and the Quaternary above the Tertiary. The oldest oil-bearing beds occur in New Brunswick and New Foundland, and the youngest in California and the Gulf Coast field. Natural Petroleum Treasures and Tragedies. Mention has already been made of the extinct animals whose buried bones were discovered about 15 years ago in asphalt beds of the Sherman or Salt Lake oil field located on the western edge of Los Angeles. One of the illustrations herewith shows the Imperial elephant, the giant sloth, and skulls of sabre-tooth. tigers. Visitors to the American Museum of Natural History in New York City will find there a splendid group of two tigers caught in the natural trap of sticky oil and asphalt, to which, like the giant wolf spectator, they were attracted by the bulky bait in the form of ground-sloths. The greatest col- lection, comprising over 10,000 individual birds and mammals dug out from Rancho La Brea, are housed in the Museum of Science, History and Art at Los Angeles; and those that are mounted must always prove of great interest to all persons connected in any way with the petroleum industry. A similar find has been recently made in the San Joaquin Valley, also near oil wells, but its extent has not yet been determined.* * Tragedies in Nature traceable to petroleum are not confined to the land by any means. According to the Oil Paint and Drug Reporter of October, 1922, nations are being called together to prevent the pollution of waters of the earth through the dis- charge of waste petroleum thereupon. Righteous indignation has been voiced in the sportsmen’s circles of Great Britain particularly at the alleged destruction of famed fishing streams by the drainage thereinto of oil from highways. The tragedy that befalls the larvae of the mischievous mosquito when kerosene or the cheaper crude oil is used to form a film on the water surface becomes a treasured protection to the health and comfort of mankind in many malarial regions. 29 ‘AVGOL JO SHYNSVEUL OIVIINGIOS GAMVN ODV DNOT JO SHIGADVUL S.ANILVN ‘Ioqyny vy} Aq sojoyg— ‘aSBo Ioop Ul pd}IVAUL ‘S1OSTy, Y}00}-01qBQ JO ST[NYsS 930N ‘SUO[ JO0J FL SYSn} pvy pues oqung UY Ae[[V} Jost Z pooj|s [BUMUIVU SIV, “ueyd -o1 [eldodty jo yuory ut UOpoISBAL :IYSII ZW ‘“soaumo0q poyove[q YIM oyRIIH pur JewWeD Ulepou spIssuOTe —poule}s-18} [[V@—jueydeq [eliodmy pue ‘ojeyng 1eITy ‘TIOIS JUBIH U01-F ‘PouUIRD youT;Xs JO PBoY : Jel IV Vaud WI OHONVY NOU SIVWINV DIYOLSIH “Hud AO SMHIA WOASDIN ‘AVAING [BOISOTOIH “GS *Q ASoJINOD— ‘puUNnoJ VIOM S[TRUNIUB JOUTIXS BLOYM SSUISSIP 910B-0Z PUB !deI} JUDTOUR UL sv Sursanqg setqqnq svS YIM ‘[1I0 Ayors ‘KAvay Jo [ood 9]0N SGIHONV SOT JO ASA NYALSHM NO VOU VWI OHONVY GNV GIAIAI TIO ANVI LWIVS AHL ITS TREASURES AND TRAGEDIES OILDOM 30 OILDOM: ITS TREASURES AND TRAGEDIES In connection with geological investigations made at great depths or before the development of an oil field, district, or pool, not only is science enriched but unexpected and valuable discoveries of coal, potash, sulphur, and other economic minerals are made. As an example of scientific treasure, there is given below the geological record or summarized log of the world’s deepest wells. This test was sunk by the Hope Natural Gas Co. on the Goff farm near Bridgeport, Har- rison Co., West Virginia, in an effort to reach the “Clinton” oil and gas zone of Ohio. It was begun April 19, 1916, and finished March 4, 1918, to 7,386 feet without reaching the de- sired depth because the cable parted 2,000 feet above the bottom. In the table, the depth to the base of each series or system starts from the bot- tom of the Pittsburgh coal seam (lower end of the Monongahela ONCE THE : WORLD’S DEEPEST OIL TEST. series), an assumed level of 200 feet Near Bridgeport, W. Va. above the derrick floor. Name of Bed or Formation Thickness Feet Series Depth Conemaweh= San dao Gee sion ele sis aeeGrane o cuswepevelsiets ornate 600- Allegheny Coal-Bearing Formation ............ 290 +} Pennsylvanian 1150 Pottsville Coal-bearing formation .............. 260 Mawel: Chum kes oo ee hie ierale cgarstoto are niente areas 260 Mountain (Greenbriar) limestone .............. 65 +} Mississipian 1740 “Big Injun’” Squaw, and Berea sand group....265 Catskill (Venango) sand gr. to base of Bayard. .770 Chemung Shales (Hlizabeth, Speechly, Bradford & Kane esand = norizons) yw cccne ceva eis oer ances 2,190 | Upper Devonian Shales 7563 POTtA ee Beds saicawied so aacteole o Carcass Wiemelece eos eae ele 1,207 Genesee: Statens asin viaienie Gatasseietetors sanreoseciaue ere eee 288 Hamilton sand | Marcellusiy copcoccsmt nce ere ies 1,368 Corniferous limestone to bottom .............. Don (Grand Total) 7586 According to State Geologist I. C. White, the temperature readings in Fahrenheit degrees were as follows: Depth Temp. Depth Temp. Depth Temp. 100 ft. 55.6 2000 ft. 74.9 5000 ft. 114.2 500 ft. 60.2 2500 ft. 81.0 6000 ft. 132.1 1000 ft. 65.3 3000 ft. 87.6 7000 ft. 153.2 1500 ft. 67.8 4000 ft. 100.0 7310 ft. 156.3 Potash salts form the basis of the most important economic treasures discovered incidentally to the drilling for oil. They were found in the Staked Plains region of Texas by scientists of the U. S. Geological Sur- vey and the Texas Bureau of Geology and Technology operating under Director Udden of the latter. Potash is one of the few essential mineral substances in which our country has not been self-sufficient so far. Un- scrupulous promoters have already seized upon its agricultural and in- dustrial importance; and warnings have been issued by the United States Geological Survey to prospective potash investors regarding the exag- gerated claims set forth as to the thicknesses of these deposits. Rarer even than potash are the medicinal ichthyol and the non-burning and inert’ helium. The former is found in mineral oils from California and Texas; the latter as part of the natural gas emanating from petroleum in limited localities of Kansas and Texas. CHAPTER III. COMMERCIAL GEOLOGY OF MAJOR AMERICAN FIELDS* Petroleum is as widely distributed geographically as geologically. The largest physiographic province of the United States, namely, the Interior Plains, was the source of more than 50 per cent of the oil pro- ‘duced during 1922. This province takes in the Appalachian field in the plateau of the same name, the Lima-Indiana field of Ohio and Indiana, the Illinois-Indiana field, and practically all of the Mid-Continent field, the Sabine uplift being (geographically) included with the Gulf Coast field in the Coastal Plain. The Rocky Mountain element comprises the fields of Colorado, Wyoming, and Montana. The California valley and Coast Range embrace the fields of southern California. . < a mos FIG. 3. DISTRIBUTION OF THE IMPORTANT OIL-POOLS OF THE UNITED STATES Adapted from a map published by Arthur D. Little, Inc. 1 wiscONstn foe a aces mre ee ay Vee" Ge * 5 mf 1 Td Py 6 \< . * 312 ap Oo C od yy we 86. g — fe S = SUNBURST FIELD ' ° Kor, 0 \s % be MONTANA \ x st Fi @ BLACK GIRCLES REPRESENT PRODUCING CENTERS OR POOLS WHICH ARE INDIVIDUALLY NOTABLE, THOUGH OF VARYING PROMINENCE. THEY MAY BE IDEN- a IFIED BY THE ASSIGNED NUMBERS, WHICH REFER TO THE LIST AT THE BOTTOM OF THE MAP, LB = LONG BEACH FIELD, CALIF. C = POWELL FIELD \ s EAST CENTRAL TEXAS 2 O UNFILLED CIRCLES REPRESENT PRODUCING AREAS OF SECONDARY IMPORTANCE, BOUNDARY LINES INDICATE THE KNOWN EXTENT OF THE MAJOR FIELDS. SF = SANTA FE SPRINGS F, CALIF —Courtesy of Wiley & Son, Ince., publishers of Pogue's “Heonomics of Petroleum.” THE SEVEN MAJOR OIL FIELDS OF THE UNITED STATES. There are many new pools not shown by the dots on this map, particularly in Oklahoma. Within the limits of the outlines of each field lie large dry areas and larger untested areas. Additional prospective oil territory is shown on a map in The Literary Digest, Nov. 10, 1923. The Mid-Continent Field. Commercial usage, largely determined by the quality of the oils, has added the pools of Arkansas and North Louisi- ana to the Mid-Continent field proper. The main oil areas of this field are situated in a broad belt extending from Kansas City south through eastern Kansas and northeastern Oklahoma, thence southwest through *Based largely upon two Government publications: (1) “World Atlas of Com- mercial Geology,” part I, by J. B. Umpleby and others, issued in 1921 and for sale at $2.00 by the Director, U. S. Geological Survey; and (2) “Manual for the Oil and Gas Industry,” revised in 1921 by A. H. Fay, 0. H. Reinholt, and other valuation engineers of the Treasury Department and for sale at 25 cents by the Superintendent of Documents, Washington, D. C. A. C. Bedford recently wrote in Foreign Affairs: “Petroleum is the most uncertain of natural resources. Broadly speaking, it is impossible to tell today where oil will be found tomorrow, and having been found, exactly how long the supply will last.’’ : (31) ITS TREASURES AND TRAGEDIES OILDOM d2 ‘dip AT19}SaMqIIOU 10 9ITs0ddo Jo BJBI]S SNOIJZTIUOgIBO UO Surjser spoq SJUBUMIEL Nveje[d SpisMp 9y} JO oul[-AYS wsaad oy} 930 Sn090BJ019 I9MO'T IO UBaqIUBMIOD Jo dn opeum N ‘PABAMISOM BSUIYOOT: ‘JOLI4SIp Jesung 24} UL [0OOg UWoOl1IaW 9Y} SMOYS SIV SOZVud AHL dO Gad AHL GASVAT SVH GZLVLIS AHL GUAHA ‘SVXEL ‘ALNOQOO DNOOA AO LUVd “ATHOOM TIO 9 L— “pvlg 94} JO Jey} possedins SuUIABY P10d0I Yad sjt ‘food speis-ysiq aATJONpoOId JSOW 9} [ITS SI IT SULING ‘d8SBIT 0} JYSNOS si0jeiedo YoryM ArojJouIVD 9yy 0} sulddoip ‘sjarivq T9O'FIT JO O1¥aI ATIVp 94} 28 poonpoad 1 Sivoeddev iel 94) IV Sol} lovey sult edid ojJenbepe YIM podojaasp 19A9 prey ysng a ‘ezel ‘ABW UL YooM B e Ray IB] SIG 04} SI I ‘ ‘ed “OD UBayoW UI [ood poz ‘IOQMIBAON UT STelIVq QOO'OE UBYI SsoaT IZ6E JO 1OUUINS 894} UL PosIVAOOSIG, ‘a1TH1d LNANILNOOGIN AHL NI S1IO0d AIGVUAWOANNI AHL 40 ANO—VMVMNOL JO LUVd OILDOM: ITS TREASURES AND TRAGEDIES 33 south-central Oklahoma into north and central Texas as far as Brown and Limestone counties. It may be extended as far west as the Texas “Panhandle” to take in the Amarillo gas pools in Potter County and the minor oil pools in Carson and Hutchinson counties. Most of the oil produced in Kansas, Oklahoma, and northern Texas is obtained from beds of standstone in formations of the Pennsylvanian series. Limestone beds are of much less importance. The “sands” are generally between 25 and 75 feet thick, but range up to 300 feet (at Healdton). In southern Oklahoma some oil comes from the “Red Beds” of the Permian series. The-oil found in southern Arkansas, northern Louisiana and central Texas is obtained from structures in sandstones or other porous rocks of the Cretaceous and Tertiary systems. In the Mid- Continent field the oil gathered in anticlines, domes, and terraces through- out an extensive region where the strata have a general westerly dip. The depth to production varies from 200 to 3,500 feet, the shallow wells being along the eastern edge of the belt and the deeper wells being confind to the western part. The wells are preferably drilled with standard tools, the rotaries being used as a rule only in parts of Texas and in the “‘Red Beds” of Oklahoma. Drilling and production cost more than in the Eastern states, although less than in Wyoming and parts of California; hence pumping cannot proceed to so low an economic limit as in the Eastern states. Well spacing is from 2 to 10 acres per well. Recovery of oil per acre is generally less than in California and in the Gulf Coast. Mid-Continent Oil is almost invariably of paraffin base, and the weighted average gravity is about 36 degrees Baumé. It grades in appearance and — gravity from the thick, black oil of Smackover and some Louisiana pools with a gravity of about 20 degrees, to the almost colorless product of the so-called “gasoline well’ near Cushing, Okla., with a reported gravity above 55 degrees. The usual gravity range, however, is from 30 degrees to 45 degrees Baumé and the prevailing color is light green. The world’s most productive light oil field is Tonkawa, in Kay and Noble counties, Oklahoma, where the average gravity is 43 degrees. The Mid-Continent field is more pre-eminent in production than in re- serves. During the past few years it has been yielding about half of the oil produced in the United States; but on January 1, 1924, it holds hardly ene-third of the total reserves. The California field may be divided into 3 geographic sub-provinces. One covers both sides of the San Joaquin valley and is known as the Valley “fields” or districts; another takes in the many small and separate districts in the mountainous Santa Barbara and Ventura counties; and the third comprises the districts of the southern coastal plain in Los Angeles and Orange counties. Except for the Kern River pool the Valley districts lie on the west side of the valley and all get the oil mostly from Tertiary sandstones that have been folded. Sharp anticlines constitute the con- trolling type of structure, yet much oil has come from monoclines and synclines. Similar in many respects are the Coastal districts although dis- playing an even greater variety of structures, but sealed faults are fewer. An insignificant part of the California petroleum is obtained from Cre- taceous formations. Compared with the Gulf Coast field of Texas much less oil has migrated from the Tertiary up into the Quarternary beds. A 1. (Above) A KERN COUNTY FIELD IN SAN JOAQUIN VALLEY, CALIF. Note the open “oilduct’” for carrying the heavy oil down grade more easily than in pipe line. 2. AN OIG FIELD IN THE COAST RANGES OF CALIFORNIA, VEN- TUBA, COUNTY: The topography and the _ political division suggest ‘‘nothing venture, noth- ing have,’ a rule in oil hunting. 3. LLUNTINGTON:~ FEED 9 EN IDE COASTAL PLAIN. View of a young field from the ocean. It is generally regarded as within the Los Angeles basin. —Oil and Gas Journal. —U. 8S. Geol. Survey. —Calif. Chamber of Mines and Oil. OILDOM: ITS TREASURES AND TRAGEDIES 35 marked feature of the California occurrences is the great stratigraphic range throughout all the four series of the Tertiary system which, in the Sunset-Midway district becomes 18,000 feet thick. Producing horizons ap- pear anywhere from 300 to over 5,000 feet below the surface. Oil seeps are numerous, and asphalt beds cover wide areas. In no other region in North America is oil found in commercial quantities where the structure is so complicated and where the surface indications are so abundant. The California oils vary in color from black to honey-yellow and in gravity from 9.9 degrees to 54 degrees Baumé, the average having recently risen from 22 degrees to 28 degrees. Heavy dark oils predominated until the light oil pools were developed near Los Angeles, 1921-1923. TT CNTs i ee wo Sette ee iy My a é or ae caer aii 7 ¥". Alhdimbragi~# San Gabriel . d : as Pree Ae tt El Monte a a, N-Cuamanga My, = Pomona ~~ Ontario \everice Ry \ WP” Fullerton #8, CHAD BAA Ew ws He Garden Grove » Ry WY ong Bea .. ‘Sel Bonk < i Westminster,» ¥5an Pedro 4 Oe NE 5407 Am. Inst. Min. and Met. Engrs. LOS ANGELES BASIN SHOWING OIL FIELDS, 1923 Near the middle of this map is seen California’s greatest individual field, Sante Fe Springs, which reached a record of 350,000 bbls. daily during the summer. In November, Long Beach or Signal Hill, 10 miles southwest, passed the champion on its decline but reached a peak of hardly 275,000 bbls. daily, 50,000 less than Powell in Texas. The newest pool, not outlined here, is Compton—halfway between Santa Fe Springs and Torrance-Redondo. (Map drawn by Wayne Loel.) “The most striking features in the three newly discovered fields in the Los Angeles basin are the enormous thickness of oil sand’’* and the limited producing area from which are coming 23 per cent of the coun- try’s petroleum at the present time, May-June, 1923. At Long Beach a thickness of over 1,500 feet has been penetrated to the depth of a mile. At Santa Fe Springs the oil sand is said to be even a little thicker, and at Huntington Beach certainly not any less, the horizon being the same in all three of these fields, California’s total oil-bearing area is considered to be *Ralph Arnold and Wayne Loel in Mining and Metallurgy, May, 1923. 36 OILDOM: ITS TREASURES AND TRAGEDIES about 1,500 square miles,* or nearly 1 per cent of the area of the state. Out of this, practically one-tenth only has been proven or is at present productive. About 30 square miles, or 20 per cent of the proven area, lies in Los Angeles and Orange counties which contain the above named new fields. These three together cover but 5,300 acres or less than 9 square miles, but they were in June, 1923, contributing at a rate equiva- lent to one-sixth of the world’s total. —Oil and Gas Journal. THE FIRST POOL FOUND IN THE GULF COAST FIELD. Spindle Top, near Beaumont, Texas, was discovered January 10, 1901, and became the leading pool of the United States in 1902. It has produced about 50 million barrels and is’ still active. See Chap. IV. The Gulf Coast field of Texas and Louisiana ranks third in respect to reserves, possessing 20 per cent as of January 1, 1924. Moreover, its pres- ent rate of production, 5 per cent of that of the whole country at the middle of 1923, places it far below California. This field includes that part of the Gulf Coastal Plain in which petroleum is associated with masses of rock salt and gypsum in domes. The oil-bearing strata are Cretaceous to Quar- ternary in age, and the reservoir rock is generally either sandstone or dolo- mitic limestone. In this coastal belt rise more than 40 low domes above the general level. They are supposed to be the surface marks of the salt domes which are beneath and which are known to produce some oil or gas. Few of the pools are more than 3 miles in diameter. The reservoir rock is generally either sandstone or dolomitic limestone, and the oil itself has an asphaltic base. The value of some of the oil is impaired by its high sulphur content—up to 2.3 per cent. The gravity ranges from 15 degrees to 32 degrees, averaging 22.5 degrees, Baume. Most.of the oil is dark brown to black, but some is green and rich in lubricating constituent. Any re- lation between color, gravity, and content of sulphur is not apparent. The zones of production vary from a few feet to hundreds in thickness and from 100 to 4,100 feet in depth. The rotary drill is used almost ex- clusively and consequently the correlation of the various sands is difficult. The Rocky Mountain field comprises all areas that produce petroleum in Colorado, Wyoming, and Montana, as well as some areas of prospective production in Utah and New Mexico. The oil is derived from beds of Pennsylvania, Permian, Triassic, and Cretaceous age. Most of the oils * State Mining Bureau, quoted in The Oil Weekly, June 17, 1922, **V. B. Ellzey in The Oil Weekly, May 12, 1923. OILDOM: ITS TREASURES AND TRAGEDIES 37 from pre-Cretaceous beds are dark and heavy, with gravities averaging 23 degrees Baumé, the heaviest being of 11 degrees. The Cretaceous oils, contrary to expectation, are remarkably light in both color and weight. Their gravity ranges from 25 degrees to 50 degrees Baumé, while the average gravity for the Rocky Mountain field is about 37.5 degrees. Worthy of special mention is the Cat Creek oil from Montana. It has a paraffin base, contains little sulphur, and is 8 degrees lighter than the average Appalachian oil or 18 degrees lighter than the average Mid-Con- tinent oil. Its gasoline content is 1% times that of Appalachian oil and twice that of Mid-Continent oil. No other pool in the United States of the same size as the Cat Creek yields such a quality of crude product. The Rocky Mountain reserves as of January 1, 1922, were estimated to be —Photo by the Author, Sept., ’23. THE LARGEST OF THE ROCKY MOUNTAIN FIELDS IN AREA. The Kevin-Sunburst Pool, found in the spring of 1922 by Gordon Campbell, is again referred to in Chapter VI. about 7% per cent of all our American reserves, Wyoming alone being credited with 6 per cent. The rate of production on July 1, 1922, equaled 5.6 per cent of that for the whole country. Since the discovery and initial development of the Kevin-Sunburst field, probably the largest single Amer- ican pool in point of area, the estimate of oil reserves has been raised so as to make nine per cent of the total. The Appalachian field still retains underground almost 1 billion barrels or eight per cent of our total reserves after producing about 11% billion barrels in the course of the past 64 years. The present rate of yield is about 4 per cent of that for all the fields. This field embraces every pool east of central Ohio and north of Alabama in an elliptical area having a major axis trending northeast and southwest. Besides southeastern Ohio it includes the petroleum territory of New York, Pennsylvania, West Virginia, Kentucky and Tennessee. The oil-bearing strata are chiefly sandstones and conglomerates of Devonian, Mississippian, and Pennsyl- vanian age. These porous rocks produce from depths of 100 to 4,000 feet, the shallowest horizons being found in eastern Kentucky and the deepest in West Virginia and southern Pennsylvania. The typical oils are of paraffin base, are free from asphalt and objectionable sulphur, and give up to 79 per cent of kerosene, gasoline and lighter products by ordinary refining. They range in color from black to light amber, but most of them are of green shade. In gravity they run from 25 degrees to 53 degrees Baumé and average 41 degrees. 38 OILDOM: ITS TREASURES AND TRAGEDIES The Illinois field, confined largely to the southeastern part of the state, with small scattered pools in the central and western parts, ranks 6th in the matter of reserves, having hardly 5 per cent of the 9 billion barrels of oil still obtainable in the United States early in 1922. The present rate of output, about 10 million barrels yearly, would afford a long life to the Illinois field, considered as a whole. Most of the oil comes from sandstone beds in the Pennsylvanian and Mississippian series of the Carboniferous system. The oils in ‘the northern part of the field are heavy, have an asphaltic base, and carry sulphur. Those in the southern part are of better grade. The gravity ranges from 27 degrees to 37 degrees Baumé. The richest area of this field is in Lawrence County, where 7 sands are encoun- tered at depths of 450 to 2,000 feet, with the richest at the bottom. The Lima-Indiana or Trenton field is of least importance from a quan- titative standpoint. Its reserves make but % of one per cent of our grand total and its recent rate of production makes but half of one per cent of the aggregate rate for the United States. It embraces all the pools in northwestern Ohio and most of those in Indiana. The oil-bearing beds in this field belong to the Ordovician, Silurian and Carboniferous systems, but the most productive are lenses of porous dolomitic rock in the “‘Tren- ton” limestone, a member of the Ordovician system and the oldest known — oil-bearing rock in the United States. This lies 1000 to 1500 feet deep in Ohio pools and averages 1000 feet in Indiana. The oil from the Carbonifer- ous rocks in southwestern Indiana properly belongs to the Illinois field, for the formations occupy the same structural basin and the two “‘fields” or districts are continuous. The oil in the pre-Carboniferous strata of the Trenton field is of lower grade than that in the same strata of some parts of the Appalachian fields and contains sulphur compounds that must be removed by special treatment. In color the oils range from green to brown and in gravity they average nearly 36 degrees Baumé. Canada. Indications of petroleum have been observed in many parts of Canada, but no fields have been much exploited except those in Ontario, where the oil occurs in sandstones and limestones of Silurian and Devonian age, and where the rate of output is now insignificant. The oil there has a paraffin base and a large percentage of sulphur. It comes from a depth of 200 to 500 feet. The Calgary field has furnished a small quantity but a field farther north in Alberta gives greater promise. In the Mackenzie field, during 1920, oil flowed from a depth of 100 feet and gushed from 800 feet. Up to August, 1923, the developments have proven rather dis- appointing, particularly in the western part. However, continued search may bring results now that new Montana fields have been found close to the Dominion line. Canada’s petroleum reserves have been estimated at 2000 million barrels, a comparatively high figure, considering past production, but not inconsistent with the great expanse of favorable formations as yet scarcely scratched with test borings. Fortunately, the more accurately measured coal resources are immense, Alberta alone possessing 17 per ’ cent of the world’s known coal or 70 to 80 per cent of Canada’s coal deposits. OILDOM: ITS TREASURES AND TRAGEDIES 39 SUMMARY OF SALIENT FACTS ABOUT THE PETROLEUM RESOURCES OF UNITED STATES Region or Major Proven Average Yield to Recoverable Reserves Field and States Area Gravity Jan. 1, 1924 Jan.1,1924 Original Miles? Degrees B. Millions of Barrels MID-CONTINENT Quintet Arka; Kan. Da... cs. 1,500? 35.9 2,550 3,450 6,000 CAE EOEUIN LAO oe 2 ce 6 6s eters a os 175 21.9 1,800 2,700 4,500 GULF COAST ; PGT Pa TTISIA TAG oo is ages aoc PAT) (i 22.4 470 2,330 2,800 APPALACHIAN Pao ago: eX O..« W. Vas, KY., NST TST eae ner Gre Spe eR a eae ae 2,500 40.8 1,380 920 2,300 ROCKYSMOUNTAINS. ©... ccs cn 6 700? 37.5 175 1,025 1,200 Wy., Mont., Colo. LEM LNOLS= UN DIANAS icswe es Fe 350 ? 32.5 350 500 850 LS S.2W. 10d. ASIN) EC ACNPACH ese oc. gt ches ete vets aes 500 35.9 460 | 90 550 N. W. Ohio, N. BH. Ind. UNITED STATHS POLI ET OVERS Sie cok aie Satie 87s 5,750 32.0 7,185 11,015 18,200 MTSCHLIAMGCOUS) = AtoeGid cles pie ec aoe 250 ? 2 None 800 800 Cora Mee LO UAE secrete ee alenie 6,000 32.0? 7,185 11,815 19,000 REMARKS. The general areas of production, as shown on generalized maps, are much greater. The actual areas of proven territory take in both producing and undeveloped oil land. They are rather well defined in California and in the Appa- lachian and Lima-Indiana fields. In roughly determining the Mid-Continent area there were considered the total number of oil wells, their spacing of 6 or 7 acres per well, and the likely percentage of proven but undeveloped acreage. In the case of the Gulf Coast, statistics published in The Oil Weekly indicate an area of 5,700 acres for 11 out of the 21 local fields or salt domes that have produced on a commercial scale; and with this as a basis a liberal allowance has been made for the acreage of the other 10 and for the undeveloped areas, the total being likely a little less than 25 square miles—a remarkably limited area for so large a production to 1924. In the Appa- lachian field there is an additional area of 1,700 square miles of productive gas terri- pas In other fields their minor areas are included where not separated in the original ata. Gravities given are on the Baume scale. They are all weighted averages, consid- ering the relative yield of different grades within each major field, and were pub- lished by the U. S. Geological Survey in October, 1922. The only radical correction to be made is for California, where the average quality of the crude oil was raised to an extraordinary extent within a year’s time due to the light oil development of the Long Beach and Santa Fe Springs fields near Los Angeles. The average has risen from 21.9 to fully 28 degrees if not higher. The heavy Smackover oil of Arkansas, ee. not Mid-Continental, has been offset largely by the light Tonkawa oil of klahoma. TANKER IN WAR-TIME PAINT, LOS ANGELES HARBOR Tankers were largely instrumental in winning the war for the Allies by carrying fuel oil and other products across the Atlantic. —Courtesy of Union Oil Co., of Calif. CHAPTER IV. MECHANISM OF THE AMERICAN INDUSTRY. - Engineering Aspects. Next to the natural resource as a foundation for the Oil and Gas Industry stands the development of tecnnologic methods for finding, obtaining, transporting, treating, and utilizing the crude petroleum and natural gas. Were it not for the wonderful work of both the geologist and the engineer-technologist, the one in exploring for new deposits and the other in striving to procure maximum recovery of the crude oil and maximum efficiency in the refining and use of the product at a minimum cost and with a minimum waste, the industry would not have attained to one tenth of its present proportion; and consequently would neither attract millions of investors nor give employment to many thou- sands of wage earners. * Since the beginning of the petroleum industry in 1859, up to five or six years ago, there has been a dearth of engineers who have had the fun- damental technical training and also sufficient practical experience so that they could compete with purely practical men. About 23 years ago, Captain Anthony F. Lucas, a mining engineer, resorted to the rotary pro- cess in drilling an 1100-foot well, and brought in one of the greatest gushers ever found within the United States. The mechanical accom- plishment was then overshadowed by his discovery of commercial oil in a Gulf Coast dome which rises but 12 feet above the prairie at Spindle Top, a little south of Beaumont, Texas. Previous to that time almost all American wells were sunk with cable tools. With a few similar exceptions, and “until recently, comparatively little attention had been given by the engineering profession to the petroleum industry except in storage, refining transportation and natural gas.’ Conservation of underground reserves has been initiated by engi- neers, notably in California where it has been carried on through the co- operative work of the operators with the State Mining Bureau. Along this line of endeavor “it is now universally recognized that the minimum protective work necessary narrows down to two requirements: 1. Ex- cluding water from the production of the well; 2. Preventing the migra- tion of water, outside the casing, from water bearing formations to oil or gas bearing formations.” ‘‘The proper setting of casing, cementing off water, checking productivity of individual wells, correct plugging of dry and abandoned wells, and various other conservation methods established elsewhere” were in 1918 being adopted in Oklahoma as a direct movement *The president of a large Mid-Continent producer has calculated, from extensive records, that 85 per cent of the wells located on the basis of careful geological sur- veys: proved productive, whereas only 5 per cent of the wells located at random were successful. Pogue’s Economics of Petroleum, p. 348. Writes the editor of the Oil and Gas Journal: In the oil business in the old days, but slight attention was paid to technical matters. The refiners were obliged, of course, to know things scientific, but the producing men were guided largely by every-day experiences. Main strength plus practical knowledge of the routine work were the essentials then as they still are to a large extent. Nevertheless, there are now opportunities for genuine “efficiency”? men in oil producing work. Many of the big concerns are profiting by the skill of technically trained men. In the refining industry the “highbrow” is more in demand than ever before. 7 E. W. Wagy, Pet. Engr., Bureau of Mines, in the Oil and Gas Journal. tg (40) OILDOM: ITS TREASURES AND TRAGEDIES Al toward the saving of crude oil. The use of cement in oil wells not only conserves the supply of the raw material but it also conserves capital and enhances the profits, as in the case instanced below. “On 141 wells in the Cushing field that had been put back to pro- ducing after cementing, there occurred an immediate increase in yield of 4,304 barrels daily. At the quoted market price of $2.25 a barrel (in CAPT: ANTHONY FE. LUCAS. The pioneer of the Gulf coast fields; first to use the rotary for drilling oil wells; and the indirect founder of the first great independ- ent operators, the Gulf and the Texas companies. At the right is shown the LUCAS GUSHHER, greatest oil well ever drilled in the United States. It came in Jan. 10, 1901, at 75,000 to 100,000 barrels a day. Since then the Gulf Coast field has produced about 500 million barrels of oil. —Courtesy A. F. G. Lucas. May, 1919) this quantity was equivalent to $9,684 a day, and at $3.00, the price at which most of the oil was actually sold, it was equivalent to $12,912.”’ At that rate the additional production would mean almost $4,000,000 in one year compared with the probable cost of less than $75,000 for cementing the 141 wells. Besides the increased yield there was likewise effected a large saving in the labor required, amounting to 40% of that involved before cementing; also a lower rate of deterioration in well equipment due to the absence of salt water.* Similar results have been accomplished by the U. S. Bureau of Mines in co-operation with the Rocky Mountain Petroleum Association in Wyom- ing. A-well which had been standing full of water was repaired and com- pletely recovered. One month’s production therefrom was worth more than the cost of the four men’s services for one year. Notwithstanding *“Recementing Through Tubing Under Pressure,’ by C. C. Thoms, California Oil Fields, July, 1920; and U. S. Oil Inspector’s report to the Superintendent for the Five Civilized Tribes of Oklahoma. 42 OILDOM: ITS TREASURES AND TRAGEDIES the various advances that have been made in the line of enlarging the’ ultimate recovery from sands, there still remains a very large margin for improvement in view of the serious fact that 80 to 90 per cent of the un- derground oil is unrecoverable by the prevailing production methods. ‘Profits from the industry will be immensely increased when the relative recovery equals or exceeds the much higher rate of that otherwise back- ward branch of mining, the under-engineered and over-capitalized coal industry. —U. S. Geol. Survey. THE GREATEST FIELD FOUND IN THE UNITED STATES BEFORE 1928. Only part of the Drumright division of the Cushing pool is shown here with wells along the Cimarron river in Creek Co., about 25 miles west of that other great pool, the Glenn. Cushing, surpassed nationally by Powell and Santa Fe Springs fields alone, was found by W. S. and R. HE. Vandruff,. geologists and former associates of the author, one year before the first well was drilled in 1912. In the chronological order of their realization, the three most import- ant and profitable applications of technology in the near and not very dis- tant future pertain to (a) the use of core drills in wild-catting rather than in developing, (b) the sinking of shafts for the mining or draining of pumped and abandoned sands, and (c) the extraction of oil from the ex- tensive deposits of bituminous shales found in certain Rocky Mountain states and in Kentucky and other Allegheny plateau states. Shale oil has no immediate value and will receive little consideration in this edition. Production engineers, constituting a new class of petroleum tech- nologists, may soon perfect American methods for mining or draining residual reservoirs in old fields or pools as advocated by Albert H. Fay in the Ow and Gas Journal, May 28, 1920. Intrenched in their ignorance, some apparently intelligent operators scorn this idea, claiming it has never been done. As a matter of fact, while shaft-sinking failed in the early boom days at Petroleum Center, Pa., tunnelling for oil was successfully undertaken in California about the same time. Actual mining of petroleum sands was carried on by Frenchmen in Alsace from 1735 to 1865 at depths of 35 to 220 feet. Such operations, on a new principle, were resumed in 1916, with the result that 2 to 5 times as much oil was thus extracted as by the ordinary well-boring process. In Estill County, Ky., during May, 1921, D. W. R. Kinney began sinking a shaft, concrete lined, and on reaching the sand at 185 feet got 4 to 5 barrels of oil a day. OILDOM: ITS TREASURES AND TRAGEDIES 43 In the meantime, and until mining methods have been adopted, pro- duction engineers have resorted to other and temporary expedients to ex- tend the extraction beyond the present limit of 10 to 20 per cent. The compressed air process has spread to some pools and properties where ordi- nary pumping has reached the economic limit, particularly in the Appa- lachian field. Some old properties there have been rejuvenated so as to yield, in this way, from one-half to equally as much as the entire past pro- duction. Flooding partly exhausted sands with water has also proven satis- factory, as in the Bradford field, Pennsylvania, where this process was initiated in 1890.* MINING OIL SANDS AT PECHELBRONN, ALSACH, SINCE 1735. French and German miners sank shafts and drove galleries for 147 years before a well was drilled in 1882 to a depth of 465 feet and gushed 500 barrels daily. (See pages 16 and 72.)— Rig and Reel Magazine, Parkersburg, W. Va. : Conservation of capital through core drilling. Out of 750 million dollars lost the last five years through unsuccessful drilling for oil, largely legitimate wild catting at that, at least 250, possibly 500 millions could have been conserved through eliminating the old fashioned, cumbersome, and costly cable and rotary systems and the substituting therefor the more reliable and scientific systems of drilling for exploratory purposes. Sixteen years ago, or four years after introducing core drilling into the Philippines,j the writer advocated the use of diamond drills in testing virgin territory for oil on the Pacific slope. Only during the past five years have the progressive California operators begun to appreciate the various advantages gained by spending a little time and money on coring of one kind or another. ‘ -The more conservative companies have hesitated to abandon entirely their practice of boring a big hole from the very beginning or “spudding in;”’ and so have tried to adapt the antiquated systems to the cutting of cores out of the strata as occasion required it. The Keystone Drilling Co., of Beaver Falls, Pa., has improvised a device for extracting a short core *See “Causes of Increase in Yield,’’ Chapter V; also, for technologic details read chapter by L. C. Sands in vol. I, Day’s ‘‘Handbook of the Petroleum Industry,” pub- lished by John Wiley & Sons, 4382 4th Ave., New York; see also “Highty Per Cent of Oil Not Recovered,’ by K. C. Heald, of the National Research Council and U. S. Gevlcescel Survey, in The Oil and Gas Journal, Oct. 18, 1923. ; See the author’s illustrated article on the U. S. Army coal mines in The Engi- neering Magazine, January, 1906; or the Review of Reviews, February, 1906. 44 OILDOM: ITS TREASURES AND TRAGEDIES while operating the ordinary cable tools. In connection with rotary tool drilling for production in the Gulf Coast region one company transformed a piece of common pipe into a combination core-barrel and cutting tool by making chisel teeth at the lower end thereof and bending alternate teeth inwards to hold the core. It cuts like an ordinary post-hole auger. Ac- cording to R. E. Collom, some companies have been using a coring device: in soft formations in which the core barrel is incorporated in the center of a fish-tail bit. Suman states that a certain Gulf Coast driller uses a EFFICIENT AND NON-WASTEFUL WAY OF HXPLORING FOR FUEL DEPOSITS. The first systematic attempt to pros- pect the mineral resources of the Philip- pines. This was done at the U. 8S. Army coal mines where the author served as superintendent of explorations, asso- ciated with Major H. L. Wigmore, in 1903-4 while Chief Justice Taft was Governor. Credit is due the progressive Corps of Engineers, U. S. A., for thus introducing a_ scientific and practical method for finding truth and conserving capital. The first drilling for oil in the Archipelago began a little later, but un- fortunately cable tools and not core drills were used. (See Chapter VIII for recent drilling in the Islands.) —-The Engineering Magazine, Jan., 1906. DIAMOND DRILLING IN THE PHILIPPNES. piece of common pipe with a V-shaped notch cut in the lower end. Upon rotating this at the bottom of the hole it has cut cores from 8 to 10 feet long, and these became wedged in the barrel by dropping into the drill stem small pieces of cast iron. This last appears to be an independent imitation of the more perfected Okell core drill manufactured in Los Angeles and used by the Shell Company and others in drilling through both hard and soft formations. A contrivance more complicated but easily repaired has been used by van der Gracht for coring in soft formations with rotary tools. Coring with the regular oil well rotaries in California has not proven altogether satisfactory. The heating of the core barrel through the rapid ro- tation volatilized or drove out the petroleum (or gas) from the sample en- tering the core barrel, and the latter, therefore, gave no reaction with ether.* On the whole, drilling systems designed primarily for development or production are neither so economic nor so dependable as the specially de- signed coring systems of usually smaller caliber but of equal or greater capacity in depth. Core Drilling in California Oil Wells.; ‘‘Core drilling, as practiced in California oil wells, is only for the purpose of taking samples at critical *The core is sometimes heated so intensely that it becomes hard to tell whether the rock is igneous or sedimentary—a very important matter—for it is a hopeless task ty drill for oil in granite or lava. ¥. C. Merritt, Los Angeles, in Mining and. pee ae August, 1922. See also “Technique of Core Drilling,” by J. E. Hlliott, M. and » October, 1923. OILDOM: ITS TREASURES AND TRAGEDIES 45 depths. The core drill is not intended to supplant the fish-tail bit in rotary drilling. Sampling by such method is necessitated since accurate well logs cannot be obtained by the rotary method. Oil sands are often ob- scured by the heavy mud used in rotary drilling, and may be easily pene- trated without the driller’s knowledge. The hydrostatic pressure of the mud-flush column at times suffices to drive the oil back into the formation so that no evidence of it may be seen at the surface. - Core drills have been evolved in California for the purpose of taking samples at frequent intervals when the expected depth of the oil sand has been reached. Only within the past year has an active campaign of core drilling been carried on in California, but at the present time it is the usual practice of many of the larger companies in the southern Califor- nia fields to takes cores at 10-foot intervals at promising levels. There are two general styles of such core drills in use, the single- barrel drill and the double-barrel drill.. The single-barrel drill consists of a length of drill pipe with teeth in one end. This contrivance is rotated in the bottom of the hole, and at the conclusion of coring sufficient weight is given the drill pipe to bend in the teeth. The double-barrel drill consists of two barrels, one within the other, both fitting into a steel shoe equipped with removable teeth. The mud flush passes between the two barrels to the bottom of the hole. Both types have advantages and disadvantages. The single-barrel drill is cheaply and easily made, but the cores extracted are not always reliable. As the mud flush does not reach the bottom by several feet, the > so-called cores cut by the single barrel are often only compressed cuttings. _ Furthermore, the generated heat is often enough to fuse the material, or at least to change into gas any oil that may be present in the cored material. The double-barrel drill extracts a true core without danger of contamina- tion by the mud flush, and without “burning,” but it is more expensive to make and to operate, and requires greater skill from the operator. Many of the companies are now using a core drill to locate the proper formation in which to cement the water string (of casing), and find that they have a greater percentage of successful water shut-offs by so doing. Geologists study the cores extracted so as to correlate shale strata by their contained micro-organisms. Sand cores are analyzed for their salt and total solubility content. The oil operator realizes that the core drill is the big- gest forward step made in the art of rotary drilling. He wants to evolve a type of drill that will retain the speed and simplicity of the fish-tail and at the same time preserve an accurate sample of the formations.” OPERATIVE DIVISIONS. Custom considers the petroleum industry divided into the four distinct functions of production, transportation, manufacturing and marketing from the standpoint of economic organization. Viewed otherwise, there should be added a fifth function, namely exploration, the operation of which is almost as peculiar to the oil industry as that of the others. It is gradually outgrowing the production division to which it has hitherto been subordinated. Synonymous already with scientific “wildcatting,” 4 .s) OILDOM: ITS TREASURES AND TRAGEDIES —Sullivan Mchy. Co. BORING FOR PRODUC- TION IN MEXICO WITH A DIAMOND CORE DRILL. A Sullivan “P-2” diamond drill showing pressure con- trol rig, rod brake and a saver of oil. Before 1922 few operators would be- lieve that the diamond drill was good for any purpose except for testing wild-cat territory. In Oklahoma recently a well unfinished with cable tools was completed to a depth of 4,700 feet with a dia- mond core drill. DIAMOND DRILL BITS BEFORE AND AFTER FULLY SET. At left the blank bit shows socket chiselled out to fit irregular shape of a carbon or black diamond. Sheet copper is used to help make a snug fit. Clear- ance or projection on cylindrical face yaries from 1-64 to 1-82 of an inch. Water grooves are also shown. OILDOM: ITS TREASURES AND TRAGEDIES 47 exploration as practiced by the efficient operators is fast coming to mean core drilling in connection with thorough geological investigations of sur- face signs. Drilling experimental wells—ordinary ‘“‘wildcatting’’—has stood at the base of the discovery of new oil fields without which the in- dustry would have dried up. For every field thus found, hundreds of worthless holes have been put down. Scientific wildcatting will not only minimize the number of resultless borings but will also cut the cost of each test at least in two, particularly in remote regions where transporta- tion, fuel and living conditions are controlling cost factors. Now that such enormous reserves of coal and ores of iron and copper have been largely measured by means of the diamond core drill the time has come that many of the skilled men and their machines can be released for the even more essential task of discovering new deposits of petroleum so as to maintain if not increase the relatively low ratio between known re- serves and current consumption or production. Exploration with the Diamond Drill. The diamond drill and the rotary oil drill work on the same general principles, the main difference being the ‘cylindrical steel bit set with ‘“‘carbons’”’ or black diamonds* which is used by the former instead of the fish-tail or other type used by the rotary, as already narrated. On account of the brittleness of the carbon and the danger of breakage if suddenly struck, it is not feasible to attach a dia- mond bit to the rotary drill stem. The operating mechanism of the dia- mond drill must be subject to much more sensitive control than the rotary drill. The bit must be rotated smoothly, without the jerks incident to the operation of the clutches and chain drives on the rotary draw works, and the feed must be controlled in a manner much more delicate than the action of a brake on a hoist. Accordingly, diamond drills are usually built as a self-contained unit with the crank shaft of the engine geared direct to the drive shaft that turns the drill rods. One or two hydraulic cylinders connected with a high pressure pump control the feed so definite- ly that the bit can be raised or lowered at will, while the bit is rotating, by the simple operation of valves. The smaller-sized drills for very shal- low work generally have a screw feed control instead of the hydraulic feed; and their portable nature adapt them for outlining structure where key beds lie less than 500 to 600 feet below the surface. The heavier drills are used for scouting, i. e., obtaining data as to the character of the oil sand and the quality of the oil.t The heaviest drills have lately been *The diamond drill has long been recognized as the most efficient method of recovering a continuous core in rock. All other drills use steel in some form for cutting, but this drill, as its name implies, uses a black diamond, found only,in Brazil. The black diamond 1s pure carbon or is chemically the same as the colorless gem, _ buat differs in crystalization and is tougher for use in industry or drilling. The great advantage of the diamond over steel cutters in core work is that it cuts freely and Maintains gauge. To core any distance this is essential as any loss in gauge means loss in clearance, with the consequent choking of the washing fluid, whether mud or water. A steady supply of wash water prevents heating of the cutting tool. The diamonds cut thousands of feet in soft sedimentary formation without appreciable loss in weight. 558 ee ges Sskeeace F2Gscf& 2222286 sfieees | o ai oO =< ad ost a 2un 0 0 ef£s52500 fap eipse, oles tera ia aE we aos Bes IPE EES. woe € 2 eee -2es 5 af 5 Aa! 22:55 a Se aoe aq =e) OUR BEST CUSTOMERS FOR CRUDE AND REFINED OILS Great Geographic Range of Buyers. It has already been stated that American petroleum products, more than any other, have penetrated into the far corners of the globe. But while the distribution of such exports is very extensive it is not uniform since some customers need certain products more than others. Thus the United Kingdom took more lubri- eating oil in 1923 than France and Germany together, Canada more crude than all others combined, China more kerosene than any other three, and the United Kingdom and France together a little more gasoline than all the rest. Considering grand divisions, Europe is yet by far our best cus- tomer, but Latin-America—Cuba as well as Sotth Amercia—has lately made large gains in per capita consumption of our mineral oil. Germany was a huge consumer of American illuminating oil before the war. Now that the Dawes plan is operating, that country is getting back on her feet and reviving her petroleum trade. During 1924, due partly to increasing imports from Persia and partly to expansion in refining capacity, American participation in British imports began to fall off relatively.* Par- ticipation of the United States is more conspicuous in the oil import trade of other countries than Great Britain. Thus China gets 83 to 93 percent of her illuminating oil from this country; Canada, during the fiscal year ended March 31, 1924, got practically 100 percent of her gasoline imports and 70 percent of all petroleum imports from the United States; and in 1923, Germany obtained from us 72 percent of all her incoming mineral oil. Gasoline, Naptha and Other Light Products. Of these exports France and the United Kingdom almost equally divided 52.8 percent in 1922 and 55.6 percent in 1923, referring to the total quantity. Canada, Italy, Aus- tralia, Belgium and Argentina brought the takings up to 73.2 and 177.6 percent respectively. for these two years. The percentages according to value were slightly less—France, the United Kingdom, Australia and * See U. S. Commerce Reports, May 19, May 26, and July 7, 1924; “‘Expect Larger European Oil Demand,” by L. M. Fanning in The Oil and Gas Journal, August 28, 1924. New developments abroad naturally bears upon the export business of the United States. See U. S. Commerce Reports, January 28, 1924; “A Review of Petroleum Development Abroad in 1923,’ by Homer Fox, then acting chief, Petroleum Division; also, by the same authority, ‘‘World Trade in Gasoline,” July, 1925; sold by the Supt. of Documents, Washing- ton, D. C., at 15 cents. OILDOM: ITS TREASURES AND TRAGEDIES 185 EXPORT DISTRIBUTION CHART FOREIGN COMMERCE DEPARTMENT, CHAMBER OF COMMERCE OF THE UNITED STATES EACH| @ REPRESENTS $100,000 TOTAL FXPOR"G, 1924: $26,495,001 Ll. La Ca wr g a Ca [4 Ca ae eens Suk h on. Age CY eB P 4 ~ Mes " 3 : : GDOW | te goR8 ies "f : > 7] 2 VA oe S| Sp ae a Saearan an ay feds ee | ae i : 34 CUATEMABA . tt. ~ : - PHILIPPS ig SOF SALVADOR® a lo | 2 gh : lout See: ! ~ sean cpsTa RIGke NyGiap ase i 7 CHILECSp _)< / Meee AICK PARAFFIN ufo, wee ie, Ea WAX CALS YR, 1924 EACH| © REPRESENTS $100,000 rorat FXPORTS, 1924: $18,525, 10 Ce = cor ar oa is 7 2 ~ wo or ier iA oa Canada acquiring together 61.6 percent in 1922 and 64.7 percent in 1923. Illuminating Oil. China averaged 17.4 percent of the quantity and 22.2 186 OILDOM: ITS TREASURES AND TRAGEDIES percent of the value of our exports of kerosene in 1922 and 1923. Second came the United Kingdom with percentages of 14.8 and practically 10, respectively, of the quantity and the value. The three next best customers for American kerosene were France, Netherlands and British India. Lubricating Oil. Naturally, the industrially developed nations of Europe need lubrication for their machinery, whether on land or sea. Exclusive of the lubricating greases, in 1923 the United Kingdom took 25 percent, France 15.8, Germany 6.6, Italy 5.7, and Belgium 5.1 percent of our ex- ports. Japan and Australia ranked respectively 6th and 7th in importing anti-friction oil from the United States. In 1922 Germany had taken 12.5 percent compared with 17.2 percent for France and 22 percent for the United Kingdom. . Gas and Fuel Oil. In harmony with her growing imports of crude oil for home refining, the United Kingdom took only 15.4 percent of these heavy oil exports from the United States in 1923 compared with 25 percent in 1922. Panama, undoubtedly on account of the bunker demand, led the other importers in 1923. Canada was a close third with 12.2 percent in 1923 and 15 percent in 1922. Chili, Mexico (West Coast), Italy, Japan, Germany, France and Argentina bought from 2.6 down to 1.8 million dollars worth of American gas and fuel oil in 1928. Unrefined Oil. Canada, for a long time, has been our best buyer of crude oil, absorbing 56 percent of our export surplus in 1923 and 76 percent in 1922. Mexico suddenly increased her takings from next to nothing in 1922 to 36 percent in 1923. They consisted of California light crude to replace her losses in refinable oil for her domestic stills. Argentina took a trifle over 4 percent—about $1,000,000 worth—or twelve times as much as in 1922. Cuba cut down her imports of our crude from $2,343,000 in 1922 to $855,000 in 1923. LEADING EXPORTS OF LIQUID PETROLEUM FROM THE UNITED STATES IN 1923 ACCORDING TO IMPORTANT DESTINATIONS (Values in Millions of Dollars) . Crude Gas and Lubricat- Illuminat- Gasoline, Total of Receiving country oil fuel oil ing oil ing oil etc. all oils United? Kingdom. .sis0... nine a eeaa $5.5 $17.6 $ 5.9 $35.6 $64.6 BIPANCer ae wai ene Gite ee ee ee eos ieee 1.4 11.8 D2 82.0 50.4 Canada: 25 co cae ca ee ee $13.0 4.4 2.5 25 (ee Dar (ars Gina se Bese Meena oon Sears 8 1.4 17.0 6 19.8 Adistialia avec ercc eae aes toate 8.2 8.6 9.0 15.8 AVGED EI Tan (ho seine ome a ets 1.0 13 2.6 22, 6.8 13.9 Det atly gi cue ie lap eae ee ss bana amece oem nets 1.8 4.4 1.6 5.3 13.1 German yaoi eee ae fe 1.5 Bel 1.5 Zee i by ea b Bel oi Ae eee some aes ce eee 4 3.9 1.6 5.0 10.9 Paani eevee Neues Cortiad ee cea eee nee 5 1.6 se Onl 1.9 10.4 Bra Zils ee eee Oe veal ee winnaar haat recites OTe i) 1.9 3.5 3.7 9.3 IMeXi CO: pees iain tera eke viene 4.7 Pau 8 iss ee! 5 8.1 INetherlands/ 235 iu) tices natin) eMpyats a 8 29 3.3 1.6 6:6 British shu Gise eye caer ae ae 2.6 3.8 er, 6.4 British? Afriea“Southin. see. ee Seite 1 2.6 2.6 6.4 PANNA. c ope con se laconic teedlovels i aneae 4.9 Sian eat .6 5.5 INGw 7 ZeAlaI yo sess sieves ia etenane aes eae ah AS) 4.0 5.2 Swedenycnc.iua ye rachs ra peet Cc acceie Hoe 4 10 1.0 2.8 5.2 Meni s Wey oe areca aaa ne comin ee tie feels a) 1.0 1:2 ay 4.8 Spal wie ites oats hey aban Ste Peng 1.7 Aer DET 4,4 Bhilip pinesssacatiee ac ee pees ; 8 6 1.6 132 4.2 Compiled by the author from data published by the Department of Commerce. Relation of Exports to. Domestic Production. In 1923 and 1924 our ex-. ports bore about the same ratio to our production that our imports bore to our consumption considering the quantity of crude oil. (See page...) The actual exports were 94.9 (and 111.8) million barrels and the production, 733.3 (718) millions*; the imports 99.5 (and 94.5) millions and the domestic * Including amount produced for consumption on leases and not entering trade channels. OILDOM: ITS TREASURES AND TRAGEDIES 187 consumption 588 (and 612.3) million barrels.t The exports therefore made 12.8 percent (and 15.5) of our total domestic yield of crude oil. In detail the percentages of refined exports were of the refined products as follows: Gasoline, 9.6 in 1922, 11.5 in 19238, and 13.6 in 1924; kerosene, 39.8 in 1922, 36.3 in 1928, and 36.4 in 1924; lubricating oil, 34.1 in 1922, 31.7 in 1928, and 33.0 in 1924; gas and fuel oil, 7.2 in 1922, 11.6 in 1928, and 11.7 in 1924. Exportation Not Necessarily Depletion of the Natural Resource. The impression prevails in some quarters that we are robbing our nation of its natural resources in order to increase our huge and superfluous reserves in gold (over $4,500,00,000 on September 1, 1924). From one viewpoint, this is not true in regard to petroleum which, admittedly, is one of the two most evanescent of our natural resources. During the past 10 years we have actually imported more mineral oil than we have exported, measured in quantity. Even in 1928, the year of our greatest overproduction, our imports of both crude and refined oil exceeded the exports by almost 5,000,000 barrels. (See “Recent Expansion in Export Trade,” page 181.) —The Texaco Star. EXPORTS SCATTERED EVERYWHERE; SCANDINAVIA GETS HER SHARE Station of Wahlunds Mineralolje Aktiebolag, at Stockholm. The Texas Company’s splended financial record is partly the result of the successful operation of its highly organized foreign sales department. The American share in the Scandinavian oil market continues to form about 85 percent of the total con- sumption in the three countries. (See U. S. Commerce Reports, March, 1926.) PETROLEUM TRADE OF THE UNITED KINGDOM IN 1924* The magnitude of Great Britain’s petroleum trade, and its dependence upon foreign sources of supply, are apparent from the fact that it paid out more than $185,000,000 for mineral oil and its products during 1924. The quantity imported approximated 1,800 million gallons (American measure) or 42 million barrels.. The exports in 1924 exceeded 125,000,000 gallons or 3,000,000 barrels valued at more than $14,000,000 dollars. The re-exports amount to less than 70,000,000 gallons or hardly 12/3 million barrels of the declared value of 12 2/3 million dollars. The increase in imports since 1921 was about 83 percent (see page 17). + Exclusive of 87.6 million barrels of bunker oil laden on vessels engaged in foreign trade. In calculating the percentages of the exports the shipments to insular possessions are included. The source of data is a bulletin of April 3, 1925, issued by the American Petroleum Institute, in turn based upon Government statistics. * Almost entirely abstracted from Commerce Reports of January, 1925 (U. S. Consul C. L. DeVault of London). 188 OILDOM: ITS TREASURES AND TRAGEDIES Crude Oil Imports. These totaled 12% million barrels for the 12-month period, a gain of over 30 percent in one year or more than 100 percent in two years. Most of the huge increase came from Persia, which in October 1924, supplied over 37.1 million gallons compared with 11.3 million gallons from Curacao (Venezuela), 6 millions from Texas ports, and small ship- ments from New York City. The imports of crude oil have grown enormously since the establishment of the large Anglo-Persian refineries at Llandarcy, Wales, and at Grangemouth, Scotland. Consequently, there has come a drop in the receipts of foreign refined products with but two exceptions.* Increase in Imports of Gasoline. The multiplying of motor-driven vehicles has upheld the growth in gasoline imports. The increase over 1923 amounted to more than 115 million gallons. The imports during October, 1924, were at the annual rate of almost 500 million gallons or 12% million barrels. This rate would allow nearly 390 gallons to each vehicle registered in use as of August 31, 1924. On that date the motor- driven vehicles numbered 1,266,416, of which 495,579 were motor cycles. There were 160,000 more gasoline-propelled vehicles than a year before. Growing Use of Fuel Oil. More than 11 million barrels of fuel oil were shipped into Great Britain during 1924, being a small increase in one year but a slight decrease in 2 years. Evidently the refineries cannot yet satisfy the increasing consumption not only in commercial and naval vessels but also in locomotives and industrial plants. During the 12 months ended ‘July 1, 1924, 45 vessels of 242,162 tons—27 percent of the tonnage of new vessels—were fitted for oil burners. The total tonnage recorded on July 1 as oil burning was 17,154,072 in 1924, 15,792,418 in 1923, 9,359,834 in 1920 and 1,310,209 in 1914. Many large office and business buildings in London have lately installed plants for heating with oil. British Coal Has Found Oil a Sharp Competitor. The shifting to oil bunkering is one cause of the British coal crisis, coal exports for bunkering in the North Sea, the Atlantic and the Mediterranean have fallen from 73,000,000 tons in 1913 to 45,000,000 at present. No wonder, since coal burning vessels now constitute but 64.8 percent of the world’s tonnage compared with 88.4 percent in 1914, according to the London Bureau of The Wall Street Journal. Less Buying Abroad of Gas, Illuminating, and Lubricating Oils. Kero- sene receipts were off about 12 percent compared with 1923 and 25 percent compared with 1922. Lubricating oil on a large scale continues to come from the United States which is likewise the chief source of kerosene and gasoline. However, lubricants of all kinds are being produced on a large scale in the island kingdom. Gas oil imports fell off during the last part of 1924 compared with the corresponding periods of 1923 and 1922. — *According to Acting U. S. Com’l Attaché M. M. Mitchell, London. For complete figures for 1925 see Petroleum Times of London, quoted in The Oil & Gas Jnl., Feb. 18, 1926, and U. S. Commerce Reports, March 8, 1926. Total British imports of 1,606.9 million imperial gallons in 1925 exceeded those in 1924 by 8 percent. The growth in the importation of crude oil (48 percent of which came from Persia and 20 percent from Venezuela) at the expense of refined products induced a drop in total value from 41.4 million pounds sterling in 1924 to 39.5 million in 1925. Receipts from the United States were 13 percent smaller in 1925. : OILDOM: ITS TREASURES AND TRAGEDIES 189 BRITISH PETROLEUM TRADE IN 1925 * Importance to the United States. The United Kingdom has long been our largest single market abroad (see preceding table of foreign cus- tomers). The trend of British trade is, therefore, of particular interest to American petroleum exporters. Of our mineral oil exported during 1925, the United Kingdom took of the gasoline, 28 percent; paraffin wax, 2 Tpercent; lubricating oils, 22 percent; fuel and gas oils, over 12 percent; kerosene, over 12 percent. In point of value British receipts of American petroleum approximates 80 to 90 million dollars or one-fifth of all our oil shipments to foreign lands. Rather disconcerting is the discovery that both the total imports of refined oil and our share therein dropped off during the period 1924-1925. Lessening Significance of the United States as a Source. Imports from the United States decreased 13 percent and the American share in the in- dividual products from non-British sources declined except in fuel oil, as follows: Kerosene (lamp oil), from 80 percent in 1924 to 58 percent in 1925; gas oil, from 93 percent to 80 percent; gasoline (motor spirit), from 76 percent to 47 percent; lubricating oil, from 86 percent to 85 percent; and crude oil, 1.6 percent in 1924 to even less in 1925. Apparently fuel oil fell off absolutely at least 100,000 barrels, although the Commerce De- partment reported a relative increase from 15.3 percent in 1924 to either 17 or 24 percent in 1925. Our sales to the United Kingdom were in the ascendency as a whole up to 1924 when the refineries at Swansea, Shell- haven and Grangemouth got into good swing. With growing receipts of crude oil from British owned wells in Persia and Venezuela (via Curacao in the Dutch West Indies), American exporters of refined products. are now facing a steady reduction in sales to this island kingdom. | Value and Variety of All Oil Imports. Due to this recent drift in the “complexion” of the imports from “blonde” products to “brunette” crudes, the total value fell about 3.5 percent in 1925 from almost $200,000,000 in 1924, notwithstanding the steady upward trend in total receipts, which were, roughly, 46 million barrels (of 42 American gallons) in 1925, com- pared with 45 millions in 1924, 38 millions in 1923 and 34.5 millions in 1922. Arranged in the quantitative order for 1925 the British imports of liquid forms of mineral oil were as follows, in millions of American gallons: Product PELoves ose 1902p, Product 1923 1924 1925 SPU CER OLLI tote akcuerane bees 402 557 674 Lubricatine oil.a.c... « 99 122 103 GABOIITIO UE hss! ete eae ace 393 507 486 GOS AOU cote alts wee cera 85 81 87 NUK adh , Pond bee Wee kc) ba aia OR ce 436 463 401 Other refined oils.... 8 5.2 7.5 IREEOSENIC mine: trs.c'eis sense eee 173 150 170 All refined oils....... 1,189 1,328 1,254 Import Origins Other than the United States. While American ship- ments have generally made up more than half the British imports in value, in volume they have made less than half because of the insignificant con- tribution of crude oil. Other sources of imports are important only in single products or two as a rule. Thus Persia supplied of the crude 96.5 percent in 1923 and 82.7 percent in 1924; Mexico, 76.7 percent of the fuel oil in 1923 and 72 percent in 1924; Dutch Borneo, 16.6 percent of the gasoline in 1923 and 11.6 percent in 1924; Russia, displacing Mexico as the second source of kerosene, supplied 8 percent in 1925; but Mexico is still second in lubricating oil, furnishing 6 percent in 1925 to 5 percent from Russia. * Abstracted from Trade Information Bulletin No. 407, U. S. Department of Commerce, Bureau of Foreign and Domestic Commerce, Julius Klein, Director, April, 1926, 190 OILDOM: ITS TREASURES AND TRAGEDIES Export Trade in Petroleum Products. With the operation of British re- fineries exports of products have risen at a higher rate than the imports of crude. The former increased about 120 percent from 90 million Amer- ican gallons in 1923 to 200 millions in 1925; the latter, almost 70 percent from 400 million American gallons in 1923 to nearly 675 millions in 1925. The principal export was fuel oil with 101 million gallons in 1925. Second in quantity was gasoline with 61.5 millions; and third, kerosene, with nearly 25 miilion gallons. In addition to the exports of British refined products, about 75 million gallons of the imports were reexported, gasoline consti- tuting the biggest item or 78 percent of the total. —The Texaco Star. BRITISH SALES STAFF OF AN AMERICAN OIL COMPANY IN SOUTH AFRICA The silver cup was likely won in a cricket match. WORLD CONSUMPTION FOR 1923* Great Britain Second Greatest Consumer. The total consumption of petroleum and petroleum products throughout the world during 1923 amounted to over 88 billion gallons or 905 million barrels of 42 U. S. gal- lons. Of this, our country consumed 25 billion gallons or practically 600 million barrels. This made 66 percent of the world figure; but by adding the 1% billion gallons of bunker oil shipped at United States ports for the use of vessels engaged in the foreign trade, the total became 70.2 percent. The next largest users were Great Britain and Russia, followed, in order, by Canada, France, Mexico, British India and Argentina. The consumption in these seven countries ranged from 3.9 percent in Great Britain down to 1.2 percent in Argentina. Inventory Changes Ignored. In reaching these estimates, domestic pro- duction plus imports minus exports has been taken to indicate consumption. No account of changes in stocks have been taken except in the figures for \ OILDOM: ITS TREASURES AND TRAGEDIES 191 the United States, Mexico, and Rumania, since accurate inventories are not available for most countries. Where official statistics for 1923 were unobtainable, unofficial figures from the most reliable sources at hand were consulted. Conversions were made to American gallons for comparative purposes and crude production statistics added to show the relation between production and consumption in the various countries. Domestic Production and Exportation. Only four out of the 16 largest consumers outside of the United States, namely, Russia, Mexico, Rumania and the Dutch East Indies, produce enough oil to meet local demands and leave a surplus for export; while only three of the remaining 12 have sufficient output to fill any important part of domestic requirements. These three are Argentina, Japan, and India. The United States had an excess of production over consumption in 1923, but the increase in stocks nearly absorbed this excess. The noteworthy result was that almost the entire export trade and bunker oil supplied to vessels in foreign trade was pro- vided by imports. American refineries supplied the rest of the world with more than 3 billion gallons (practically 75 million barrels) of petroleum products in addition to crude shipments to make a total of 4 billion gallons (95 million barrels), or 30.8 percent of the estimated total consumption outside of our country. In other words, the Old World except as noted, Canada, and much of South America would suffer serious want were it not for the intensive development of the oil resources in the two major re- publics of North America. (See map on page 18.)* ESTIMATED WORLD CONSUMPTION OF PETROLEUM AND PRODUCTS IN 1923} Population, Millions of gallons Consumption Geographic division millions - Production Consumption per capita GM teG eR INP OGIN a: cates. ste cieie se aa aise eae 47.3 satan 1,486 31.4 RUSH eee ee tein en oe ares aieke ee sate eine e 93.4 1,603 1,153 12.3 Dominionwote Canada s.as ces. cee iasers 8.8 is 715 81.5 VERT Cert terrueeoe hotel a cbc RSIS 6 oe aie ite aire 39.4 or 480 122 MEXICO Oar hoa ores sigs te minerals 15.5 6,278 476 30.7 BEISISU EI NOIS Paces cilities, cats cicla we le rarele' 319.1 318 A471 1:5 PAS EMEA wie emtde siercter cial cue rece a ctory oIMth sale 9.0 LST 418 46.4 BERTI ET Go Pelee Os vo lcs Gv 8 al Paehhile «Bas 17.4 456 377 16.0 Republic of Cuba .......--.ceeeeveees 2.9 0° 275 95.1 Dutch Masts Na1es) signs Siecle eineie 4 Ses 50.0 630 260 5.2 Renublic Of China eis. ets aj. wlohe so 8 eee 302.0 0 253 8 Ta rere eee ich ee ee ole oF areca a eeeleia nas 3.8 0 217 57.7 INietherig muse a ctce sie ciclc aera ls oi g'e-s oud sie 6.8 0 183 26.8 Titer lye a ere tase ialitcties icolis yatta 6 ea aie) 0 eliassgrs 37.5 1 175 4.7 GER HIA IVE rete erties Vins alae mn el ws ie olan t inks 39.9 15 167 2.8 Japan and Formosa .....++.+++++se8- 60.6 71 166 2.7 South America, unspecified .......... 17.9 290 113 6.3 PR sel are rae eS Ra PS eels © sige'ere 30.6 0 109 3.6 Pols te catende ha i oleae sles e'le-ereie arana's 27.8 210 106 3.8 1 pe ee ee reg oe ie SS 12.7 44 95 1.5 Philippines .......-seeeeeccreeeeeeece 10.4 0 83 8.0 Belgium and Luxemburg .....+.-++++- aot 0 78 10.7 aE T ELLTSh cvatere te (oe Sees pieiers eon 608 arava leis aie eve 5.4 0 50 9,2 Mia Ptew coin toss ee ae eee a 20.8 0 49 2.4 Union of South Africa ......-.++-+--- 6.9 0 38 5.5 New Zealand 9. cs sc. ve oceans oe vl oes 1.2 0 25 20.3 Central America .....---seeseeeeeees 5.8 0 15 2.6 Venezuela .cvcsccsccr cece set cmenens 2.4 160 18 7.5 * Adapted from Commerce Reports, September 8, 1924, H. S. Fox, petroleum specialist. + Both the absolute and relative amount of refinable Mexican mineral oil have been decreasing, so that the United States may be regarded as generous to the importers of her refined oils since these products have been replaced with inferior crudes from across the Rio Grande. The percentage of American petroleum which fills the wants of foreign lands becomes 35 instead of 30. 8 if the one and one-half billion gallons of bunker oil for ships in foreign trade be excluded from the total consumed outside of the United States. 192 OILDOM: ITS TREASURES AND TRAGEDIES ae” ae ET 02 "4 Ee at AW S3LV1S GILINA Y SSS ~NOILGWASNOD | if SNOTIVI JO SNOITHW Wwne2 SIUNgds ‘€c6l S19Ndoad #& WAITIOALId JONOILINGOUd INV NOILdWNSNOD G1AOM SS A 7/77. ~TNOILONGOYd GN3931 + | aa Sen 3 “vRUINgobt y WIIVIHY HLNOS WIHLO a A MEO WIdsy HINOS JO/NOINN ' a) ‘ nZ Za eee < ie ome ire > : ‘% Ta . Or czy) CZ) LI; E it TNYODGIVI| IO DIOUL e . wey 5 fe ; - “Grey = e ~ A rizvse G 601 é SOL ~ eee WOIVIHY WYINID i wey SS WIINZINIAS 7 os OT 5 . win? > es 7 ote ~ ~ \ rg GNY Nydvh 1 Li t iv ~ a x ’ & Nee ‘ a —U. S. Commerce Reports. OILDOM: ITS TREASURES AND TRAGEDIES 193 CHAPTER X—LATIN AMERICA, LATENT AND PRODUCING INDUSTRIAL POSITION OF THE LATIN REPUBLICS Leadership in Many Lines. Many North Americans erroneously look upon Latin America as a group of mere manyana lands. ’Tis true that the natural resources of this large region—17.5 percent of the earth’s land area—are largely latent; and yet, the hundred million inhabitants—5.5 percent of the earth’s total—appear to be quite happy and contented. Per- haps they plan to leave a little pioneering for posterity. Several causes have encouraged moderation in the rate of development — the tropical climate, the density of vegetation in humid parts, various other drawbacks to exploration, a small mileage of railways and of good highways, a scarcity of certain skilled labor and technical talent, and last- but not least, the erratic treatment accorded foreign capital in some of these countries. Nevertheless, it is astonishing to stop and consider the long list of com- modities treasured in international trade for which Europe, Canada and the United States depend upon Latin America as an important or even exclusive source of supply. Thus Cuba leads the world in sugar; Mexico, in silver; Central America, in bananas; Brazil, in coffee and black diamonds; Argentina, in quebracho, a tanning material, and Chili, in sodium nitrate. Practically all of the’ world’s wild rubber is now obtained from Latin America. South America stands next to the United States in copper and next to the Straits Settlements in tin. Ofttold Tales of Treasures and Tragedies. History and romance recount fascinating stories about the fabulous wealth of the Incas of Peru and the Aztecs of Mexico.j The cruel conquests by the Spaniards, however de- plorable, opened up the treasure vaults of the vanquished which eventually led to the development of soil and oil by the overcrowded Europeans and their North American descendants. The Spaniards, however, overlooked the more useful minerals in their persistent search for gold, silver, and precious stones. It is startling to realize how the world’s stocks of one metal—silver—have emanated largely from Latin America during the past four centuries. About 50 percent is even now coming from Mexico alone besides minor quantities from Bolivia, Peru and Chili. In contrast it may be noted that the world’s gold has been accumulated mainly during the past three-fourths of a century in and from English-speaking lands, and then particularly from South Africa during the 20th century. World sources of the red metal, remarkable to relate, are now, more than in the past, traceable to the two Americas, home of the copper-skins—90 percent in 1924, Glory of Panama, Gateway For Gold in Days of Old.* Balboa’s great discovery opened the way for the flow of wealth to Spain. In 1519 Panama, “The Place of Fish,” was built on the Pacific coast. It was the first city founded by Europeans on the American continent. Here came great galleons, laden with gold and silver from the countries to the south. They * While Chili and Peru produced together almost 15 percent of the world’s copper, Latin America (including Mexico) as a whole is yielding as much of the red metal as Africa, Europe, Asia and Australia together. j The reader is referred to Prescott’s well-known histories. 194 OILDOM: ITS TREASURES AND TRAGEDIES U.._S. BATTLESHIP TRAVERSING PANAMA CANAL Not until this waterway had been open for eight years did the ‘volume of petroleum traffic become noticeable. In 1922 Cali- fornia crude began to move to the Atlantic seaboard. During the fiscal year ended June 30, 1924, all forms of mineral oil made almost 51 percent of the 19,000,000 tons of eastbound cargoes. were the precursors of the clipper-saile which carried gold and goods from California in the fifties and sixties of last century, and of the petroleum tankers loaded with liquid gold from later Goleondas. Over 250 years ago this second strongest citadel in Spanish-America was spoliated by the boldest buccaneer of the seas, the Welshman, Henry Morgan. Only a few arches and a broken tower now mark the overgrown site of the older Panama. The revolt of colonies over a hundred years ago and the Cali- fornia gold discovery by Marshall in 1848 resulted in the rebuilding and rejuvenation of Panama. In 1855 a railroad was completed across the isthmus—for a time the most profitable of all steam lines. Although the earliest settlers saw the eventual necessity of digging a ditch between the oceans the physical difficulties were too great for its attempt until modern machinery could be invented. It was the malarial condition rather than the financial troubles that prevented the French builder of the Suez Canal from accomplishing what General Goethals did with the help of General Gorgas. This famous sanitarian successfully fought the mos- quito—and his main ammunition was mineral oil. When the Panama Canal was opened on August 15, 1914, nobody dreamt that eight or nine years later the leading toll-payer would be petroleum!* United States Enterprise in Latin America.t Prior to the war, Europe led in the economic life, particularly in South America. Our American bankers and traders gained during the period 1914-1918. They met a tem- porary setback after the Armistice when every weapon of commerce was employed against them. Credit for a large share of our present success in overcoming European competition is due to the judicious investment of American capital and to the pioneer work of American engineers. How- ever, long before the United States was able to export capital, its citizens were applying skill and ingenuity in building railways, establishing steam- * See E. C. Brooks’ ‘‘Stories of South America,’’ Johnson Publishing Co., Richmond, 1922, See also Roger W. Babson’s ‘‘The Future of South America,”’ particularly pages 239-249, for unfavorable treatment of American capital. { Abstract of address by Julius Klein, U. S. Dept. of Commerce. OILDOM: ITS TREASURES AND TRAGEDIES 195 ship lines, and opening coal and metal mines in South America. Thus, 72 years ago, Wm. Wheelwright, of Newburyport, Mass., planned the first railway and subsequently projected the first trans-Andean railroad. He established the first steamship line on the west coast of South America. Twenty years later Henry Meiggs performed the tremendous feat of con- structing the highest standard-gauge railway in the world, the marvelous Central Railroad of Peru. The Panama Canal is the outstanding achieve- ment of American engineering enterprise. There are other striking proofs of our ability and our interest in the development of the resources of Latin America such as its deposits of copper, iron, silver, tin and petroleum. Only Three Share Well in‘World Trade. Since Latin America as a whole has poorly developed power resources (page 204), manufacturing has not advanced there as far as in those foreign countries that have applied their available energy in the form of either solid fuel or “white” coal. For this reason no nation south of the Rio Grande, with only two notable exceptions, rank high in both total world trade and in per capita commerce. These two, Argentina and Cuba, are agricultural countries which invariably have a huge surplus of certain products for export. Their mass production of these is related to their large imports of mineral fuel, particularly petroleum of which Argentina also obtains a considerable quantity at home. Brazil, which likewise ranks among the first twenty nations in the world trade, has only 1/7 the per capita commerce of Argentina and only 1/9 that of Cuba. This is owing to her large population (now nearly 32,000,000) and to her backward state of industrial development.* FOREIGN COMMERCE OF LEADING COUNTRIES IN 1924 (Millions of Dollars) United Kingdom ...... O[S00R LOLA Us ae tic stere oizia'sle 155405" Denmarle a. s.yie. cto ooo 755 United States ........ 8,200 Malyeredesmacdsecs Beare 4 1 Oman EST ELZIb here oYoleve ws acre tne Putty e455 WPM VICEe cite seis ceili! cleicic 4,275 Belgie ee cise cis ators MAGS A UStiriay ss acne ticle eis. aie 725 Germany ....... Fen 8,730 Argentina ..c.cccocce TEAAD Te Cuba. viele cs Suheclecinlds 710 British laniaye sc cice + ae 1000S AUStrslia Fs. 2ste cieics siete e D250 opis weden Niws-s...0 2 delete aete 707 Canada rr. acts code s'es - 1,850 Czechoslovakia ....... 970 China or Russia ...... fh us DADAM tease o Helos Sasa’ 1,750 Switzerland 2 .es cesses 815 UNITED STATES TRADE WITH LATIN AMERICA Position in Our Foreign Commerce. During 1924 all Latin America im- proved her position by commanding 22.2 percent of our entire foreign trade compared with 21.9 percent in 1923 and with 43.3 percent retained by Europe. Of our total imports of 3,610 million dollars in 1924, 29.4 percent came from the region to the south; of 3,793 millions in 19238, 27.8 percent came therefrom. In 1924, entire Europe supplied only 1 percent more than Latin America of our buying abroad; all Asia 3.6 percent less. As in our *From “International Trade in 1924,” U. S. Commerce Reports, June 1, 1925, J. J. Kral, Statistician. All of the Latin American countries are in that stage of economic development where the energies of the people are chiefly devoted to the production of raw materials. A feature of their trade is the specialization of each region in one product and the consequent depend- ence of their prosperity upon foreign markets. Notable examples are wheat, wool and hides in the River Plate country; coffee in southern Brazil and the Caribbean region; wild rubber in the Amazon valley; cacao in Ecuador; Chili saltpeter in the Atacama desert; petroleum in Trinidad and northeastern Mexico; and bananas and coffee in Centrl America and the West Indies except Cuba.—U. S. Commerce Reports, Supplement 9, 1921. { For more painful details see “Our World Trade in 1924,” by C. D. Snow, For. Com. Dept. of the Chamber of Commerce of the United States; also “United States Trade with Latin America in 1924,” by J. R. McKey, U. S. Dept. of Com. (10 cents, Supt. of Docu- mer.ts, Washington, D. C.) 196 OILDOM: ITS TREASURES AND TRAGEDIES petroleum trade with Latin America so our total exports thereto make a value much less than our imports therefrom. These were 770 million dol- lars against 1,060 millions, leaving a debit balance on our national ledger. Our exports to the south were 16.8 percent of all our 4,591 million dollars exports in 1924; 16.6 percent of 4,167 millions in 1923. Europe took 53 percent of our external sales in 1924, Asia 11.2 percent; in 1923, respec- tively 50.2 percent and 12.3 percent. How the Separate Nations Stand. Some of the southern countries show up well in comparison with old world powers that deal with us, as indi- cated below. The figures refer to percentages of our export and import totals. Our Fifteen Best Customers, 1924 Chief Sources of Supply ; 1 Great: Britain: siccices aor sii seieieienst ZL 1 Canada oie 0s ie os obec, 00 cisternae 11.1 2 i Ganada stad Jue coke dete cane eerste 13.6 2 Cuba (sugar 87%)*' 0... cesar 10 SU \GerMany | Zaiaieie tie cecal dusrs aborecaterereteteveiecs 9.6 3 tS ADAM iis oc, 5. snide p buele Suakenop Seenecee Mer eanES 9.4 4 eee aN ede Ble aker eters karenereeetemeia arotesanetote 6.1 4 Great) Britain. -<.,...(.c4- cose eee 9.3 BSA AM ae sscve bla sit el ater gieveksin orere cnatezevelererers 5.5 5 Brazil (coffee 88 %)......eccsrcees 5 6 Gaba: (cotton cloth 6.8%) ......... 4.4 6 Mexico (crude oil 54.5%).......... 4.6 PATA YNSE Sie ecw arerelavc: seer olohsteveisieae aces cians) re 4.1 7% Straits, Settlements <2)\-(ciessrectelete urs 4.1 Se olan Gi’ os ransce eis s etevose sie ie-eoeuste stencvstevers 3.3 8. France © .:.:6,0.s%0's 0s eieis « ticle be easieperceammees 4.1 9 Mexico (refined oil 6.7%) ......... 2.9 9. Germany ve. ois e/lo nie ocsue ee ronene eee 3.9 LO AmStraliaiey oh ctetosecclare woenitesiorets eens 20° 10> ‘China sis Soc sa sic steusicmiate te een 3.3 11 Argentina (farm machinery 14.4%) 2.5°.: 11> British’ India. *. 3. on. oe ee eee 2.9 LA) SBeleium Favalcses teats e sere aoe caetee aiorette 2.5 12 Chili (sodium nitrate 48%) tiers ates 2.1 US OnChin a 7. %0. screws veresens sia re ote avekevepenoloierevslerciers 2.4 13° Philippines} ..0.3.:0ji2'ca ere Sees 2.7 LAPS PAIN re vse alee wale oicle ersle eMac era tears 16 14 Argentina (flaxseed 32%) ......... 21 15 Brazil (refined oil 19%) ........... TA. 2 16> Ataly | secGie es oieiekio bist c ere kee eee 2.1 We Buy More Than We Sell. From European nations we usually buy only half to one-third as much as we sell to them; but the reverse is true of Latin American countries. Thus Chili’s exports of nearly 99 million dollars to the United States were actually more than 8 times as great as her purchases therefrom; those of Brazil, 234 times as much as her imports; Cuba’s, 14/5 times; Mexico’s, 14% times, and Colombia’s, twice as much. Argentina, on the other hand, raising farm and range products of the tem- perate zone similar to our own, supplied us with goods worth only five- eighths as much as those received from us. It is therefore not surprising to note, in the second table above, that three Latin American nations were among the first six of our chief sources of supply. It is an astonishing statement, but true nevertheless, that all Latin,America in 1924 bought barely five-sixths as much of us as Great Britain did—notwithstanding a ratio of 5 to 2 in total population. The contrasts in this triangular trade would be intensified if the United States were to refine all the crude oil to be shipped in the future from South America and were to dispose of the products to European customers. Notable Changes in Our Trade. Latin American commerce with the United States in 1925 increased 5 percent to 1,920 million dollars or 2.4 times its value in 1914. The total exports,and imports in 1924, 1,830 mil- lions, was six times what it was in 1900. The nature of the trade has changed materially during a decade or two only in regard to great gains in nitrate and copper shipments from Chili, copper from Peru and crude oil from Mexico. Recent increased sales of wool, hides, linseed and que- bracho to Europe from the River Platte region permitted Argentina, Uruguay and Paraguay to buy more automobiles and gasoline from the United States. Imports from Brazil climbed in 1924 to practically 180 million dollars, almost half as great as those from Cuba, caused by higher coffee prices. During last year we bought a less quantity of oil than in 1923 from Mexico; but its higher value and the higher values of winter OILDOM: ITS TREASURES AND TRAGEDIES 197 vegetables, lead, copper and silver made it possible for Mexico to purchase more automobiles, foodstuffs and mining machinery from us. Latin America (i.e., Mexico) still monopolizes exportation of mineral oil to our country, for all the rest of the world contributes less than 1 percent. —The Texaco Star. DISCHARGING AMERICAN CASE GOODS AT A SOUTH AMERICAN PORT The docks here at Rosario, Argentina, like those at Rio de Janeiro and Santos, in Brazil, boast modern facilities for transferring cargoes of refined oils from the United States. PETROLEUM AS A FACTOR IN OUR SOUTH AMERICAN TRADE? Advancing Value of the Oil Trade. In South America’s foreign com- merce petroleum played but an unimportant role before the World War. Since 1913 it has become a potent factor in dealing with the United States and Mexico. The development of both production and consumption has variously influenced importation. Thus Colombia has been able, since 1922, to supply her own demands largely for petroleum products other than lubricants and paraffin wax. Nevertheless, our country has been enabled enormously to increase its sales of refined mineral oils throughout South America. In the largest country these now make nearly 20 percent of all our sales thereto, and in all South America 11 percent in 1923.t =_ * The late increase in the trade between the United States and Latin America was due almost entirely to enlarged imports in the form of automobiles, gasoline and oil well sup- plies, as well as iron and steel, from the northern republic. 7+ M. M. Taylor in Commerce Reports, October 20, 1924; abstracted and supplemented by the author. ~ According to J. R. McKey, Department of Commerce, petroleum products worth over $64,000,000 made 7.38 per cent of our exports to all Latin America and ranked fourth, or next to iron and steel, cotton manufactures and automobiles in 1925. Among our imports during that year, $75,400,000 worth of crude oil and $30,700,000 worth of refined petroleum together constituted 10.2 per cent of all our Latin American imports ranking below coffee (26.7 per cent) and sugar (19.5 per cent). 198 OILDOM: ITS TREASURES AND TRAGEDIES Internal Trade Hitherto Trivial. Despite expansion in the production of Venezuela, Peru and Argentina,* the commerce in oil between South American countries remains relatively unimportant. Elsewhere natural barriers along political boundaries, i.e., transport difficulties encountered away from the coast, interfere with intra-national shipments. Peru pro- vides Brazil with little or no petroleum, sending most of the crude (which makes two-thirds of all her oil exports) to the United States, Canada, Cuba, via the Panama Canal and to Argentina, around Cape Horn; also four-fifths of the raw naptha to Argentina and the United States,} the rest going to Europe. Venezuelan oil from Lake Maracaibo has to be re-shipped in ocean-going vessels from a Dutch West Indian island, Curacao, where some of it is refined. The bar at the mouth of the Lake limits navigation to vessels of less than 11-foot draft. South American Oil Imports More Valuable Than Exports. Contrary to the condition of our trade in general with Latin America (page ..) and in petroleum with Mexico, South American oil exports are still worth much less:than oil imports. The reason is twofold: (1) Exportation in quantity has just commenced and (2) the receipts are mainly high-priced or refined products whereas the shipments consist chiefly of crude oil. In only two countries, as implied above, is the export phase more important than the other. The imports of all forms of petroleum from the United States were worth $39,000,000 in 1924 and $32,300,000 in 1923. As indi- cating a trend towards a better balance, the receipts in 1924 had a value only 10.4 times that of the shipments compared with 11 times in 1923. It will take a long time, however, for crude exports to equal refined imports. RELATION OF PETROLEUM IMPORTS TO TOTAL IMPORTS FROM THE UNITED STATES (Values in Millions of Dollars; Percent Petroleum of Total Imports) Value Percent Value Percent Country 1923 1924 1923 1924 Country 1923 1924 1923 1924 Argentina .... $14.2 $13.2 12.6 11:3 |) Colombia’: 3233) $ 346 $ .67 1.9 2.3 Braziliiccslsesls 9.5 12.6 21 19.4 Peru ica cues 74 .66 3.7 2.8 Chiltyn veces. 3.9 7.6 12.5 24.0 Venezuela .... .40 bl 3.3 2.9 Uruguay. .)..)./s 2.7 3.2 18. 17.5 Rest of South America ... -40 46 8.7 ret) The three “ABC” countries and Uruguay together took 14.7 percent of their imports $205,000,000) in 1923 and 15.8 percent (of $232,000,000) in 1924 in the form of petroleum products; all South America 11.8 percent of the imports ($270,000,000) in 1928, and 12.3 percent (of $315,000,000) in 1924. The lower standard of living in five of the six other republics and in the three Guianas is reflected in the small per capita consumption made possible by their inconsequential imports of petroleum products. Outside of the “ABC” countries and Uruguay, South American imports of United States petroleum products made about 3 percent of the total imports in 1928 and 1924. . Reliance on Latin America For Liquid Fuel. The topnotch in oil pro- duction has been attained by the United States. Remarkable has been our ability to keep output at so high a level—50 to 70 million barrels monthly— for so long a time (since December, 1922). It would be simply miraculous for our producers to maintain the flood above the 700 million mark (70 * Argentina’s output of almost 5 million barrels in 1924 filled but 40 percent of her domestic demand. { Return cargoes from the United States consist almost exclusively of gasoline, kerosene, and other refined products. OILDOM: ITS TREASURES AND TRAGEDIES 199 percent of the world’s output) after the end of 1927. Admittedly the spurt in the spring of 1925, due to the “cloud-burst” in Arkansas, meant very little to American motorists since.Smackover oil is so very low in gaso- line. A setback of 100-million barrels in 1927 should not be surprising. Until our immense shale oil deposits can be developed we must depend upon increasing imports. Upon what foreign sources may we count? Certainly not on Mexico for any increase, since imports thence have dropped 75 million barrels in four years. Can the rest of Latin America meet our emergency? Yes, in view of its huge resources and the present activity of highly organized American operators therein. —Texaco Star OFFICE STAFF OF AN AMERICAN OIL CO., AT KINGSTON, JAMAICA Of $23,000,000 United States exports to all British West Indies in 1925 fully 5 percent consisted of kerosene, gasoline, and other petroleum products including asphalt. Present Interdependence of Pan-American Republics. Although South America is not yet as populous and productive as either Europe or Asia it surpasses both of these grand divisions in the number and degree of com- modities supplied to the United States if the little of Latin America out- side of South America be included with the latter for statistical purposes. It appears from the table below (for 1923) that the exclusiveness with which Latin America fills our need for nondomestic crude oil is no less formidable than, for instance, her ability to cater to our cravings for ba- nanes, sugar, and coffee. Percentages for 1925 differ but littlé. From Latin America From Latin America Commodity Millions Per cent Commodity Millions Per cent Bananaser tic csc sess Bese we Ay; 99.9 ASP HAL Dares tka ieee $ 86.98 90.5 DUAL EE Pmelois cs Meee O49 99.5 iW haleroiliicieietene s reree 1.90 90.0 RICE rite © sive leone Winis 4.1 99.9 Bauxite Gress nose sacle .52 87.4 TAN OTE taaat is Pa NRC 2.15 99.2 Flaxseed ohieca seni ete 42.00 85.9 MINERAL OIL ........ 78. ] 98.9 Teas OFeianaca a ts, e ties 2.63 82.8 Quebrachoweres «ccs > vielcis 4.8 98.5 Copper cae amies sae. 62.61 75.5 COM GEN nice ee eere tie oe se LSES 97.8 MeYtilizers oo. .hhc + co bela 44,4 69.4 * Philippine sugar considered non-foreign. 200 OILDOM: ITS TREASURES AND TRAGEDIES _. In return, Uncle Sam sends to Latin America 82.8 percent of his exports of butter; of his exports of cement, 93.3 percent, and of sugar-mill ma- chinery, 79.6 percent. Of all explosives and ammunition shipped abroad, 67.2 percent goes to Latin America; of furniture, 62.4 percent; of eggs, 61 percent; of cotton manufactures, 58.4 percent; of agricultural machinery, 86 percent; of oil well machinery, 41.4 percent; of aircraft, 90 percent, and of petroleum products, 13 percent. United States Imports of Crude Oil, 1924-1926. Unexpected upkeep of domestic production in the United States between 715 and 770 million bar- rels during the past four years and extensive application of the cracking process for gasoline manufacture have permitted a steady decline in the importation of petroleum, as shown in the following table wherein the figures represent millions of barrels of 42 United States gallons crude oil. Source 1924 1925 1926 Source 1924 1925 1926 MEXICO NAS oaks catalase oN ehe ute 74 55 40 Colombia ......... oe a ate a st 2 WenieZUel a oractearce eee eles 142 4.7 sal Pers: -CbCas aurusiaieceas orto Sloe 1.8 5 ' LMM}; SNS % WY, G y SD” , “i, yy MO, Ufy"4 Z ARICO BOD se Re] Alluvials Se ES Llaros : 88 SNES Pliocene TR ; TM Miocene \Tertiary 0 10 20 30 40 50 60 70 80 Focene Kilometers Cretaceous Quaternary GEOLOGICAL MAP OF EASTERN VENEZUELA AND TRINIDAD The close relationship of Trinidad to the mainland is clearly evidenced. The largest oil seepage in the world is Bermudez Lake, at Guanoco (see middle top of map). DIFFERENCES IN ECONOMIC AND GEOLOGIC CONDITIONS Natural Conditions Not the Same in South America. American demand and American enterprise cannot alone account for the fact that the United ‘States and Mexico have been the source of two-thirds of the world’s 13,000 million barrels of oil produced to July 1, 1925. Scientific research, discov- eries of new fields, and deeper drilling in the United States’ point to its possession of greater reserves than were estimated only two or three years ago (pages. 19 and 39). Eventually it may be established that North America originally had much more than twice as much petroleum under- OILDOM: ITS TREASURES AND TRAGEDIES 201 TYPICAL MUD. VOLCANO OF EASTERN VENEZUELA This one is located in the state of Mon- agas on the _ south- west side of the Gulf of Para, opposite Trinidad. Seepage of oil is associated with it. Similar gaseous volcanos occur along the Caribbean coast of Colombia. ground as South America. It seems that there is more organic material in the sedimentary rocks here than in the region south of the Caribbean Sea (pages 22 and 23). One indication of this is the relative scarcity of coal in all Latin America. Partly offsetting this, Mexico has an immense thickness of organic limestone underlying its major oil fields. A greater stratigraphic range and wider extent of possible oil-bearing beds also characterize the North American continent. Nature has laid down additional unfavorable conditions for finding, extracting, and marketing mineral oil in South America. Mountain and swamp barriers interfere with transportation; the climate is not everywhere encouraging, especially in regard to humidity; and even where exudes are common the vegetation obscures the sight if not the smell of the oil. Geological Occurrence of Latin American Oil. South American and Mex- ican oils occur almost wholly in strata of Tertiary and Cretaceous ages These beds have been folded into oil-holding structures around Lake Mara- caibo and in Colombia, but in Peru and Ecuador they are badly broken \ CRATER OF MUD VOLCANO ON TRINIDAD As on the mainland of South America, sol- fataric formations are associated with seep- ages of petroleum. *In Northwest Peru and sSoutnwest Iitcuador the formations belong to an early Tertiary age. Alternating layers of clayey slute, sandstone, ete., compose the strata which rest on hardened sandstone of Cretaceous age. The oil-bearing beds are most tricky, being inclined, folded and even faulted to the extent of 1,000 feet or more —T I. Builetin No. i78, January, 1924, U. S. Department of Commerce. 202 OILDOM: ITS TREASURES AND TRAGEDIES causing many dry wells to he drilled.* In the Comodoro Rivadavia field of southern Argentina the first traces of oil and asphalt are found in an up- per Cretaceous bed of greenish and whitish sand and clay from 550 to 700 feet thick. The thick and almost flat stratum of heavy Tertiary clay above accounts for the lack of surface signs nearer than points 35 to 100 miles away. In the main fields of Mexico, near Tampico, the outstanding fea- tures are: (1) A tremendous thickness of the “mother rock,” the Tama- sopo limestone; (2) association with volcanic necks and dikes; (3) in- numerable seepages similar to those of eastern and northwestern Vene- zuela, and (4) unique underground condition of supposed cavernous stor- age and known hydrostatic pressure that in places permit a single well to drain an entire pool without pumping. Latin American petroleum comes ~ from sources 200 to 3,000 feet deep, averaging less than 2,000 feet in 1925 compared with almost 3,000 in the United States. Characteristics of the Crude Petroleum. The quality of the oil varies, but not so much as in the United States where there is a much greater range in depth as well as in the geological age of the oil horizons (see pages 26-28). The Mene Grande and Comodora Rivadavia oils of 18° and 18.5° B. are heavier than the average from the older California fields; La Rosa oil is a little heavier than the average Gulf Coast product (page 39); Las Infantas} is reported from 27° to 36°, and El Mene, 37°, so are simi- lar to Mid-Continent average; Peruvian is the lightest and best, of mixed asphalt and paraffin base, that from Negritos and Lagunitas yielding 24 to 30 percent: gasoline and naphtha and 25 to 34 percent kerosene with a lu- bricating fraction, thus comparing with the Pennsylvania grade of crude. The heaviest and most viscous oil is the asphaltic crude from the Panuco, Ebano and Topila fields of Mexico. It varies from 10° to 15° Baumé and is chiefly a fuel oil. Labor Relations Not Always Ideal. Anarchistic agitation originating not entirely in the United States have made Mexican workmen dissatisfied — with the relatively higher wage scale followed in the oil fields than in the rest of Mexico. Relations between employers and workers are not such as tend toward an increased efficiency of labor. Strikes have been frequent and there is considerable unrest among the labor element. Mexico is a country where continued development is still a factor in its prosperity, and undoubtedly the dampening effect of strikes and other labor disturbances react to lessen the flow of money available for new enterprises. The strike of August, 1924, was directed particularly at a Royal Dutch-Shell subsidi- ary (La Corona), but sympathetic strikers also forced the suspension of American operations near Tampico.* The strike of May-June, 1925, grew out of the struggle between rival unions and resulted in a number of mur- ders. Among those killed was the native superintendent of a pipe-line sys- tem owned by a subsidiary of the Pan-American Petroleum and Transport Co. Like the attitude of governments, labor conditions generally in Latin America are best at the beginning of operations in the oil fields and up to the time that returns come in from the investments of foreign capital. Future industrial peace would benefit both employes and investors and *R. A. Lundquist, a division chief, in the issue of May 18, 1925, U. S. Commerce Reports. { The weighted average gravity of the’ oils produced from the Venezuelan fields (Mene Grande, La Rosa and El Mene) during 1924, as determined by the author, is 20.8° Baume or 0.5 more than the gravity of the oil from the discovery well at Smackover, Ark. OILDOM: ITS TREASURES AND TRAGEDIES 203 oil sold to foreign consumers. Decent and even liberal treatment of Latin American labor has always been the policy of American as well as British management of petroleum enterprises throughout the Western Hemisphere. Troubles have invariably been traced to parasitic interlopers. Domestic Demand Limited by Road Development. The condition of the highways in Latin America are still a handicap to motorists. Out of 44,000 miles of roads in use early in 1925, only 12.6 percent were classed as .good. About 20,000 miles were building or projected, according to U. S. Commerce Reports (April 6, 1925). How backward motoring must be is implied by the limited mileage for each of ten countries listed below. The first col- umn figure shows the mileage of all roads (old, building and projected); the second indicates the percentage which the good roads made of the total in use, and the third the number of gallons of petroleum consumed. Miles of Percent Per capita Miles of Percent Per capita Country roads good demand Country roads good demand Brazil ..... 26,500 7.8 3.6 Colombia .. 2,500 37.6 33 Mexico .... 12,000 7.5 30.7 Bolivia ... 2,460 ala hae ? Chilis 7.8. 3,400 9.8 57.7 Cuhbay see. 2,100 1.33 95.1 Perdis as900 11.6 20.? Argentina . 1,800? 40.6 46.4 Venezuela.. 2,700 29.2 7.5 Ecuador ... 1,240 0 ? TRINIDAD HAS GOOD ROADS; PRODUCES LIQUID OIL AS WELL AS ASPHALT It is the only part of the British West Indies which sells more to the United States than it buys. The difference is due largely to Trinidad’s exports of asphalt, motor fuel and crude oil. These were valued at over $1,000,000 in 1925. The oil wells, in the southwest near the asphalt lake, give this island probably the highest yield of petroleum per capita and per square mile of total area in Latin America. About 30 percent of its 1,755 square miles are considered possibly oil-bearing. Hardly any of our states have so few miles of highways, and none of them has so low a percentage of good roads as the average, 12.6 percent, for all the Latin American lands. The drier climate of Argentina accounts in large degree for her high percentage of good roads. In the case of Colombia and Venezuela, unquestionably the new roads built by the oil operators have helped to bring the percentage up. Tropical South America, notably Brazil, will not show a great increase in consumption of refined oils for some years because of the natural difficulties in the way of con- structing and maintaining good roads. With hardly more than 150,000 cars and trucks in all South America, it is found that a single state, Iowa, which ranks only ninth in the Union, possesses four times as many. The table above plainly implies that current consumption of petroleum products is independent of rural road conditions and extent. 204 OILDOM: ITS TREASURES AND TRAGEDIES Other Reasons Which Retard the Opening of Oil Fields. Reference has already been made (on page 10) to the dubious attitude of the various Latin American states towards foreign capital which is eager to enter the oil regions. Aside from tax treatment and political turmoil, there are two outstanding reasons for the tardy development of the petroleum deposits south of Mexico. According to one authority* who returned early in 1924 after. ten years abroad, these two reasons are the human element and the lack of efficient drilling machinery. This is more particularly true of Eu- ropean and Asiatic conditions where American drillers and American machinery are less well known than in Latin America. The writer would add also the climatic conditions, notably in Colombia and Venezuela. DORMANCY OF COAL AND DAWN OF OIL DEVELOPMENT South America’s Deficiency in Coal Deposits.; The energy resources of South America are neither so well balanced nor so widely distributed as those of North America. Though the development of her large oil fields is encouraging and though the potential water power on the east flank of the Andes is enormous, South America has smaller coal resources than any other continent. The contrast with North America is notoriously sharp. Mexico and Central America, however, have very limited deposits and yield less than 1,000,000 tons a year compared with more than 600,000,000 tons from the United States and Canada. Hitherto, Chili has been the chief source of solid mineral fuel mined in South America. The total annually obtained in all Latin America rarely runs over 2,500,000 tons, a quantity exceeded by 18 of the 30 coal states in the Union. Coal Consumption Inconsiderable. Owing to the climate and the lack of large industrial development the annual consumption of the entire South American continent is no more than what Colorado could supply with her 10,000,000 tons a year. During 1924 Argentina imported almost 3,500,000 tons of coal, nearly 90 percent British, and Brazil about 1,500,000 tons, half from Great Britain and half from the United States. Cuba, the rest of the West Indies, Central America and Mexico took together almost 1,200,- 000 tons from the United States. To replace 10,000,000 tons of coal would require no more than 35,000,000 barrels of fuel oil or less than the expected output of crude in South America in 1925. A Quickening in Oil Production. As evidencing the virginity of the oil resources south of Mexico, a study of the production tables on pages 14- and below, will bring out several surprising facts. The longest producing country in South America, Peru, in 30 years has contributed only 50,000,000 barrels or half of 1 percent to the world’s total of about 14,500,000,000. * TL. R. McCollum, sales manager of the Titusville Iron Works, quoted in The Oil and Gas Journal, April 3, 1924. + Partly abstracted from ‘‘World Atlas of Commercial Geography,” U. S. G. S., 1921; read also ‘‘Coal Resources of the Americas,” by B. L. Miller, of Lehigh University, pub- lished by The Pan American Union, 1928. t According to the 12th International Geological Congress, the world’s coal resources, as shown in 1913, were as follows (in millions of metric tons): Colombia, 27,000; Chili, 3,048; Peru, 2,039; the rest of South America, 10. Total, 32,097. United States, 3,838,657; Canada, 1,234,586; Mexico, Central America, etc., 505. Total North America, 5,073,481; Europe, 784,190; Asia, 1,279,586; Africa, 56,200; Australia, 165,572; New Zealand, 3,386; other islands, 1,452. Total Oceania, 170,410; total Eastern Hemisphere, 2,292,025; total Western Hemisphere, 5,105,528 (of which only 0.64 percent in South America) ; total world’s reserve, 7,397,553 (of which only 0.43 percent in South America). OILDOM: ITS TREASURES AND TRAGEDIES 205 barrels to the end of 1926. By the end of 1927, Venezuela will rank ninth in accumulated output. Another truth, very surprising fact, relates to the large percentages which the output in 1926 and in the past five years made of each country’s aggregate to the end of 1926. Of Venezuela’s total pro- duction to the end of 1926, over 99 percent has been obtained in six years. Of Mexico’s 1,450,000,000 barrels, 61 percent has been procured during the period. 1921-26. Included in the total for Latin American are the trivial quantities of crude oil obtained in Cuba and elsewhere. Recent as the development has been in Persia, where 65 percent of the output has been procured in four out of thirteen years, it has not been nearly so rapid as in Colombia, where all the output was obtained after 1920, and in Venezuela where 92 percent gushed forth in the same short period. That Mexico is not yet a minus factor is emphasized by that fact that more than 11 percent or almost one- ninth of its yield in twenty-four years flowed to the surface during 1924; also by the fact that 84 percent of all Latin American petroleum produced in 1924 came from that nearby republic. The Outlook for the Future in Latin America. With four times as much credited to her as to all the rest of Latin America during the past four years (1923-1926), Mexico will likely remain the world’s second producer of petroleum until 1929. But in Mexico production passed its peak (of nearly 200,000,000 barrels) in 1921; whereas in South America, notably in the northwestern end and in the republic of Peru, the mining of mineral oil is gaining momentum each year. By 1928 the yearly yield of Mexico should easily be equaled if not exceeded by that of the rest of Latin America. All Latin America may by 1930 have an annual rate of output half that of the United States. OIL RESOURCES AND DEVELOPMENT OF MINOR COUNTRIES OF LATIN AMERICA Cuba, Richer in Ore Than in Oil Reserves. While Cuba contains deposits of asphalt, copper, gold, manganese and mineral oil, they are not known —The Texaco Star THE CUBAN SUGAR INDUSTRY TAKES FUEL OIL FROM MEXICO AND THE UNITED STATES Typical Cuban fuel-oil installation at a “Central” (plantation and mill). It is interesting to note that the bagasse or refuse from the mill is itself a source of liquid fuel (alcohol) and the fibrous part thereof can be made into the new building material. celotex. 206 OILDOM: ITS TREASURES AND TRAGEDIES to be important compared with the 3,200,000,000 tons of iron ore reserves* found chiefly in Oriente Province. Asphalt seeps and veins or oil and gas seeps have been reported from every province, mostly in broken serpen- tine within Cretaceous beds above Jurassic limestone.** They are most common on the north coast. In western Cuba alone the asphalt is con- sidered proof of former large accumulations of oil, at least 20,000,000 bar- rels of which was evaporated or oxidized to leave the residuet From the wells at Bacurano, Province of Habana, about 4,000 barrels of oil are an- nually produced.t The per capita consumption (95 gallons, or 2% barrels, in 1923) the largest in Latin America although road conditions are not ideal. Outside of the United States, Cuba is one of the four best customers for Mexican crude oil. Our country is its principal source of refined prod- ucts. We supplied $6,200,000 worth in the fiscal year 1921-22. QUARRYING AND HAULING ASPHALT The Trinidad asphalt lake of 115 acres is only 138 feet above sea-level but over 175 feet deep. Since 1888 it has supplied about 5,000,000 tons of asphalt for paving famous avenues in leading cities. —The Lamp A unique model of this ‘“‘World Wonder” may be seen in the General Asphalt Com- pany’s Office at Philadelphia. Trinidad Long Celebrated for Its Lake of Asphalt. This island, believed once to have been physically a part of eastern Venezuela, is an important producer within the British Empire. Its asphalt lake is situated a mile from the sea and covers over 100 acres. Oil production began in 1908, fol- lowing the year in which Argentina entered the list. In all Latin America, Trinidad stood next to Mexico and Peru until 1922, when Argentina ad- * Supplement No. 51, U. S. Commerce Reports, 1923. ** “Petroleum Reserves of the West Indies,’ A. H. Redfield, Am. Inst. Min. & Met. Enegrs., 1922. +The Oil Trade Journal of January, 1924, tells of the early (1899-1918) activities of Attorney Albert Wright, of later investigations by the geologists, Ralph Arnold and Barna- bas Bryan, and of the developments conducted on the Bejucal-Madruga uplift by the Haskell-Owens interests. ~The concession at Bacuranao, Province of Habana, owned and operated by a local company, is the only active petroleum concession in Cuba producing crude. It has a progressively increasing production the past few years, amounting to 182,000 gallons in 1924. The crude is carried by a pipe line to Minas and there loaded into tank cars. A con- cession in the Province of Santa Clara has produced a very light oil requiring almost no refining for use as motor fuel.—Foreign Trade Notes No. 40, Department of Commerce. OILDOM: ITS TREASURES AND TRAGEDIES 207 vanced to third place. The greatest increase came in 1924 with a million more than the 3,050,000 barrels in the year before. The yield of 4,300,000 barrels in 1925 tied Trinidad with British North Borneo (Sarawak) for twelfth in world rank and third position in the British Empire, India being first. Most of the 60 wells active in 1923 are British owned and located in fields south of the lake. Most of the oil is topped and sent to British mar- kets, but in 1925 about 65,000 barrels of gasoline was sent to the United States (the first such shipment having been made in 1924), besides 250,000 barrels of crude and 70,000 tons of asphalt. Curacao Not Politically Part of Venezuela. It is a small island located northeast of the Gulf of Venezuela but not quite as close to the mainland as Trinidad. It is considered part of the Dutch West Indies although on the south side of the Caribbean. A Royal Dutch subsidiary operates a refinery on Curacao. The crude oil comes almost entirely from Venezuela, in low- draft vessels from Lake Maracaibo able to cross the 11-foot bar. In the last quarter of 1924 the imports amounted to 436,000 metric tons (about 3,000,000 barrels). Exports in the same period consisted of 267,000 tons of crude oil and about 161,400 tons of fuel oil shipped in the deep-sea tankers; also 973,000 gallons of gasoline, 388,000 gallons of kerosene, and minor amounts of Diesel oil, benzine, gas oil and distillate. Venezuela should be credited with practically all of the petroleum which trade papers state is coming from Curacao. West Indies Otherwise Wanting in Oil. These islands, exclusive of Trin- idad and Tobago, do not constitute a promising area of oil reserves. Most of the West Indies present unfavorable structure or composition. The smaller islands, excepting Barbados, are made up of late eruptive rocks or flat-lying Upper Tertiary sediments. Of the Greater Antilles, only Cuba and Haiti-San Domingo seem to be geologically built for the accumulation of commercial pools of oil. —Texaco Star AMERICANS TESTING FOR PETROLEUM IN PANAMA The Carib Company’s No. 1 Well, Camp and Crew near David, Chirique Province, in this Central American Republic. Up to 1927 no commercial discoveries had been made in Central America although oil seepages are encouraging. Central America Not Promising in Petroleum. Nicaragua is notoriously voleanic so that recent lavas and tuffs conceal the underlying structure. 208 | OILDOM: ITS TREASURES AND TRAGEDIES It is, however, possible that petroleum reserves are present. Guatemala and British Honduras are much better off, having jointly a broad zone of moderately disturbed Cretaceous and Tertiary sediments including bitumi- nous beds. It resembles the belt of Central Texas, which takes in Luling, Mexia, and Powell; therefore it should be explored more thoroughly. Hon- duras has seepages, but its strata have been more violently bent, broken and intruded than those of British Honduras and is accordingly not considered so promising as the latter, or even as Costa Rica and Panama. In some respects the region northwest of the Canal is analogous to the southern California oil fields, which differ, however, in not containing igneous intru- sions. The sediments of the California Valleys occupy wider areas and are more continuous than those of the coastal plain and foothills of Costa Rica — and Panama.* Ecuador Has Procrastinated in Petroleum Production. The presence of petroleum in Ecuador is mentioned as far back as 1700, but the year 1923°- was the first in which there was any substantial production. By the mid- dle of that year the daily yield had risen to 15,000 barrels. The chief com- pany is the Anglo-Ecuadorian, a subsidiary of Lobitos Oil Fields operating in Peru. Much interest has been shown in the Santa Elena peninsula and in the Oriente region. Ecuador has three small refineries.} Bolivia Badly Situated for Becoming a Big Producer. The oil deposits of this plateau region lie mostly east of the Cordilleras in a belt of seep- ages running from Argentina to central Bolivia. Near Santa Cruz oil is obtained from surface pools. Should oil be proven in commercial quanti- ties there would still remain the problem of getting it to market. It must either be brought south by long pipe line to the nearest navigable river or north through the very difficult and little known territory to the Madera- Mamore Railway and thence to the Amazon.f THE THREE GREAT “A B C” COUNTRIES Chili, the Champion Producer of Coal. This land belies its name for it needs but little fuel for heating. Most of the domestic coal and the im- ported oils are consumed by the copper and nitrate mines, the railways, and the industrial plants. While Chili is said to possess only one-ninth as large coal reserves as Colombia, it has been producing half of all the solid mineral fuel mined in South America. Lately, production thereof has de- clined £ so that the expansion of industry and commerce has in large meas- ure come to depend on imported products of petroleum, fuel oil in particu- lar. The receipts of such oil in 1924 from the United States alone, 4,800,- 000 barrels, was equivalent to 1,500,000 tons of coal, or as much of the lat- ter as Chili ever produced in one year. This quantity was 2,200,000 barrels more than in 1923 when our shipments and those from Mexico amounted to 4,300,000 barrels together. Gasoline imports were less than 3 percent of the total value of all oil receipts from our country in either 1923 or 1924, which were respectively $3,940,000 and $7,560,000. Foreign capital is not: fascinated with oil prospects in Chili and is leaving the wildcatting to local concerns. Eventually high grade oil from the Mendoza field in western * A, H. Redfield, U. S. G. S., in Mining and Metallurgy, July, 1922. + W. J. Archer in the N. Y. Commercial, March 31, 1924. g + According to Commerce Reports, July 6, 1925, has become demoralized because of competition with British and American coais and with American and Mexican fuel oil. OILDOM: ITS .TREASURES AND TRAGEDIES 209 Argentina may be piped across the Andes, since this field is so high (6,600 feet above sea level) and is situated within 200 miles of Valparaiso and 150 miles of Santiago.* Brazil Has the Biggest Unexplored Area. Brazil, although the leading manufacturing country of South America, has not developed a great source of fuel within its borders up to the present time. In 1922 Brazilian coal mines produced only about one-fifth of the 1,600,000 tons of coal consumed. Prospecting and test drillings for petroleum have not located any deposits of great importance. The country has immense resources of water power well distributed throughout the populated areas, but the utilization of this power on an extensive scale is more or less remote. Investigations have shown that the Brazilian shale oil deposits are not only rich but that they cover extensive areas, especially in Bahia, Sao Paulo, and the States to the south. It is thought that the hope of a future national fuel supply lies in the development of these shale oil deposits, and this presumably must be brought about largely by foreign capital. Refined Oil the Leading Import from the United States. The United States of Brazil, with a population of 82,000,000, imported in 1923 about 22,000,000 gallons of gasoline, 30,000,000 gallons of kerosene, 7,000,000 gal- lons of lubricating oil and grease, and 47,000,000 gallons of gas and fuel oils. .As there is no local production and no refining of imported crude, these totals indicate the present annual demand. The United States sup- plies practically the entire petroleum market, except for fuel oil, the larger share of which is brought in from Mexico. | Brazil is one of the most im- portant South American consumers of refined petroleum, from the view- point of the American exporter, being second only to Argentina. In 1928 the United States exports of petroleum to Brazil were valued at more than $9,500,000 and in 1924 at more than $12,600,000. In the latter year 30,- 400,000 gallons of gasoline made up 47 percent of the total value; 26,400,- 000 gallons of kerosene, 33 percent; 7,100,000 gallons of lubricating oil, 15.8 percent. Argentina Filling Two-Fifths of Her Home Demand. Despite the cheap- ness of draft animals, the use of tractors is growing, chiefly in breaking and plowing land and in road ‘building. About 6,000 farm tractors were in use in Argentina at the middle of 1925; there would be more but for the high cost of motor fuel and oil. Consumption is greater, however, for autos, heating, lighting, industrial plants and railways not to mention the bunker demand. Per capita consumption had been higher than in other South American countries until 1924, when Chili passed the 50-gallon mark. Demand in 1923 was for 9,800,000 barrels, 35 percent of which was met with home production of heavy oil; and in 1924 it called for more than 11,- 500,000 barrels, 41 percent of which was supplied from domestic deposits. Sources of Argentina’s Imported Supply. Of the 1,100,000 barrels of gasolina bought from abroad in 1928, over 54 percent came from the —. * For additional details read “Argentine Petroleum Industry and Trade,” by G. S. Brady, Trade Information Bulletin No. 81; also “U. S. Trade With Latin America in 1924,” by ' J. R. McKey and H. S. Giusta, T. I. B. No. 345, U. S. Department of Commerce. j Director Julius Klein’s introduction to “Petroleum in Brazil,” by M. A. Cremer, T. I. B. No. 311, January, 1925, U. S. Department of Commerce, supplemented with statistics for 1924. See also “Oil Possibilities in Brazil,’ by the late J. C. Branner, in Mining and Metallurgy, June, 1922, American Institute Mining and Metallurgical Engineers. At one time a very active American held a concession of 13,000,000 acres in Santa Catarina. poy pun bry— ‘souopuedepul Ss [Izertgq JO &reszoatuue YOO 24} SUI} eLOUIIULULOD uoT}Isodxe oy} peyeoo, SAS qysit, ayy ye ernsurued ey} UO "gayeqS =peyUy ay} WOAf pedleost 210M qusoted =O) ‘syz0duit asey} JO “soyURS OF pue yzod sly} 0} eurBd PZ6T Ut [izerg Aq poyoduit syonpoid uinejorjed JO YOM 000°000‘8T$ sy} gO. Yon, . “pizo™ ay} Ul sz0qiBy jeanyeu snowey Sou DAY ay} JO 3uO OUIANVE AG OLA AO wOduvH AHL “AABN 9Uly -uas1y oy} TOF [oNF SB Aperyo ‘surddo} 104jse ‘pesn useq sey yt AABoy OS Sug ‘“euesorley yuso1ed ZI 0} % Wory pue eyyydeu pues ourjoses qyusored 9 uey} Ssef Splels PF suppoeso qnoyuiM ‘snoss8zeID geddq oy ul SUOT}VULLOF JOUTISIP g WoOAF seulo0d euneg ‘seetsep YZ Ajrzeou OF QT JO wUnNe[ortjod “(1ze1)” ervep. oF {f° ayseuop s,eulyuesty f° yuaoied BG JeAO JO B2INOS oY} useq sey prey SIyL dWWVO TIO NVLITOdOWSOD V ‘VIAVGVAIN OXOGOWOI OILDOM: ITS TREASURES AND TRAGEDIES 211 in -Cordillera at El Quemada, in Jujuy bilities of future production appear to lie almost entire Cordilleran ranges and valleys. at Plaza Huincut, ly in the Argentine plain \\ 1 Vas S \P SANTA FE a ( ===. “yoo URUGUAY A > leum has been obtained from the folded cretaceous beds below less than 1,000,000 from the Triassic, are E GRAVEL AND GREAT FLOWS OF BASALTIC ROCKS To the end of 1926 about 32,000,000 barrels of petro the plain at Comodoro Rivadavia in Chubut territory ; [\ gas 0, ean a Liz little from the Jurassic or Cretaceous of the pre According to Redfield possi and the relatively narrow belt of pre- LOCATION OF ARGENTINE OIL FIELDS @ _—s*FIELDS IN EXPLOITATION. ~ @ PETROLIFEROUS AREAS. === MAIN LINES OF RAILROAD. NU Noreen | ; ERED BY PLEISTOCEN miles ARGENTINA—THREE-FOURTHS A VAST PLAIN OF NEARLY FLAT MESOZOIC AND TERTIARY BEDS COV- Neaqun territory; and lately a Province. United States, over 23 percent from Peru and 21.2 percent from Mexico. In 1924, of 1,500,000 barrels, 42 percent came from our country, 25.6 per- cent from Mexico, and 31.3 percent from Peru. Our contribution of kero- sene fell off slightly—from 78 percent of 61,800,000 gallons in 1923 to 73 percent of 64,700,000 gallons in 1924. Receipts of crude and fuel oil re- mained stationary, being 4,700,000 barrels in 1923 and 4,800,000 barrels in 1924, being almost evenly divided between Mexico and the United States, with a little crude in 1924 from Peru. : 212 OILDOM: ITS TREASURES AND TRAGEDIES Development of Comodoro Rivadavia. This field is still practically the sole source of domestic petroleum (see map, page 211). It was accidentally discovered near the coast of southern and arid Argentina while boring for water in December, 1907, at a depth of 1,755 feet. Oil from Comodora Rivadavia is heavy and asphaltic averaging a gravity of 18.5° Baumé. It is therefore heavier than Gulf Coast crude of Texas and yields very little kerosene and much less gasoline—from 12 to 20 percent of both. The area within a 15-mile radius of the discovery was declared a reservation and has since been developed exclusively by the Government. It turnd out to be the best part of this coastal field. The output of 125,000 barrels in 1913 slightly exceeded that of the foregoing five years. Extraneous coal sup- plies for public utilities were cut off during the war and forced more rapid deyelopment. From 1,150,000 barrels in 1917 the yield increased to 1,750,- 000 barrels in 1921. Little Trinidad, beginning its own production in 1908, had led Argentina up to 1922 when the output of the latter reached 3,000,- 000 barrels. It rose from 3,400,000 in 1923 to 4,700,000 barrels in 1924, but was still less than half of 1 percent of the world’s production and hardly one-thirtieth of Mexico’s output the same year. In the last year 3,400,000 barrels came from Government wells, making 74 percent of the total from Comodora Rivadavia.+ LOADING PIER FOR TANKERS TAKING CRUDE OIL FROM COMO- DORO RIVA- DAVIA The absence of natural harbors along the southern coast of Argentina at times make diffi- cult the shipments to Buenos’ Ayres, 1,000 miles away. PERU HITHERTO THE PRINCIPAL PRODUCER An Oldtimer in Oildom.* Spanish pioneers had dug ditches and shallow wells along the coast and had used the evaporated product as pitch for caulk- ing boats and ships. Modern enterprise began in 1867 with the drilling of wells and the erection of a refinery by Prentice of Pennsylvania. The com- + For description of the other Argentine fields see accompanying map. * Read “The Ancient and Modern Oil Wells of Peru,” in The Lamp, December, 1921; ‘“‘Petroleum Industry and Trade of. Peru and Ecuador,’”’ T. I. Bulletin 178, U. S. Depart- ment of Commerce; ‘‘Oil Exploration of Peru,’’ Bulletin of the Union Oil of California, July, 1923; The Rig and Reel Magazine, June, 1923, and various papers by V. F. Marsters, in Mining and Metallurgy, American Institute of Mining and Metallurgical En- gineers. Early in the 20th century W. L. Hardison, an associate of the late Lyman Stewart (see frontispiece) formed in Los Angeles a company composed of Gen. F. H. Flint, M. Whittier, C. W. Brown, et al. They got 41° oil in five wells 150 to 250 feet deep drilled at an elevation of about 138,000 feet in the world’s highest oil field near Lake Titicaca. OILDOM: ITS TREASURES AND TRAGEDIES 218 pany which succeeded him at Zorritos produced in 1901 about 75,000 bar- rels of very light oil. This field has maintained its annual yield at that rate during the past decade. The foremost field, Negritos, was first de- veloped in 1874 under the direction of Edgar Fowks, an American. One of the three wells then spouted from a depth of only 60 feet while another flowed 400 barrels daily from 3380 feet. Herbert Tweddle began British operations here in 1888. His company brought in its eighth well in 1899 at 545 feet and this continues to produce, thus evidencing the long life of wells in the Negritos field. More than ordinarily colorful is the story of operations carried on by Ed. L. Doheny, Sr., one of the most picturesque and powerful figures in American petroleum history. Thirty-one years ago, or six years before he pioneered Mexican petroleum, this Californian com- menced drilling in Peru, but soon afterwards abandoned activities at Ne- gritos because of unusual developments at home. — ZORRITOS, THE THIRD FIELD IN CURRENT YIELD IN PERU The output of the 3 fields in 1926 approximated 11,000,000 bbls. About one-third was ex- ported to the United States— over 3,600,000 bbls., valued at more than $8,000,000 f. o. b. New York. Negritos and Lobitos the Leading Sources. The small yield of the Res- tin field (106,000 barrels in 1921) is statistically included with the much larger yield of the nearby Lobitos field which is now second only to Negri- tos. The first attempt of a British company to find oil between Lobitos and Restin resulted in failure. Its wells, credited with 75,000 barrels in 1905, were taken over by the Lobitos Oilfields, Ltd., in 1908. This producer in 1924 got more than a million barrels from both fields which it controls. Standard of New Jersey indirectly owns the rest of Peru’s production. Negritos is the source of 80 percent of the present output of Peru—almost 8,000,000 barrels in 1924 compared with 6,400,000 in 1923. The two prin- cipal sands vary in depth from 1,500 to 2,000 feet and from 2,600 to 3,000 feet. The quality of the oil is far superior to that of the La Rosa field in Venezuela, but the huge potential yield of the latter will likely permit it to ¢ Tweddle is said.to have discovered the great Baku field in Russia. A son of William Keswick is still identified with the development although his original company, the London and Pacific Petroleum Company, together with two other operators’ were absorbed in 1914 by the Canadian branch of the Standard Oil Company of New Jersey: (Imperial Oil through the International Petroleum). 214 OILDOM: ITS TREASURES AND TRAGEDIES surpass Negritos in 1925. However, it is claimed that the richest of all oil areas in Peru lies in the little explored “montana” region east of the , Andes. Peruvian Trade in Petroleum. The import trade of both Ecuador and Peru is unattractive to the United States for two reasons: (1) Of the combined population of about 6,000,000, some 90 percent consist of Indians and “mestizos” whose purchasing power is next to nothing, thus differing radically from Argentina; and (2) the domestic output of oil, particularly in Peru is of such high quality and large quantity that the five refineries in the two countries supply nearly all the local demand for gasoline and kerosene. Thus in 1924 Peruvian imports of petroleum products from the United States amounted to less than two-thirds of a million dollars and was made up almost entirely of lubricating oil and grease, and paraffin wax. Similar imports into Ecuador did not quite reach $150,000 in value compared with $106,000 in 1923. ( Comparative Position in United States Trade. On the other hand, about two-thirds of the Peruvian production of more than 6,000,000 barrels in 1923 was sold to foreign consumers. In that year 18.6 percent of the $100,000,000 worth of all her exports were made up of crude and refined oil. The United States alone bought from Peru 1,550,000 barrels of crude oil in 1923 and 2,440,000 barrels in 1924. Peru’s petroleum exports, crude and refined together, ranked third, or next to sugar and cotton in value during’ 1923. These shipments, while quantatively equalling those of Vene- zuela in 1928, were hardly half as great as the latter in 1924. The north- ern oil, like that from Comodora Rivadavia in Argentina, is not worth as much per barrel because it is best adapted as fuel oil to compete with coal. While the Plate river republic must buy foreign oil until its light oil areas shall have been developed, Peru, Ecuador and Bolivia, because of the nature of their inhabitants, can not be looked upon as promising customers in the petroleum trade of the United States. South American markets for our refined products can be expected to expand mainly in Brazil and Chili. Peru should, however, retain a prominent place in our receipts of “raw” | petroleum, but below both Colombia and Venezuela. COLOMBIA, A COMING IMPORTANT PRODUCER Districts Near Coast Disappointing. Surface signs are numerous in Colombia. Some, near the Caribbean Sea, are well located for transporta- tion but have not signified much so far.* The potential production of the republic as a whole has no tyet been determined.t The cost of delivery * Unsuccessful so far, both in the Bolivar field near El Carmen, Standard of California has drilled below 4,000 feet and Gulf Oil Corporation to about 3,800 feet. To find oil in commercial quantities near the coast, future operations will be deep and expensive. The De Barco concession of about 2,350 sq.. mi. (see map), if developed to production must await an outlet to Lake Maracaibo through Venezuela which it borders. See ‘‘Colombian Oil Fields in 1924,” by L. G. Huntley, American Institute Mining Engineers. t Ww. J. Archer, in New York Commercial, March 31, 1924. According to C. W. Wash- burne and K. D. White, Colombia has an almost ideal situation with respect to the world’s markets, being but a short distance from the Panama Canal and the West Indies. The sailing distance from its Caribbean ports to New York (about 1,800 miles) is less than that from Tampico, Mexico, and practically the same from its Pacific seaboard. No other South American country borders on both oceans. A very complete 18-page story of petroleum in Colombia appears in a commercial and industrial handbook (Special Agents Series No. 206, Department of Commerce) by P. L. Bell, Trade Commissioner; 70 cents, Superintendent of Documents, Washington, D. C. OILDOM: ITS TREASURES AND TRAGEDIES 215 at tidewater will average more than in Venezuela owing to longer pipe line haul as shown below. Since 1922 the Tropical Oil Company’s refinery at Barranca-Bermeja has supplied all domestic demands, Development in the Barranca-Bermeja District. Colombia’s first pro- ducer was completed in 1918 by the Tropical Oil Company on the De Mares concession 400 miles inland. This tract covers 2,061 square miles—70 miles along the Magdalena and Carare rivers and averaging 30 miles wide. Roberto De Mares obtained the concession in 1905 from the government and i + = o + ny SRR a, Pe ian so enonaen VeastonnomnennanE Ze FG RREN WICH ae : | } Barrens Dies t tds ie gay i a8 Carthagen y, : H fa * H t 1 » 4} Jn} * A | Senet ag casey pene re ees apne SSS HRCA Santa Martone oie a) a : piles PP | . p \ 4 ao) / | Pysracnno’ GULE OF Pe a WY DARIEN | j Be SE GULP or bp) PANAMA \ i i oH i Pap OS 4 see ps ee Gime gond Istana? 4 j { 1 ht ‘ a -- es Sanne sant —Am. Inst. Min. & Met. Engrs. RELIEF MAP OF COLUMBIA AND WESTERN VENEZUELA AROUND THE LAKE MARACAIBO BASIN Colombia is nearer New York than any other Latin-American oil coun- try. Note the location of Barranca-Bermeja on the Magdalena River, over half way between the seaport, Cartagena, and the capital, Bogata, in the mountains. See other map for location of the Andian pipe line and Manomal, its terminal near Cartagena. OILDOM: ITS TREASURES AND TRAGEDIES ww BARRANCA-BERMEJA REFINERY AND TANKS OF TROPICAL OIL CO. d Metallurgy. ming an ° —M "As OILDOM: ITS TREASURES AND TRAGEDIES 217 was organized in 1916 for the purpose of exploring the concession, begin- ning in 1917. In 1920 the International Petroleum Company, Ltd., a sub- sidiary of the Imperial Oil Limited acquired control in the Tropical Oil Company. Since then development has made enormous strides despite many obstacles. ' Las Infantas Field Has the Principal Proven Structures. Drilling has so far been confined to the northern part of the property, 35 miles east of Barranca-Bermeja.° During 1924 19 rigs were operated by the Tropical Oil Company on three neighboring structures. This “infant” enterprise was attended by a staff of doctors and nurses besides 300 foreign employes and over 3,000 natives. Road maintenance alone in this rainy region re- quires a large force—after finishing the expensive clearing and grading through the jungle-mantled hills. The Infantas field has wells scattered over a distance of six miles—17 completed to the end of 1924 out of 28 altogether on the De Mares concession. Actual and Potential Rate of Production. By early 1925 some 30 wells had been drilled to the oil sand on this concession, proving the existence of oil over a wide area. Four different oil horizons total 250 feet in thick- ness within a depth of 2,260 feet (comparing with the depths in Mexico). A life of 20 to 30 years is claimed for the producing wells the initial yield of which varied from 1,000 to 3,000 barrels daily. Almost all of the wells of the Tropical Oil Company are shut in while the pipe line is building. Only half a million barrels were withdrawn from the wells in 1924, or very little more than in 1923 when Colombia was credited with 425,000 barrels. The potential output of the 30 odd wells of the Tropical Oil Company alone is said to be 50,000 barrels daily, equivalent to more than 18,000,000 bar- rels or nearly twice as much as Venezuela produced in 1924, American Capital in Control as in Peru. While practically all the petro- leum hitherto obtained in Venezuela has come out of British and British- Dutch concessions (Royal Dutch-Shell leading by far), 100 percent of the Colombian output has come out of the American owned concession named above, and most of the other companies operating in Colombia are of American origin. Next to Tropical Oil Company (subsidiary of Interna- tional, which controls five-sixths of the Peruvian production) interest cen- ters in the operations of the Colombian Syndicate (said to be in the hands of New York bankers and the Agwi). Its properties are close to those of the Tropical Oil Company and through both of these the 360-mile pipe ‘line of the Andian National Corporation has been laid between Baranca- Bermeja and Cartagena. (See view of first tanker load, page 172.) Immense Mineral Wealth Awaiting Attention. A few minerals have already made Colombia famous. In gold it still leads all South American nations after mining it since Spanish colonial days. It excels the rest of the world in emeralds* with stones worth $14,000,000 each year. Since Russia relapsed, Colombia has become the world’s chief source of plati- num. The output thereof in 1923 was valued at $4,000,000. These three later enlisted the aid of Pittsburgh oil men.t The Tropical Oil Company * Like salt, emerald mining is one of the government monopolies which brings big revenue. y These men were J. C. Trees, George W. Crawford, M. L. Benedum, and Senator John S. Weller. Imperial Oil, Ltd., which indirectly obtained control from them, is a subsidiary in turn of the Standard Oil Co. (N. J.). Much of this information has been abstracted from The Lamp, August, 1924. A ITS TREASURES AND TRAGEDIES OILDOM 18 2 *s10}B1edO UBdIIeWW 0} posBeT SI YyoryM jO jared oS1el B@ ‘poq aye] 94} MOTEq Wory Surwmi0d Mou SI uorjonpord 4ey} SMOYS MOIA aIOYS JeyjouUW “OO TIO uooveg-ung ey} JO sioJZeNbpeey [eI0[ ey} SMOYS SIYT, VIHAZANGA ‘OdIVO -V4UVW ANVI JO AUOHS DNOTV ANOS IVOIGAL ANDIAN NATIONAL PIPE LINE BETWEEN BAR- RANCA BERMEJA AND TERMINAL SOUTH OF CARTAGENA, COLOMBIA, COMPLETED IN MAY, 1926 OILDOM: ITS TREASURES AND TRAGEDIES 219 minerals approximate $25,000,000 in their combined annual value. Never- theless, the country’s mineral resources remain largely latent. Most nota- bly true is this of coal, the deposits of which in Colombia constitute six- sevenths of all South America’s known reserves of that fuel. In coal and railway development it is pretty much on a par with the Philippines,} where, however, the search for oil was lately abandoned after one company had spent more than $1,000,000. Low Density of Population Implies Undeveloped State. With an area twice that of France, but with only one-third of its territory inhabited, there extend vast stretches about which little is known. The factor most unfavorable for early and rapid economic development is the lack of trans- portation facilities. Unless the hydroplane route is followed, ten days must be taken to travel from the seaboard to Bogota, the capital. A unified railway system must be developed to solve this serious problem. Because of this deficiency and because of the great distances, life is centered along the Magdalena river which is navigable for 830 miles. The deepening of the old Digue canal, 85 miles long, from Calamar to Cartagena, will allow river steamers to unload at the deep-sea wharves and thus reduce the re- loading cost. Commerce and Oil Consumption Will Grow With Greater Highways. Roadbuilding, stimulated to some extent by oil development, helped to in- crease the imports from the United States $6,700,000 in one year. They were $29,000,000 in 1924 compared with $22,300,000 in 1928; but less than 1 percent of these imports in 1924 consisted of petroleum products.t In the other South American countries refined oil made up from 1 percent in the case of Bolivia to 20 percent in the case of Brazil. Exports to the United States advanced from $46,000,000 in 1923 to $58,000,000 in 1924. Coffee alone accounted for $50,000,000 or six-sevenths of last year’s exports to our country. { See the author’s article in The Engineering Magazine, February, 1906. Colombian coal beds contain nine times the 3,000 million tons credited to the coal reserves of Chili. See “The Fuel Supply of the World’ by L. P. Breckenridge, Mining and Metallurgy, February, 1921. Read “Colombia’s Riches Reviewed by Bank’ (the Royal Bank of Canada) in the New York Times, July 3, 1925. t The operation of the refinery at Barranca Bermeja to a large extent has dispensed with imports of petroleum products. TYPICAL SCENE IN COLOMBIAN OIL FIELDS 220 OILDOM: ITS TREASURES AND TRAGEDIES VENEZUELA A VERITABLE TREASURE VAULT FOR PETROLEUM Is Venezuela Replacing Mexico as a Petroleum Eldorado? American producers look to this South American republic as the greatest future source of supply.* The first commercial well was drilled in 1914 by the Caribbean Petroleum Company, then a subsidiary of the General Asphalt Company. Control soon passed to the Royal Dutch group which continued with success in the Mene Grande district. Elsewhere developments in the Maracaibo basin were disappointing until the Borroso No. 2 of the Vene- zuelan Oil Concession, Ltd., drilled itself in December 14, 1922, in the La Rosa field (page 11). This proved one of history’s great wells, flowing wild 120,000 barrels daily for nine days. Later the same company made big discoveries west of the lake at La Paz and Conception in the district of Maracaibo.} Geology and Physical Geography. Venezuela is next to Colombia the northernmost country of South America, and extends almost to the Equa- tor. Its western part is in the same longitude as New England. It is half as large as Mexico and almost as large as Texas, Oklahoma and Kansas combined. Venezuela has a varied climate according to elevation which largely determines the three zones of mountains, plains (or llanos) and forests. The main topographic divisions are: (1) The Guiana highlands south and east of the Orinoco; (2) the great central plains extending 650 miles east and west; (8) the northeastern branch of the Great Andine chain entering from Colombia on the southwest; (4) the low Lake Mara- caibo region in the northwest. Two distinct major oil districts have been differentiated: (1) The Caribbean, which includes the Maracaibo basin (four states) and the State of Falcon, and (2) the Eastern Venezuela or Orinoco basin from the delta to the Para promontory and including part of the interior state of Guarico. The formations of the former range in age from Cretaceous to recent and include limestone conglomerate, sand- stone and shale up to 15,000 feet thick. Where these rise to outcrops on the edge of the Maracaibo basin ay supply seepages for which this re- gion is famous.¢ Maracaibo Basin Compared with California. Producing horizons in the Maracaibo district are analogous to the so-called “oil zones” of the Los Angeles basin and the San Joaquin valley in California. There is a re- markable similarity of physical character of the producing horizons, the geological age is approximately the same (Miocene and Eocene, see page 27), and the general structural conditions are almost identical.** These * Julius Moritzen in The Baltic-Scandinavian Trade Review, November 19, 1924. + Michael O’Shaughnessy, author of ‘‘Venezuelan Oil Handbook.’’ t “Oil Industry in Venezuela,’’ by Senor Lucio Baldo, representative to the International Petroleum Exposition, October, 1928. J. W. Lewis in ‘“‘Transactions of the Am. Ynst. Min. and Met. Eners., 1923,’”’ refers to a very small part of the 400-mile -“‘horseshoe”’ of outcrops marked by oil and gas seepages. At the northern end of the Meme Grande anti- cline, he and Frank Widde (in 1913) mapped 4,000 separate oil seeps and more than 600 acres of asphalt—making probably the world’s most spectacular surface signs of oil. ** Hirst noted by the California geologist, Ralph Arnold, according to E. B. Hopkins and H. J. Wasson, page 190, “Petroleum in 1924,” A. I. M. E. The bulk of the proved production comes from Miocene oil sands; less from Eocene formations. ‘The Cretaceous, though petroliferous, is highly metamorphosed in the uplands where exposed, and in the basin is too deeply buried to be the source of commercial output. The general structure is that of a horseshoe shaped geosyncline with its center occupied by Lake Maracaibo. OILDOM: ITS TREASURES AND TRAGEDIES _ 221 conclusions are evidence more and more with the progress of development. Even the rotary method of drilling, the use of which is practically estab- lished in Venezuela, is patterned after California practice. aves * ~~" ae ; wary NNOs ih NM B —Photo by Arthur Knapp. LA ROSA, LEADING VENEZUELAN FIELD IN 1926 Previously, Mene Grande had been foremost. Lago Petroleum, with leaseholds extend- ing over the lake, is here competing with the Gulf and Dutch-Shell in drilling line wells, a common practice in the United States. (See Mining and Metallurgy, July, 1925, and page 88, Oil and Gas Journal, November 25, 1926.) Production and exports from Venezuela in 1926 approximated 36 million barrels, making this country fourth in the world, displacing Persia. Mene Grande and La Rosa the Foremost Fields. The Mene Grande field is on the eastern side of the lake or about 70 miles southeast of the city of Maracaibo. It yields oil intermediate in gravity to the Mexican heavy and light oils. The La Rosa field (see page 11) lies on the lake shore about 25 miles southeast of Maracaibo. Its oil is two degrees lighter than that from the Mene Grande field and about two:degrees heavier than the Gulf Coast oil of Texas. In the following table is shown the importance in 1924 of these two fields compared with others in Venezuela, two of which, La Paz and Conception, both producers in 1925, are located on the west side of Lake Maracaibo. New Production in Wells pro- Gravity, Age, Field Wells 1924, barrels ducing degrees years Ie OmCEDATICEGS rate cietae sole hem creel ws aae 16 5,240,000 3% 18 9 ET MMLLOS Mis eer aa alee, asereia Sue te. 8 eS ooh ous «felgie 13 2,960,000 20 20 3 MVC TA CIMT oh. es oai ev es'ahate ¢, a'e’ two eke wats Hoe eee ja 1,050,000 25 SY! 2 Ne AMMBE TEL Zp eta Pochaliars ot curs a ee oheko ars ee 6 8 sueke: See 2 None shipped 3 28 1 Conception) tm eam.>s BARS ats item Mente. 2) suct ovens i None shipped se 37 il Tremendous Potentiality; Production Tied Down. Assuming that only 75 wells were producing throughout 1924, the average per well would make 123,000 barrels, equivalent to almost 340 barrels per day or 50 times the average in the United States. One authority rates Santa Rosa alone with a daily capacity of 200,000 to 400,000 barrels, or the same as 73 to 146 million barrels per annum, if the wells were all opened wide. This does not seem to be a great exaggeration in view of the fact that several wells have been credited with 50,000 to 75,000 barrels initial yield under high New wells completed in 1924; none were dry except six in El Mene where the total completed was therefore 17 producing wells as of January 1, 1925.. 222 OILDOM: ITS TREASURES AND TRAGEDIES gas pressure and that no dry wells have yet been drilled. Many wells else- where around Lake Maracaibo were either pinched down or entirely shut in pending improvements in transportation. It is not hard to believe that Venezuela will produce between 45,000,000 and 50,000,000 barrels in 1927. Future output will be limited largely by conditions in the world markets and by the availability of transportation facilities.* British Capital Dominates Production. After nearly nine years of oil productivity in Venezuela, American capital has barely begun to share - therein, as shown in the following list of potentially producing concerns as of late 1924 (name of oil field and daily capacity in barrels within paren- theses): Royal Dutch-Shell, through management of Venezuela Oil Con- cessions, Ltd. (La Rosa, 30,000), (La Paz, 20,000) and (Conception 10,000); Royal Dutch-Shell through ownership of Caribbean Petroleum Company, (Mene Grande, 15,000) and of Colon Development Company (De Oro, 2,000) and (Tara, 2,000), making owned and controlled altogether 79,000 barrels or 53.5 percent of the total; Lago Petroleum (Sir James T. Currie, Pres.) (La Rosa, 30,000 from wells, 1,500 to 1,900 feet deep); Creole Syndicate} EL BANO WELL OF THE SUN-BEACON OIL COMPANY This Philadelphia concern owns concessions on 1,500,000 acres in the district around Lake Maracaibo. It is a subsidiary of the Sun Oil Company. Among other large companies interested in Venezuela may be mentioned the Atlantic Re- fining, Anglo-Persian, British Controlled Oil- fields, British Equatorial Oil, New England Oil Corp., Pure Oil Co. (owning Orinoco Oil), Sinclair Consolidated, Standard of California (owning Richmond Oil), Standard of New Jersey (through Standard Oil Co. of Vene-. zuela), The Texas Co., and Union Oil Co. of California. Gulf Oil Corp. jointly with Lago Petroleum is developing the new and deep Lagunillas field in Venezuela, these two having three- fourths of the 27,000 bbls. daily yield early in 1927. Although the discovery well was not completed before August, 1926, Lagunillas has. already moved ahead of Mene Grande and ranks next to La Rosa in daily production. * According to the Mexican-Venezuelan Service Bureau, quoted in The Oil and Gas Journal, January 22, 1925, the deepening of the Lake Maracaibo outlet for ocean-going tankers has béen abandoned; likewise the pipe-line-plan of the Dutch-Shell interests. Engineering, economic and political difficulties prevent the dredging of the bar now 11 feet deep. As was the situation in the Panuco field of Mexico for some time, so for the present Venezuelan oil must continue to be removed from the Maracaibo basin by shallow- draft tankers to deep harbor (s) for trans-shipment. See reference to Curacao on a pre- ceding page. (The second ‘“‘c’? in Curacao is sounded like ‘“‘s.’’) t Of 25 West 48rd St., New York; C. K. McCornick, president; H. G. Cortis, vice-presi- dent, and Robert Trumpley, secretary-treasurer. For further details see article. by Michael O’Shaughnessy in The Oil and Gas Journal, December 18, 1924, recent proceedings of the Am. Inst. Min. and Met. Enegrs., U. S. Commerce Reports of June 30, 1924, and recent issues of The Wall Street Journal, March 2, 1925, ete. Oil News of London for December 27, OILDOM: ITS TREASURES AND TRAGEDIES 223 jointly with Venzuela Gulf Oil Corporation, both American (La Rosa, 30,000). Venezuela Advanced in 1925. .A gain of about 11,000,000 barrels, or almost 120 percent, over the output of 9 million in 1924 placed this republic 3 million ahead of Rumania, which hitherto had ranked sixth in world pro- duction. The actual exchange in rank occurred early in 1925. Two new shipping fields began operations—La Paz and Conception—making a total of five, all located in the Maracaibo Basin. Exports were made through the port of Maracaibo by the three principal companies: Dutch Shell, Largo Petroleum, and Venezuelan Gulf Oil. They amounted to 19 million barrels. The difference between output and export represented oil refined locally, sold as fuel and consumed in drilling operations.* The La Rosa field was more active in 1925 than all the others, due to competitive drilling of the V. O. C., Ltd., Lago Petroleum, and Venezuelan Gulf Oil Co. whose wells range from 1,450 to 2,800 feet in depth. Mene Grande, monopolized by the Caribbean Petroleum Co., was extended to 3,300 acres total proved. The outstanding feature of El Mene development by the British Controlled Oil Fields was the bringing in of a 980-foot well for 2,100 barrels early in 1925, followed by others of high initial, with rapid decline to settled yield. In El Mene were drilled seven dry holes, the only ones in Venezuela, making the average hazard rate in 1925 only 4.4 percent for all the fields, or zero percent outside of El Mene. With the laying of pipe lines La Paz—Conception—Punta Piedras, water shipments began in July and totaled 550,000 barrels by the end of 1925. New discoveries include the Ambrosia pool, apparently an outlier of La Rosa field, and the Guanoco, a heavy-oil field near Guanoco asphalt lake in eastern Venezuela. The former was found 6% miles north of La Rosa, under Lake Maracaibo, and hardly half a mile from shore, at a depth of 1,378 feet. Output in 1924 and 1925. .The following figures are based on tables com- piled by the American Petroleum Institute and E. L. DeGolyer: World lLatin-Am. (Million bbls.) Per- World lLatin-Am. (Million bbls.) — Per- rank country 1924 1925 cent rank country 1924 1925 cent Orme MEXICO a «tee oe ne 140 115 10.8 16% Colombia +..:.:.... 0.4 1.0 a 6 Venezuela ........ 9.0 20 1.9 Cubate ete: oc ema. .01 .01 SSEECYUA oer scree. © 7.8 9.1 9 Ul PArcentinae.. 5.3 4.7 6.5 6 IGT tet ats Fee Were eee ee es 4.1 5.0 0.5 Total Lat.-Am.. 165 156.6 14.8 During the three years 1923-1925, production was practically stationary, South American gains being offset by Mexican losses. There will be notice- able increase south of Panama after the completion of the Columbian pipe line (May 1, of 1926) and the deepening of the outlet from Lake Maracaibo. Two countries improved their rank in 1925: Venezuela displaced Rumania, and Peru passed India. Never theless, because of Mexico’s loss, Latin America’s percentage of the world total dropped from 16.3 in 1924 to 14.8 in 1925. The world increase of about 50 million from about 1,015 million barrels in 1924 was almost equaled by that of the United States and was about 10 million more than the output of all South America in 1925. * Standard of N. J. has arranged for rights to the B.C.O. output above the 20,000-barret limit controlled by the Shell interests. The daily production of the B.C.O., Ltd., was around 6,000 barrels early in 1926, according to The Wall St. Journal, Feb. 8, 1926. Most of the data above was abstracted from an A. I. M. E. paper by E. B. Hopkins, consulting geologist, and H. J. Wasson, geologist for the New England Oil Co. 224 OILDOM: ITS TREASURES AND TRAGEDIES MEXICO, LAND OF SILVER, SISAL HEMP AND HEAVY OIL Wealth Is Vast and Varied; Unevenly Distributed and Developed. De- spite its large areas of arid, semi-arid and mountainous land—hardly 40,000 square miles, or 5 per cent of the total, being tillable—Mexico is immensely wealthy due to her vast deposits of minerals, and in less measure to her range in climate. Because of the latter and the topography this republic is rather independent of foreign importations of food, fibers and forest products. . Since half of the country lies within the tropics, her agricul- tural products are extremely varied. Except for certain, manufactures, Mexico is surprisingly self-sustaining. Her people, mostly of mixed and pure Indian blood, are devoted mainly to farming south of the 24th paral- lel and to grazing and mining north thereof. After agriculture, mining is Mexico’s oldest and most important industry; but the revolution raised havoc with it as it also hindered the development of the oil industry, though less permanently.* A premature revival in mining began in 1920, but no marked improvement was noticed before 1923.7 Significance in Our Latin American Trade. With few exceptions, Mexican farm and range products are raised for home consumption; min- eral products for export mainly.t While Chili supplies most of the nitrate needed by American farmers and others, it is Mexico that cultivates the maguey plant in Yucatan from which we get sisal hemp or hennequen of commerce for making binding twine. Ten years ago, the United States bought more than twice as much of such hemp as of mineral oil from Mexico; and excluding gold and silver, this fibre then made up one-fourth of all our Mexican imports in point of value. While our imports of hen- nequen, hides and coffee were falling off after 1912, our takings ot petro- leum have tremendously increased. From 12 per cent of $93,000,000 worth of all our Mexican imports in 1913-14, mineral oil advanced to nearly 55 per cent of $167,000,000 in the calendar year 1924. The $91,000,000 worth of oil was then equivalent to half the value of our receipts of coffee from all Latin America in 1923. While we buy a little more from Brazil and twice as much from Cuba, on the other hand Mexico, at least in 1924, was more than twice as big a customer as Brazil. Strange to say, Mexico is our third best Latin American customer for petroleum products. For obvious reasons, our purchases of Mexican petroleum has helped to main- tain our profitable export trade in refined mineral oil. * Despite the exigencies of war, which marked the Spring of 1915 in Mexico’s petro- leum belt, property damage sustained was relatively small. Greatest sufferer was the Mexican Petroleum Co., at Ebano, where Villistas fought Constitutionalist forces. The company lost several steel tanks including one of 55,000 barrels capacity while three similar ones were badly damaged. Oil losses aggregated 150,000 barrels. Buildings were more or less ruined by shell fire. Eventually the Villistas were driven back. But in May they occupied the Panuco fields, stopping river shipments. Due to ample storage at Tampico, actual exports were not affected. Pipe-line transportation from the southern fields to either Tampico or Tuxpam was not interrupted.—Geo. Blardone in The Oil and Gas eras January 138, 1916, reprinted in ‘‘U. S. Mineral Resources,” 1915, Part II, page : {+ Compared with the high record of production in 1912, the year 1923 showed 11.7 per cent increase in silver, 48 per cent in lead, and 1,360 per cent in zine. Copper and gold decreased 6.7 and 25.4 per cent respectively. The Mexican Embassy, according to the Wall Street Journal of July 28, 1925, reported the output in 1923 to be 342,600,000 pounds; lead, 117,400,000 pounds; copper, 6,200,000 pounds; silver, 638,000 ounces, troy of gold, and minor. amounts of mercury, zine ore, graphite, manganese and arsenic. Mexico keeps it place as the world’s leading source of silver, the second in lead, the fifth in gold and the seventh in copper. . Iron and coal are the only important mineral products not produced for exporta- tion, for they do not suffice for the domestic demand. OILDOM: ITS TREASURES AND TRAGEDIES 225 MEXICAN PETROLEUM PRODUCTION The Mexican Oil Fields: Location and Area. There are two oil re- gions: (1) The Isthmian or Minatitlan and (2) the Tampico-Tuxpam. They are 300 miles apart although largely within the State of Vera Cruz. The former is located on the Isthmus of Tehuantepec and yields the light- est oil in Mexico, but on a scale rather scanty. ‘The important producing fields occur in the northern part of Vera Cruz and across the Panuco river in Tamaulipas, 300 miles below the Rio Grande.* The oil territory, embracing much barren ground, extends over 25,000 square miles. Con- sidered semi-proven is 10,000 square miles of which one fifth is owned by one American company alone. Productive to date are fewer than 25 local fields or pools aggregating less than 100 square miles. Noteworthy Physical Features of the Tampico-Tuxpam territory, which lies within the Gulf Coast plain,* include (1) the absence of natural har- bors other than the mouths or lower channels of the larger streams, the bars at the entrance of which must be dredged; (2) the belt of lagoons, too shallow for ships but navigable for flat boats, notably the long Tami- ahua; (3) the wide and flat valley of the Panuco wherein bedrock is ob- scured by a blanket of recent deposits, and (4) the low, conical hills which mark the surface signs-of volcanic plugs. As a fitting background for the oil fields and coming closer to the coast the farther south, the oil bearing Tamasopo limestone turns up.on edge 60 to 70 miles west of Tampico and there helps to form the Sierra Madre along the border of the highlands. Structural and Economic Geology. The general structure of this re- gion—the source of 99 per cent of the Mexican oil—is that of a monocline of Cretaceous, Tertiary and Quaternary strata dipping easterly under the Gulf. The principal oil-bearing beds are iimestones and limy shales of Cretaceous—Eocene age. The parent rock appears: to be the Tamasopa limestone which still retains much of the oil in its uppermost and cav- ernous horizon. It thickens from 3,000 feet in the latitude of ‘Tampico to fully 10,000 feet towards the south. It deepens also in the same direction, being beyond reach of the wells drilled south of the Tuxpam. Along volcanic necks and dikes of basalt. much of the oil has migrated upward into.the San Felipe shale and limestone, and into the overlying Mendez ‘marls and clays.+ Quality of the Crude Oil. Except for the minor and much lighter oil obtained from Furbero and the Isthmian fields, Mexican petroleum presents two grades: (1) The so-called light crude (considered heavy in the United States) is found in the southern fields, that is, in the string ‘of pools ex- tending south from Dos Bocas to Alamo, and (2) the heavy crude coming * This plain is locally known as ‘‘La Huasteca” or (climatically) as ‘Tierra Caliente.” From three to ten miles inland it is low, sandy and destitute of vegetation. Back of this narrow belt the surface, covered with q dense growth of tropical plants, rises gradually to the foot of the steep ascent of the Sierra Madre. The Gulf Coast plain is about 60 miles wide south of parallel 22° North and widens farther north to 150 miles, Partly abstracted from “Plain Facts About Mexico” by G. J. Hagar, Harper & Bros. j The domes of the light-oil area appear localized along a crescentic anticline (or major fault ridge?), the “Golden Lane” of Mexico’s past production. The Tamasopa limestone represents organic deposits formed on a sinking sea-bottom when the Gulf of Mexico was connected with the Gulf of California via the submerged Isthmus of Tehuantepec. This enormously thick limestone is considered the equivalent in age to the Woodbine sand of east-central Texas (Powell), southern Arkansas (Smackover) and northern Louisiana (Caddo and Haynesville). See part V in the revised ‘‘Manual for the Oil and Gas Industry,” Bureau of Internal Revenue, 1921; also ‘(Mexican Petroleum’? by W. J. Archer, 1922. 226 OILDOM: ITS TREASURES AND TRAGEDIES FLOATING OIL ON TROUBLED WATERS A beautiful scene in the Southern or Light Oil field a little north of the Tuxpam River, showing bamboo growth in the background and seepage oil on the surface of a small stream. The pacifying effect of petroleum on stormy waters is well known. Unfortunately, in in- ternational relations oil apparently adds fuel to the flames of diplomatic disagreement. As a reward for contributing heavily to the finan- ’ cial support of the Mexican Government, the confiscation of their oil properties acquired before 1917 is bitterly opposed by American and British producers of Mexican petroleum. from the Panuco valley fields which include the various sectors of Panuco proper as well as the Ebano, Chijol and Topila fields or districts. The light crude runs from 19° to 22° Baumé and yields 10 to 13 per cent gasoline by topping. The heavy oil has a gravity ranging from 10° to 15° and is chiefly used as fuel oil, with or without topping. Most of the Mexican oil is of aspalt base, but a small per cent of paraffine wax has been obtained from the light or southern oil. Some of the latter has been completely refined, giving 35 per cent lubricating distillates.* Torrid Temperature a Peculiarity of Mexican Petroleum. The crude oil is characteristically warm to very hot. The temperature varies from 90° to 181° Fahrenheit (32° to 88° Centigrade) as the oil leaves the ground. Its average temperature in the Ebano field is 105° F., and at the Dos Bocas well the salt water and oil was as hot as 165° F. This natural liquid for some reason becomes generally warmer the farther south the wells are located between Ebano and Alamo. The temperature of the oil is of great value from an economic viewpoint in that it decreases the viscosity of the fluid and permits it to move more freely through the pipe lines. At times, therefore, the temperature has been a factor in determining the rate or daily production. As it is, most of the heavier or sticky crude must be heated.+ * According to Col. George A. Burrell, in National Petroleum News, February 4, 1920, a considerable portion of the light oil is completely refinable: Gasoline, up to 15 per cent; kerosene, 7 per cent; light lubricating distillate of 26° gravity, 25 per cent; heavy lube distillate of 20°B., 10 per cent; gas oi] and coke, 15 per cent, and 1.8 per cent by weight, of refined wax. Some of the heavy oil contains fully 65 per cent asphalt. Lighter oils, richer in gasoline, are found farther south, as at Furbero (gravity 24° B.) and in the Tehuantepec or Isthmian field (36°). In October, 1924, it was reported that oil as light as 50° B. had been found in the Huasteca Company’s No. 8 Tres Hermanos at a depth of 3,785 feet and with an initial yield of over 2,000 barrels. t The light oils have the higher temperatures. See U. S. Commerce Reports of Octo- ber 24, 1921; also the author’s chapter on the Mexican Oil Fields in the revised “Manual for the Oi] and Gas Industry,’”’ U. S. Treasury Dept., 1921. OILDOM: ITS TREASURES AND TRAGEDIES 227 ONE OF THE MANY VOLCANIC NECKS These plugs have penetrated the oil- bearing shales and limestones with sills extending horizon- tally here and there. In cooling and con- tracting, voids were left for the oil to fill very close to the ba- salt. This view, taken near Ebano, shows oil- tanks of the Mexican Petroleum Company. —From photo by the author. A QUARTER CENTURY OF MEXICAN TREASURES AND TRAGEDIES American Entrepreneurs Establish the Industry.* In May, 1900, C. A. Canfield and E. L. Doheny, at the suggestion of the president of the Mexi- can Central Railway, examined the prospects tributary to that line and lo- cated west and southwest of Tampico. So well impressed were they with the remarkable seepages that they acquired 450,000 acres in fee before com- pleting the first well. This event occurred on May 14, 1901, oil being struck at the shallow depth of 545 feet. It marked the beginning of the Mexican Petroleum Company’s operations in the Ebano field along the railway, 35 miles west of Tampico. In April, 1904, the first gusher in Mexico was brought in by this company. It flowed 1,500 barrels daily, a modest affair compared with the smashing records which followed in the southern fields. Unfortunately, no substantial markets for this oil of fuel grade was secured until in May, 1905, when the Mexican Central Railway Company contracted for 6,000 barrels daily. Considerable asphalt had been made, however, for paving use in Mexico City. As a result of Mr. Doheny’s personal investiga- tions south of the Panuco River, lands in the Southern oil district were ac- quired in 1905 and 1906. * History of Pre American Petroleum Development. The earliest reference to oil as an industry was the recording, in 1857, of an agreement whereby a group of merchants in Tabasco were to exchange cacao for iron sheets needed in making oil tanks. The natural product, known as “illuminating oil,’”’ came from a spring near Macuspana within the Isthmian fields. In 1865 the Government authorized a Spaniard to exploit deposits near San Jose de Jas Rusias, Tamaulipas. The favorable results led to the organization of a company in 1868 by Mexican planters for exploiting petroleum seepages and springs lo- cated near Furbero, Vera Cruz. This attempt and another made in 1878, also near Furbero, proved failures. In 1876 a Boston sea captain brought back with him from Tuxpam some “chapopote”’ or tar. This caused. the forming of a company to drill for oil on leased land known as Chapopote Nunez and Cierro Viejo, just north of the Tuxpam River and 35 miles north of Furbero. A, little oil was obtained in two wells about 500 feet deep, only two miles from the Potrero del Llano field of subsequent fame. Lacking financial support for expansion, the old captain became discouraged and committed suicide in the early eighties. Later on Cecil Rhodes’ attention was attracted to the oil possibilities south of the Tuxpam. His syndicate, the London Oil Truct, spent $400,000 in a futile fashion, and its successor similarly spent fully $300,000. This affair was finally and unfairly abandoned beeause of the unfavorable report made by a young geologist sent to Mexico by Sir Bover- ton Redwood. Had these early explorations been extended north of the river and per- sisted in a little longer, there is no telling but what British instead of American capital would have benefited the most from the development of Mexican mineral oil. Early in this century, even the Geological Institute of Mexico had grown pessimistic with regard to the creation of a petroleum industry in that country based upon its domestic resources —U. S. Commerce Reports, September 13, 1920, and “Mexican Petroleum” by W. J. Archer, 1922. For detailed history of Mexican petroleum from the days of the Aztecs to the middle of 1922, read the article in The Lamp of August, 1922, contributed by R. Leibensperger chief geologist for the Transcontinental. d 7 Sixteen years later, this well was flowing 800 barrels daily, a loss of 1 h per cent, an evidence of the wonderful vitality of Mexican wells. a AD aad 228 OILDOM: ITS TREASURES AND TRAGEDIES PATRIOT, PIONEER AND PROPHET “Man of Vigor and Vision’’ Edward L. Doheny, Sr., in a prophetic attitude at one of the huge seepages in the Light Oil district to the south of Tampico (see Chapter XII). The oil exudes here from joint. cracks in the lava rock near the contact between a voleanic ‘‘neck’’ or “‘plug’”’? and the sur- rounding sedimentaries. This view was taken by the author in 1921 within Mora- lillo near the Buena Vista River and the historic ruins of Piedra Labrada situated about five miles west of Cerro Azul, the world’s greatest oil well. (This Doheny discovery of February, 1936, is still pro- ducing—near the “blue peak’ of the same name.) —From photo by the author. British Capital Contributes to Quick Development. In 1904:an affilia- tion of “El Aguila” (or Mexican Eagle, then a Pearson interest)* opened the much lighter oil deposits (of 26° Baume gravity) at Furbero, 125 miles south of the Ebano field (the oil from which is extremely heavy, viscous and asphaltic). The output in 1917 was hardly 35,000 barrels compared with more than 1,100,000 from Ebano. In 1908 the Pennsylvania Oil Company (taken over by the Mexican Eagle) brought in a 2,500-barrel well (San Diego No. 2 at 2,006 feet) in the Dos Bocas pool (see map). Four months later, on July 4, 1908, the famous Dos Bocas gusher (S. D. No. 3 came in at 1,825 feet) but caught fire almost at once. The flow was estimated at 150,- 000 to 200,000 barrels a day, so that some 10,000,000 barrels. of oil burned by the end of August, when salt water replaced the oil. Thus was ruined an entire pool. Over $38,000,000 worth of oil and equipment was destroyed in this disaster; but Lord Cowdray (then Sir Pearson) did not lose courage. The efforts of Mexican Eagle were finally crowned with success despite a financial struggle with the Waters-Pierce Oil Co.. As narrated below, six- teen months after the Dos Bocas disaster, Lord Cowdray’s company came into its own with the drilling of a monster well. *In 1902 the same interest had begun operations in the Isthmian zone, later building a large refinery at Minatitlan; but production was never important, dropping from 226,000 barrels in 1915 to less than 1,000 in 1919. The occurrence of petroleum in the Tehuantepec field is connected with salt domes and is thus similar to the Gulf Coast fields of Texas; but the oil-bearing formation, a Cretaceous dolomitic limestone, is older than some of the oil sands of the latter, according to A. H. Refield in Engineering and Mining Journal, March 19, 1921 (see pages 27 and 36). yj When the author passed by it in 1921 sulphurous salt water was still gushing out of its huge crater, at a rate of over 1,000,000 barrels daily according to one informant. . te —— OILDOM: ITS TREASURES AND TRAGEDIES 229 A Memorable Period in the’ History of Mexican Petroleum. The year 1910 ushered in a new era in the evolution of the Latin American oil indus- try. In February was found the Potrero del Llano pool through the drill- ing of a 500-barrel well to the depth of 1,933 feet. But not before the day after Christmas did Potrero No. 4, from a depth of 1,911 feet, belch forth one-fifth of a million barrels per day. Offsetting these achievements of the Mexican Eagle, the Doheny company drilled in Juan Casiano No. 7 on September 11, originally making about 70,000 barrels a day. Thus was established the commercial value of Mexico’s light-oil area through the discovery of two great pools 25 to 80 miles apart. This crescentic “Golden Lane,” has gone down into oil history replete with tremendous treasures and tragedies. The greatest sensation was reserved for early 1916, an event foreshadowed by the eminent oil geologist, Israel C. White (page 65). —Los Angeles Oil Bulletin. PART OF THE SMALL CASIANO BASIN, VERA CRUZ, MEXICO One of the pumping stations of the Huasteca Petroleum Co., a subsidiary of the Mexican Petroleum Co. (Pan-Am. Pet. and Transp. Co.) ; daily capacity 60,000 bbls. Finding The Major Field of Heavy Oil. In the same year, 1910, only a decade after the arrival of Messrs. Canfield and Doheny, the major field of the Northern district, 15 miles southeast of Ebano, was discovered by the East Coast Oil Co., (a Southern Pacific subsidiary). The first Panuco producer, one mile southwest of the village of that name, was then brought in at 1,781 feet, but good only for 10 barrels daily. This was a small be- ginning for the Panuco field whose various sectors are now producing twice -as much as all the southern fields.* It has never been as spectacular as the Southern district, its big wells rarely running beyound 10,000 barrels daily. In 1914, however, the Corona (Royal Dutch Shell), at 1,806 feet, brought in a 37,000-barrel well located but two miles from the discovery well.7 Three Famous Fountains of Oil. The world’s most celebrated and com- mercially successful wells are the Cerro Azul No. 4, the Potrero del Llano * The heavy-oil or northern district, to which Panuco belongs surpassed the southern district in production during the week ended March 24, 1923, the former then averaging 205,000 barrels daily. For thirteen years the light-oil district had held the leadership. tj As in the United States, the initial yield of big wells has often been exaggerated. From 100,000 to 150,000 barrels daily was variously claimed for Corona No. 5. From 1917 to 1925, chiefly in 1921, a number of southern wells came in at 30,000 to 100,000 barrels— from three to ten times as great as the gushers of the Panuco, Ebano and Topila fields. 230 OILDOM: ITS TREASURES AND TRAGEDIES and the Juan Casiano No. 7. The last, while not the discovery well of the Casiano-Tepetate field, was easily shut in, permitted to flow 20,000 to 25,- 000 barrels daily and by November, 1919, had alone drained the larger twin pool of its 85,000,000 barrels of petroleum. Not nearly so sensational as the other two, it may never be surpassed by a single producer outside of Mexico. Similarly, the Potrero pool was exhausted almost entirely by one well. Potrero del Llano, ran wild for 8 weeks, its pressure being 270 pounds greater per square inch. More than 10,000,000 barrels of oil escaped to the sea down the Buena Vista and Tuxpam Rivers* The greatest gusher of all is said to be the Cerro Azul No. 4. Most spectacular was its spouting of oil to a measured height of 600 feet. The gas pressure was terrific, destroying the derrick and throwing the 2-ton drill bit and stem out of the well and 125 feet away. The gigantic force was finally chained in one-sixth the time it took to capture its nearest rival, Potrero del Llano. —Courtesy of W. J. Archer POTRERO DEL LLANO NO. 4 IN 1926 This famous well went to salt water Christmas, 1919, but in the spring of 1926 was yielding 1,000 barrels of oil daily. Yield, thousand bbls. Year Name of well Life, Rock Depth, Initial drilled years pressure feet daily Ultimate 1910: JuaniCasiano NOM is cele ginsks Gs civic eee 9 580 lbs. 2,112 70 85,000 1910 Potrero del Llano No. 4......... HAAG Caines: 850 lbs. 1,911 200 93,800 1916 fCerro Azul No. 4.......cecceeeeee sidbielee iat cee. OSDir DS: 15752 261 Active * During the revolutionary days, ten years ago, the Mexican Eagle Oil Co. enclosed their great well in a solid cement black for protection against the frolics of the warring factions.—The Oil and Gas Journal, March 5, 1914. {In February, 1921, the author saw the drill stem at the spot where 16 feet of it was driven into the ground within ten feet of the moving-picture operator. The well itself is obscured by a mound of earth piled up to prevent fire. Cerro Azul has been flowing al- most 11 years, or since February 10, 1916. Potrero del Llano came in December 26, 1910, and Casiano No. 7, September 11, 1910. The average daily yield of the last named was over 21,000 barrels, but little less than the combined daily output of Pennsylvania’s 75,000 wells in April, 1925. Cerro Azul No. 4, to May 1, 1925, had produced 76,177,637 barrels of (Mexican) light oil. In August, 1925, it was averaging 6,000 barrels daily, equivalent to a yearly rate of 2,000,000 barrels. The Wall Street Journal, August 1, 1925, was wrongly informed in a dispatch from Mexico that Cerro Azul No. 4 has become the world’s second largest producer. Casiano No. 7 will likely retain that honor fully four years rider bac Both now belong to Pan American (Eastern) which is controlled by Standard of ndiana. : OILDOM: ITS TREASURES AND TRAGEDIES 231 Marvelous Manifestation of Southern Wells. From 1910 to 1921 there were discovered 8 or 9 light oil pools which before 1925 had each produced from about 11,000,000 barrels (Zacamixtle) to 250,000,000 barrels (Lower Chinampa). Of the great gushers born along the crescent—Dos Bocas to Tierra Blanca—four have already been referred to. They were the great- est the world had ever known. Many of the others exceeded 50,000 and even 75,000 barrels daily initial, comparing with the Lucas gusher and the Lakeview, the two greatest in the history of the United States. In the course of 15 years, through fewer than 400 perforations about 825,000,000 barrels of Mexican light oil was extracted. To flow an equal volume of water, the Potomac at Great Falls would need nine days. Impressive indeed is the outbreak and the capture of the wild wells. Oil men outside of Mexico are mystified by the unfailing uniformity in the daily produc- tion of each well not offset. Outsiders are no less startled by the state- ment that pumping wells are “rare birds” in the Tampico-Tuxpam region.* With so few wells drilled in the southern district, the average daily yield per well has been very high—at one time over 2,000 barrels compared with only 6 or 7 barrels in the United States. The Explanation of the Extraordinary Behavior. In both the heavy and light oil fields of Mexico the propellant is not gas but hydrostatic pressure, that is, the force of imprisoned sea water, “fossil salt water’ as it may be called. It is not connected with the open ocean, neither is it like the arte- sian water which feeds into porus beds from a higher elevation and owes its pressure to such a head. Eventually salt water appears in all Mexican wells, and in some cases very suddenly replaces the oil. Such was the fate of Juan Casiano No. 7 which for 110 months maintained a daily flow of about 22,000 barrels.} Moreover, Mexican petroleum, as found in the Tam- pico-Tuxpam fields, appears to move underground in an unrestricted man- ner. Connected and more or less open passages are likely present in the cavernous limestone or along its contact with the shale. The cooling and consequent contraction of the igneous intrusions, also left channels along the contact with the sedimentary beds for the free flow of the liquid fuel. Comparison of Mexican with American Fields. The oil fields of the United States differ greatly from those of Mexico, geologically as well as commercially. The age of the former varies greatly (page 26) while that of the other is almost entirely late Cretaceous and early Tertiary. Owing to this fact our oils have a much greater range in quality—from the heavy *It is safe to say that fewer than 4 per cent of the wells in the United States are flowing at any one time. Probably less than ten out of Pennsylvania’s 75,000 are producing under natural pressure. The first well in Panuco to be placed permanently on the pump was the Penn-Mex Fuel Company’s No. 1 Tessada, according to the Fuel Oil Journal, No- vember, 1913. This contradicts the broad statement on page 820 of Pogue’s excellent “Economics of Petroleum’’ to the effect that no pump has ever profaned the casing of any Mexican well. “These wells are born in the full virility of their gigantic powers. They live like giants, straining at the chains that bind them, and they die as giants should, stricken as by a thunderbolt.’ _} Since so few of the world’s oil wells are located in synclines (pages 23 and 24) re- placement of oil with salt water becomes their inevitable fate. In Mexico and the Gulf Coast fields of Texas a rise in temperature of the oil gives warning of the coming tregedy. Most of the light-oil pools of the Tampico-Tuxpam region have gone to salt water largely or entirely during the past six or seven years. According to Edward DeGolyer, a well on lot. 190, Amatlan, closed as non-productive September, 1921, was reopened in 1922 and early in 1923 was yielding 1,700 to 2,000 barrels daily. A well in Alazan pool (just north of Potrero del Llano) produced intermittently during four years after the first appearance of salt water, a total of 2,000,000 barrels, and early in 1923 was flowing about 2,000 barrels daily. More than half the oil obtained in the United States is from wells which have shown or now make salt water, and wells are still being drilled in the older and partly abandoned Mexican pools for “strippers.” Paz No. 1 —The Texaco Star. tial production, 40,000 bbls. daily, cut to 7,000 when pinched on account ini . > SCENES FROM MEXICO’S MAJOR OIL FIELD—PANUCO The 4,000,000 bbls. of Mexican crude produced by the Texas Co. in 1922 made 2.2 per cent 1922 at 2,084 feet of the total for all producers. also (lower three views) the heavy oil, of about 14 degrees Baumé, discharging into earthen res_ in Note coating of ice on flow line to pit caused by expansion of gas accompanying the oil. late of salt water. A well of The Texas Company of Mexico, closing in the gusher, and the quintette which ‘‘captured’’ the ld well wi ervoir. came in fuel oils of California to the light Pennsylvania grade which is rich in gasoline, kerosene and lubricants. Our fields are more scattered; the active Mexican fields are almost confined to two parts of one State. Ours have been producing 65 years—three times as long as the Mexican fields. It was necessary to drill 660,000 wells (not all successful) to produce 8,300 million barrels of American oil by the middle of 1925; but only 3,000 wells have been drilled in Mexico to deliver 1,300 million barrels. Some 800,000 live wells in the United States were July 1, 1925,-averaging 6.5 barrels daily from a weighted average depth of about 3,000 feet while no more than 1,000 producing wells in the other republic averaged about 300 barrels each from an average depth of no more than 2,000 feet.* Both dry- * According to Blardone there were 870 producing wells in Mexico, June 30, 1924. These had an average daily yield of 439 barrels per well or a total of 382,000 barrels, a little more than the average daily of Texas throughout the year 1924. OILDOM: ITS TREASURES AND TRAGEDIES 238 well hazards and drilling costs are from 2 to 5 times as great as in the United States. Comparisons below are made with oil fields in three States where conditions do not entirely differ from those prevailing in Mexico.+ Point of comparison Gulf Coast Mexico California Arkansas Producing area, miles...... 25-30 90-100 185 50-60? Usual geological structure... Salt dome Faults, folds Anticlines Low domes ? Age, chief oil horizon...... Ter., Quat. Cret., Ter. Tertiary Cretaceous Range of depth, feet....... 100-4,500 1,400-2,700 400-6,737 1,100-2,800 Average depth, 1925........ 3,100? 1,900-2,100 3,200? 2,300? Quality of oil—base........ Asp. & Par. Asphalt Asph. (paraf.) Asphalt Quality—gravity range, B... 15°-32° 10°-22° 11°-41° 13°-31° Heavy oil, 1925 (10°-25°).. 100% 100% 58% 85% ASSOLINGSVICIG < wsore orss0.di0 808. Low Low Variable Low Temperature of oil F....... Up to 110° 90°-181° Gas pressure Ordinary Natural propellant ........ Gas pressure Hydrostatic p. 2,250 mil Gas pressure Output to end of 1925, bbls.. 530 mil. 1,360 mil. 670,000 175 mil. Average daily, Aug., 1925... 100,000 260,000 Long B. mid’y 240,000 Price at well, Aug., 1925... $1.25-1.50 $1.00-1.20 $1.25-2.40 $.85-1.35 Prineipalsmarketsis. «css. Dom. and For. Foreign S.W. U.S.,For. Domestic, U.S. pris: < eeoeral ee cpeueemame yc. aemammmmcemesr 4 ame te one ‘ q : Be § * ey 4 | ae ax —The Texaco Star. FIELD STORAGE FOR THE HEAVY MEXICAN CRUDE OIL To reduce its viscosity this oil is usually heated before pumped through pipe lines. Mex- ican conerete reservoirs can hold about 25 million bbls.; steel tanks, about 59 million bbls. PRODUCTION AND TRADE IN MEXICAN PETROLEUM Six-sevenths of World’s Oil from North America Republics. Considered together, the United States and Mexico occupy a unique position in the world’s mineral industry. They contribute about 60 per cent of the copper, lead and silver, and almost the same per cent of the zinc. In the last named metal the southern republic has made huge gains in the past two years. Mexico is now first in silver and second in lead but only seventh in copper. It became a commercial producer of petroleum in 19@1, the same year that Russia attained her peak with 51 per cent of the world’s 167 million barrels. Mexico’s rise in mineral oil was almost meteoric up to 1921 when her output (variously estimated at 193 to 202 million bar- rels) equalled the entire world’s production in 1903. In 1905, before Mexico reached the million mark, the United States alone controlled over 62 per cent of the world’s current yield. In 1911, when Mexico produced 12.5 million barrels, and ranked third for the first time, the two republics con- : j These four regions are more or less similar in the age and quality of the oil, it be- ing mainly used in direct competition with coal as fuel for railways, steamers, etc., and for making gas. Some is cracked into gasoline. Considerable lubricants have come out of grade A Gulf oil and the lighter California oils. Of late years the latter has proven twice as rich in gasoline content as the average oils from the other three regions. 234 OILDOM: ITS TREASURES AND TRAGEDIES tributed 68 per cent. In 1918 Russia lost second place to our neighbor,* sixteen years after losing first place permanently. The following table shows how the two border republics improved their joint position from 1916 to 1923 when they controlled exactly seven-eighths of the world’s output of petroleum. Altogether, during the 10 years, 1916-1925, the two supplied 84.3 per cent of 7,400 million barrels.} — Millions of barrels World Millions of barrels World Year U. S. Mexico Total pct. Year U. S. Mexico Total pct. POUG Se oeress otolactere 300.8 . 40.6 341.4 74.0 LO DT sears cbse cate 472.2 1938.4 665.6 87.0 VOU ise cae oer le ree 835.3 55.3 390.6 78.7 go 2 ACA a tpatidl A 657.5 182-3 739.8 86.0 TOUS she sctere este tscs 356.0 63.8 419.8 83.4 PODS ate wee 433.0 ~ 152.0 885.3 87.5 LOW were She ee eaO LO 87.1 465.5 84.0 1 ODA Sen ersits eee 720.0 141.0 861.0 84.5 POZO as wetetactcae 443.4 168.5 606.9 87.3 1925 as ore ee 764.0 116.0 880.0 82.0 Panuco The Premier Field at Present. Cacalilao was not found before late 1922 but by the end of 1923 had produced about 45 million barrels of heavy oil. It reached its peak in 1924 with an output of 69.4 million bar- rels. Being considered merely a northern sector or extension of Panuco proper, the latter is generally credited with Cacalilao’s output. Panuco contains other outliers and is an extensive area or composite field not com- parable with the: small and single pools listed below under the southern, or light oil district. The latter, centering about 60 miles south of Tampico, lost its leadership in May, 1928, when the heavy oil district forged to the front. The inevitable salt-water invasion began in 1921, and in 1923, the yield of light crude fell off by the enormous amount of 74 million barrels from the 1922 total of 188 millions. This loss in a single year exceeded twice the peak production of either Illinois, Louisiana or Pennsylvania. OUTPUT OF MEXICAN PETROLEUM FROM NORTHERN FIELDS AND SOUTHERN POOLS IN 24 YEARS Year of Production in million barrels Total Area, Field or Pool discovery To the end of 1923 During 1924 to 1925 Panuco (including Cacalilao)........... tiee'et OL OLO 270 93 363 Ebano (including Chijol)..... Bratgls Glatetaroistsce gees LOO 28.4 6.3 34.7 Topila ..... Sialeete Grates atte diate ata Si aletovelene witera ters 1910 14 1.2 15.3 Miscellaneous ..... Eeuig sarah stele a ioks erate erate Di eiatare 4.5 sil 4.6 Total northern or heavy oil...........+. - 1901 317.0 100.6 417.6 Lower Chinampa (incl. Northern Amatlan and Ios Naranjoa), sss sicss ween se ste nie obs 238 11 249 Casiano-Tepetate ..... Rate eielecdlete eres df (deci eeretie 1910 138 188 Toteco (Cerro Azul)........... Rieveketedereie siete rere Mane Lame 134 6.1 140.1 Potrero del Llano and Alazan..........s2e-- - 1910 111 0.6 111.6 Cerro: 7A ZU le PLOMEL share) cre cevie ote ater dieaela lel crete toe cles 1916 13.3 76.3 779.6 Alamo Meola Sole eicrce eleters sine tote worerarokovene ferns eer LOLS 41 14.6 81.6 Tierra Blanca-—Chapapote Nunez.. she iil eve oe ee eal Geb 26 Miscellancousit 2c cm ow aie erccoten oislaisteesctoleye Ta coireee 22.5 ove 22.7 Total southern or light oh. ee na ie aatch acer 3 1910 783.8 38.8 822.6 Total, all Mexico........-eee. ASAT EN A 1,100.8 139.4 1,240.2 *One naturally wants to know why it was possible for a new industry to spring up so suddenly and especially to expand during a long period of political unrest and industrial depression. One reason may be found in the geographic location of the oil fields in al- most uninhabited jungle and not very distant from -tidewater. Another is suggested by the nature of the two principal transportation methods—buried pipe lines and open barges, both safer from attack than trains of tank cars. Still another was the need of revenue by the ruling party, and this was more easily provided the encouragement and protection of an industry which could quickly and profitably dispose of its products even though the whole world might be at war. + This percentage is approximated in the iron ore production of the United States from Minnesota and Michigan together or in the world steel production by the United States, Great Britain and Germany. t Includes Zacamiztle, with 11,000,000 barrels, to the end of 1924; Chicincillo, San Geronimo and San Miguel, 6,000,000 barrels; Furbero, Tanhujo, etc., hardly 2,500,000 bar- rels; Capoacan and the rest of the Isthmian or Tehuantepec pools, not quite 3,000,000 barrels, besides a few thousands from Chiapas and Tabasco. In addition to the above commercial production there was burned about 30,000,000 barrels during the Dos Bacas disaster. Total, Tampico-Tuxpam, 1,237 million barrels. OZ ON sOfUaU{UOISUOL, Gl (ON (P4ctautsuorSUe4, Lf OA (OxUPUIEUWOISUOdS, ‘9 OM PUOAOD Transcontinental Comp O/ Off JOALUAU/ZUOISUDAL ‘Ef ON BuU01ED a TZ Off [Osu {U0IGUO4L ie YON sefuauuUorsuoLty THE CACALILAO SECTOR OF THE PANUCO FIELD SHOWING EARLY DEVELOP- MENT, 1922-23, BY THE STANDARD OF N. J. (TRANSCONTINENTAL) AND THE ROYAL DUTCH-SHELL (CORONA) From development to January 1, 1926, leading heavy oil pools produced as follows: Panuco, proper, 264.2 million barreis; Cacalilao, 158.6; Tulillo-Chapacao, 55.1; Topila, 15.6. The light oil pools supplied the following quantities: Lower or Southern Chinampa, 178.6 million barrels; Casiano-Tepetate, 145.7; Toteco-Cerro Azul border, 144.7; Potrero del Llano, 100.8; Cerro Azul, 87.6; Southern Amatlan, 69.8; Alamo, 42.6; Tierra Blanca, 39.5, and Chapapote Nunez, 13.1 million barrels.—Blardone’s special to The Wall Street Journal, March 5, 1926. —Courtesy of The Lamp. 236 OILDOM: ITS TREASURES AND TRAGEDIES Daily Yield Diminishing During 1925. Salt water was steadily intruding in the Cacalilao, Chapacao and Corcovado whence the greater part of the oil came in 1925. From the 1925 peak of nearly 400,000 barrels daily during the week ended April 18, production had dropped a little below 300,- 000 barrels daily during the last week of June. The highest rate was reached late in 1921 when Toteco swelled the total to 700,000 barrels daily. This stupendous figure will stand a long time before approached by the peak production of any other foreign land. California alone among the states has ever surpassed this record, having reached the daily average of 872,000 barrels during the weeks ended August 11 and August 18, 1923. During the first half of 1925 output aggregated 65 million barrels, two- thirds of which was of heavy or Panuco grade.* This was but 5 million less than half of the 1924 yield. Nevertheless, as already noted, there had more recently occurred a rapid drop of 100,000 barrels in daily rate of production, all within ten weeks up to the end of June, 1925. As indicated, the decrease is due largely to natural causes, but some of it has been ascribed to a conservation policy of the Pan American Petroleum & Trans- port Co. (Eastern) which is now controlled by Standard of Indiana. This leading producer of Mexican Crude is said to be saving the latter for fu- ture use by drawing heavily on the abundant Smackover oil for its Destre- han refinery in Louisiana. Although most of the other producers have nearly exhausted their known reserves, Mexico must still contain immense quantities of unmined oil not only within the owned or leased lands of a few companies but also within a huge and promising territory yet untested.} Decline Continued in 1926. Between January and December, daily pro- duction of Mexican crude oil declined 111,500 bbls—from 306,091 to 194,547 bbls. The year’s total approximated 90 million bbls.—25 million less than in 1925. While output thus fell off over 21 percent, exports of all min- eral oil declined about 18 percent—from about 100 million bbls. in 1925 to 82 million in 1926. The principal destinations in 1926 were: United States, over 65’ percent; England, 16.6; Cuba, 6.1; Canada, 2.8, and Porto Rico, 2.4. The total value of all petroleum exports diminished 27 percent —from 171,164,000 in the first half of 1925 to 125,465,000 pesos in the first half of 1926. Decrease is attributed to the drainage of many wells and the absence of extensive drilling since the promulgation of the new oil laws. Up to November 1, a total of only 291 productive oil wells were completed during 1926 (compared with 17,415 in the U. S.). In five years the average initial yield of Mexican wells has dropped from over 6,000 bbls. to about 600 bbls. daily. Meanwhile the dry hole hazard has as- cended so that now hardly 1 out of every 8 holes drilled is rated a com- mercial producer. WHO’S WHO IN MEXICAN PETROLEUM Prominent Producers in Mexico. Pan American Petroleum & Trans- port Co. (Eastern), through its secondary subsidiaries, the Huasteca Petro- * Only a few years ago it was the other way around, so that of the total to the end of 1924 there was almost exactly twice as much so-called light oil as of heavy oil pro- duced in Mexico. t ‘‘Mexico is no longer a menace to the American producer, nor is it likely to become so, ihouek there probably will be new fields discovered comparable with those already known. This condition has been brought about as largely by the development of facilities for increased consumption in the United States as by the decline in Mexican production.” —E. DeGolyer in “Transactions of the Am. Inst. of Min. and Met. Engrs.,” 1923. See “No Immediate Threat from Foreign Oil,” L. M. Flaming in the Oil and Gas Journal, October 30, 1924. Mexico’s output in 1926 approximated half that of Oklahoma, or two- fifths that of California. ~The yearly rate at the beginning of 1927 was hardly 70 million bbls., or less, than that of the Gulf Oil Corp., or not quite one-eleventh that of the United States. OILDOM: ITS TREASURES AND TRAGEDIES 237 leum Co., operating mainly in the light oil district, and the Mexican Petro- leum Co. (of Calif.), operating around Ebano (both immediate subsidiaries of Mexican Petroleum Co. (of Del.) is by far the foremost producer of Mexi- can Oil. Standard of Indiana, through its recent purchase of Pan Ameri- can, has therefore twice as much Mexican production as Standard of New Jersey has through its control of Transcontinental and Penn Mex Fuel Co. In the table below the individual companies* are arranged in order of their output for 1925, the figures representing millions of barrels. Company 1925 Total Company 1925 Total Mexican Petroleum ........ 37.37 843.82 National Railways ......... 2.30 3.29 Dransecontinental 2.3. c.% sas. 20.62 116.83 Aiencice Gillies a7 Walt dtc es mee 1.30 35.91 Mexican so oeaboard . 4a... 12.66 76.81 Maste COASU. v. mee teu ese soe -99 31.98 Fup y evlme UTE Wee octk) ficraelaisteic ees < 9.31 97.56 item Lexash Go. ans chia sale .86 42.00 HOVE Wg S Sh oN 2 tie Se ae 7.97 69.56 Renne-Mexs Fuel!?) i .66 04.0. a5 44.58 Mexican Magle sie. 630.6 ac 6.54 218.72 stands, Oils: See) tycictn sia ein: 53 24.72 UO) DAM eae co ie leas wieicre™ (Oc49 97.74 New England Fuel ........ 51 26.72 MEXICAN PETROLEUM COMPANY’S GUSHER IN TIERRA BLANCA, 1925 Gushers ‘gauging 25,000 to over 75,000 barrels daily are still being brought in on the former Do- heny holdings in the Southern fields, where the Pan - American Company retains huge oil reserves. —Pan Am. Petrol. & Transport Co. Eleven companies contributed 86.4 per cent to the total of 140 million barrels produced in 1924. The Texas Company and 64 others, each con- tributing less than 2: per cent, made up the balance. The eleven leading producers in 1925, including The Texas Co. of Mex- ico, supplied 92 per cent of the total, 115.7 million barrels. This indicates | a drift towards centralization. Standard of Indiana and Standard of New Jersey together controlled 51 per cent of the total in 1925. Of 37.6 mil- lion barrels of light oil produced in 1925, Pan American furnished 58.3 per cent, Mexican Eagle 16.4 per cent, and Gulf Oil 7.4 per cent; a total of 82.1 per cent for the three. Of 78.1 million barrels of heavy or “Panuco” oil, it took five companies to contribute 81.1 per cent: Transcontinental (25), Mexican Petroleum (19.8), Mexican Seaboard (15), Royal Dutch (11.3), and Sinclair (10), _* Of the total (1,350 million barrels) to January 1. 1926, Mexican Petroleum is credited with 25.5 per cent; Mexican Eagle, 16.2 per cent; Transcontinental alone, 8.6 per cent, or with other Standard of N. J. subsidiaries, about 18 per cent; International or Mexican Seaboard (Hammond interests), 5.7 per cent; Gulf Oil (Mellon interests), 7.2 per cent; Royal Dutch-Shell alone, 7.2 per cent, or as a group (including Mexican Eagle and Oilfields of Mexico), about 24 per cent; Sinclair, 5.2 per cent. ‘ 238 OILDOM: ITS TREASURES AND TRAGEDIES SECOND WELL, TOTECO- CERRO AZUL POOL Toteco No. 1, of the Interna- tional Petroleum Co., operating subsidiary of Mexican Seaboard, shortly after it came in. Before shut in the roaring gas was heard by the author at a dis- tance of half a mile. Note the valve anchorage and B. E. Hull at left; at right, R. C. Holmes, now president of The Texas Co., 1926. Initial yield of this well, 2,038 feet deep, was 60,000 bar- rels; total in 16144 months to July 1, 1922, was 10,219,000 bar- rels or 7 times that of the dis- covery well, Toteco No. 1 of the Mexican Gulf Oil Co., which came in February 9, 1921, with initial of 14,000. The third to share in this world record pool for daily production (516,000 bbls., on December 22, 1921) was the Huasteca Petroleum _ sub- sidiary of Pan American Pet. & Transp. Co. Its first well, of 75,000 bbls. initial, produced 15,218,000 bbls in 1214 months. —Texaco Star Shipments Show Decided Decline. During the past eight years from 80 per cent to more than 95 per cent of the oil produced in Mexico has been exported. Tanker shipments keep close pace with production, and thus the following table reflects the recent and continued falling off in out- put of crude oil.* The figures stand for millions of barrels. To obtain the quantities exported, the bunker oil and coastwise (domestic) ship- ments have been deducted: | Month, 1925 Shipments Exports Month, 1925 Shipments Exports JANUALY vices cc pietite oocee tot eOD: 9.91 G20) pt Ca eererat a eames Coch Cre 5 sie cee Oss 8.71 WeDEUATY ieee ce aioe -- 10.00 9.20 May aise in 2s ere -- 10.10 9.43 March s..:. cence dees taid ede 10.01 J UNC sacs eee Sree iets . 8.90 7.92 The marine movement aggregated 61 million barrels in the first half of 1925 or 10.5 million less than in the corresponding period of 1924. It amounted to 183.8 million in all of 1924 compared with 143 million in all of 1923. The maximum movement occurred in 1922 (the year after peak production) when 181 million barrels were taken away by tankers. Ex- cluding bunker fuel (6.8 million) the shipments of 127 million barrels in 1924 consisted of 63 per cent crude and 37 per cent topped oil and dis- tillates. Share of The Leading Shippers. In the accompanying table some note- worthy changes appear. The Mexican Petroleum Co. (former Doheny in- terest) decreased its exports more than 3.5 million barrels because of entering the Mexican gasoline and kerosene market, whereas, before 1924, virtually all of its production was sent out of the country. Loss in pro- duction of Panuco oil explains the loss of over 6.5 million experienced by * Shipments continue declining, in the 31-day month of July, 1925, amounting to only 8,440,000 barrels. To maintain shipments without greater loss during the past 18 months a little oil was moved from stocks which (including crude, fuel and distillates) decreased from 22.5 million barrels on January 1, 1924, to nearly 19.7 millions on January 1, 1925. Shipments fell off further in 1926, being but 5.4 million bbls. in November compared with 6 million in October, and the average of 7 million bbls. per month up to November 1. As usual, Huasteca or Mexican Petroleum (Pan-Am. P. and T.) led with 36 per cent of the combined October and November shipments. OILDOM: ITS TREASURES AND TRAGEDIES 239 “Ta Corona,” the Dutch Shell subsidiary. The greatest proportionate drop was that of The Texas Co.—64 per cent of its 1923 shipments. Flush production early in the year from heavy oil holdings in Cacalilao enabled Gulf Oil Corporation to ship 3.75 million barrels more than in 1923. Simi- larly, Mexican Sinclair and Empire Gas and Fuel companies enjoyed good gains. The quantities represent millions of barrels. Shipping Company 1924 1923 Shipping Company 1924 1923 Transcontinental ........ sal eeceys 29: Gin mela The sTéxas (Co.. of “MexXinr. <,..< ass 3.1 8.7 PT UASTO CAM me rsittie + aiccelaiere's.e ec: 6 PO Re oe Wy AL INew )Hngland* Buel? css: os ces ee 2.0 3.6 Dutch Sell iv evsleterersi¢ cies « saps e L066 > F 20k Mexican | SeCabOarda sc s sees sce © a PY 3.7 Mexican Eagle (Aguila) ........ 14.6 18.1 Atlanticn Gulig (AS wt) isissis sete +l ih-at 3.2 Mexican Sinclair .....--.... Ritiors se O.7 Banticos bostonies ocin.e Mie tcdavete avers 9 5 MIEXTCAT GUL See tere occ creic’s acc ete, « L1G 7.8 UML V ies che ve teh oalees eet orca wee exe 8 a | East Coast (S. P. Ry. ie mares See 7.2 Biencen OilGntactie sie caettoe scn tiers Ati 9 Empire Gas & Fuel.......c+e0. 3.5 2.4 TITLOPOCCH INEM cMyrets tea cs iietn ta ete eilele. & ols AY! 6 During the first half of 1925 Huasteca (or Pan American Eastern) re- sumed its leadership with exports of 20.3 millions, or at the annual rate of 40.6 millions. This marked a gain of 5.1 millions over the first half of 1924. Standard of New Jersey similarly increased 1 million and Mexican Eagle almost 3 million barrels. The other important companies registered losses ranging from 1 to 4.2 millions, the maximum by Mexican Gulf, dur- ing the first half of 1925.* —The Texaco Star. BARGING CREW AND SUPPLIES ACROSS THE PANUCO This shows how low and swampy most of the land appears | in the Panuco field through which this navigable stream meanders leisurely ‘‘a la manana.’ r TAMPICO—TREASURE TOWN OF MEXICO World’s Most Exclusive Oil Port. Tampico is the queen of seaports in the southern republic. Petroleum has enthroned this Cinderella of Mex- ican cities.* In less than a quarter century it has become, moreover, the metropolis of oildom outside of the United States. Los Angeles harbor * At the beginning of 1927, Huasteca was producing 58 to 60 per cent of the light Mexican oil and 33 to 34 per cent of the heavy, shipping around 40 per cent of the total exported. Next in production (and shipments) was Standard of N. J.; third, Mexican Seaboard; fourth, Royal Dutch-Shell; fifth, Mexican Eagle; sixth, Gulf Oil. 240 OILDOM: ITS TREASURES AND TRAGEDIES —Photo by author, 1921. TAMPICO HARBOR, SHOWING STANDARD .OIL TANKER (LIGHT) AND BARGES (LOADED WITH OIL BROUGHT FROM THE PANUCO FIELD FOR TRANS-SHIPMENT) alone of all the world’s ports has ever surpassed Tampico in tonnage of oil shipments. In value it does not show up so well since the big bulk of the liquid is shipped unrefined—63 per cent as crude and most of the rest as topped erude in 1924, Due to favorable railway rates from the interior, placing her on a par with Vera Cruz, the second seaport, and due to her strategic situation, half way between Matamoras (opposite Brownsville, Texas) and Vera Cruz, Tampico now dominates the export trade with the United States— to the extent of 50 per cent in 1923 and 638.5 per cent in 1924. The actual values were $70,700,000 in 1923 and $106,000,000 in 1924. The exports in- cluded, besides pertoleum, ixtle fibre, sisal fibre, hides and chicle. The imports, worth not nearly so much as the exports,’ included immense quantities of pipes and fittings, oil field and mining machinery, autos and trucks, as well as minor amounts of general merchandise. The importance . of Tampico to the United States is emphasized by the fact that three-~ fourths of Mexico’s foreign commerce is carried on with out country. Rivals Arose to Relieve Tampico’s Congestion. In the matter of oil shipments Tampico was obliged to share rather heavily with “mushroom’’ competitors during a decade.f From 1912 to 1922 not quite 35 per cent of Mexico’s marine movement of oil was out of Tuxpam and Port Lobos, the * The history of Tampico begins in 1823. It was a straggling village of humble, scattered huts, without any commercial importance. A more ideal townsite could not have been found on the Gulf coast. Situated only six miles from the sea, and on the higher north bank of the Panuco just below its junction with the Tamesi, Tampico is in sight of the broad bosom of the Gulf and gets the benefit of its health-giving breezes. The rolling tract of land on which it is located enjoys natural drainage. * * * The Midas touch of oil transformed Tampico from a quiet, leisurely little town into a noisy, bustling burg of over 100,000 inhabitants.—The Texaco. Star, March, 1921. : j * * * The phenomenal development of oil production taxed the T. harbor beyond its capacity. As the industry moved southward, Tuxpam became the logical shipping point ; but the lack of a harbor for ships of size obliged the operators to install sub- marine pipe lines to loading berths out in the Gulf where tankers could load to capacity. In 1918, The Texas Co. established a terminal at Agua Dulce opposite Lobos Island, 70 miles south of Tampico. At the end of August, 1925, there was a shut-down, the last of several sea-loading terminals along the 18-mile stretch of the Gulf Coast from Tecomate to Agua Dulce in the State of Vera Cruz. These cost about $34,000,000 and had a salvage value of $4,000,000 when abandoned. At the height of production in 1921, from the Golden Lane,” as the light oil area was known, and when construction was at its height, 4,250 men were employed at the seven sea-loading stations and topping plants. At times there were as many as 48 tankers either loading at the end of sea lines or awaiting berths. —Petroleum World, August. 1925. OILDOM: ITS TREASURES AND TRAGEDIES 241 fluctuations being from 21 to 42 per cent. The 100 million barrels of pe- troleum which passed out of the Panuco river in 1921 made 57.5 per cent of the total shipments by water that year, the banner year in Mexico’s production. Tampico bettered her share in 1922 when the 122.7 million barrels constituted 66.2 per cent of the total. Her first tanker cargo of crude left on May 20, 1911, and the total for that year amounted to less than 900,000 barrels. Her share that year was about 90 per cent, and with the abandonment of Port Lobos, beginning in 1924, Tampico is again more firmly seated in the saddle with a percentage of 97 for the half- year ended June 30, 1925. The topping plants at Port Lobos have also been shut down. Because of the failing quality of Mexican crude even some of the refineries at Tampico have closed. On January 1, 1923, seven plants along the Panuco could refine 300,000 barrels daily—85 per cent of the national capacity. This seaport, considered as a single city and not as a district like Los Angeles, has actually been supreme throughout the world in capacity for partial refining, that is, topping.t Uncle Sam The Biggest Buyer of Mexican Oil. Owing to its popularity as fuel oil Mexican petroleum during the past ten years has penetrated to many foreign lands, as many as 382 in 1922. The more important desti- nations for the vessel shipments in 1924 are indicated in the following table: Destination Mill’n Bbls. Percent Destination Mill’n Bbls. Percent , of exports 1923 1924 1924 of exports 1923 1924 1924 Liniteds states vce... 5 96.5 89.2 73.0 @Ganadau cteocnsc nes 2.4 1? 1.5 United Kingdom ..... Wa 8.4 6.8 Panamae ees wrote. 1-2 Rak 0.9 Cuba & West Indies... 6.8 7.6 6.2 Central America ..... 1.0 0.8 0.7 SouthmAmerncad.as oc. ce 6.7 5.5 Alia OLNersiac chon ake ctne 123 0.8 0.7 Continental Europe.... 4.2 5.4 4.4 ESN amreN ees POLL io. meee ie LAS tou dtelss 100. It will be noted that the United States generally takes three times as much Mexican oil as all the other countries combined. France, Italy and Germany were the leading Continental buyers in 1923, the first taking just one-tenth as much as the United Kingdom. In South America, Argentina in the same year bought 3.5 million barrels or almost as much as Brazil, Chili and Uruguay together. Total Latin American shipments of Mexican oil amounted to 16.2 million barrels in 1923 and the same in 1924. In the first half of 1925, the United States was the destination of 77 per cent of the shipments abroad and prosperous Cuba of 7.5 per cent or more than half again as much as the United Kingdom. In computing percentages both bunker oil and coastwise shipments to other Mexican ports were deducted from the total tanker shipments—133.8 million in 1924 and 143 million in 1928. t According to The Wall Street Journal, which stated that the Corona refinery of 60,000 barrels capacity was closed and that the Transcontinental (20,000 barrels) was dis- mantling, presumably late in 1923. According to U. S. Commerce Reports, November 16, 1925, there are 19 refineries in Mexico, of which 8 are topping plants with capacity of 268,042 bbls daily, and 6 are com- plete plants of 192,285 bbls. capacity; total, 461,390 bbls. There is also one plant pre- paring gasoline exclusively, and another producing asphalt alone. The total refining ca- pacity is about 50 per cent in excess of current yield of crude. Of 140 million barrels produced in 1924, hardly 67.5 million was refined. Of the products, 64 per cent was fuel oil; 20.7 per cent, crude and refined gasoline; 3.1 per cent kerosene; 1.4 per cent asp halt; 0.28 per cent lubricants. According to U. S. Commerce Reports, February 8, 1926, exports of crude petroleum and products in 1925 approximated 963 million barrels out of 114.8 million produced hav- ing a value of about $145,000,000 U. S. currency. Of the domestic production about 11:6 per cent was consumed in Mexico in addition to 1.8 million barrels of products imported, making the total consumption a little over 15 million barrels or 42 gallons per capita. 242 OILDOM: ITS TREASURES AND TRAGEDIES Meaning of Mexican Oil to Americans. Elsewhere it has been re- marked what a factor Mexican fuel oil proved in winning the war. As bunker fuel in direct competition with coal it may remain the principal utilization because of its gravity.* The United States, to the end of 1925, has received from the southern neighbor somewhat over 825. million bar- rels of petroleum having a monetary value of between $500,000,000 and $600,000,000.+ Ultimately and in various ways the derived products and the directly consumed crude were worth a great deal more to us Ameri- eans. For instance, our motorists must have indirectly appreciated the addition to their supplies of about 75 million barrels or nearly 3,200 mil- lion gallons of gasoline. Not only that, but without doubt the imports from which this motor fuel was refined~did depress the price of the do- mestic product. No wonder, then, that Mexican oil proved obnoxious par- ticularly to our Mid-Continent producers who once and again chorused a eall for an import duty on foreign petroleum.t It appears that the high tide in the output of the Tampico district came concurrently with a period of enormous expansion in our own production. Low prices were bad enough for the oil business of the United States, but the worst feature of the over-production in North America was the encouragement of economic waste of a precious product. Altogether too much good fuel oil has been burned inefficiently beneath boilers instead of running Diesel and semi- Diesel engines. : —From photo by the author. PAN-AMERICAN TANKER AT HUASTECA PETROLEUM COMPANY’S TERMINAL This shows part of the loading pier on the south side of the Panuco, opposite Tampico, or about five miles from the gulf. Farther south is the large tank farm. Significance to Our Southern Neighbor. While the world abroad has bought and burned nearly nine-tenths of all the oil produced*in Mexico, largely as fuel oil in place of coal, this combustible has signified a great deal more to the Republic than is apparent at first sight. Used originally *The Oil Trade, July, 1925, reports that Pan. American (Eastern) will install ex- tensive cracking facilities in Mexico for getting a high gasoline recovery from its large production of low-gravity oil. ey : ‘ ; f In the six years, 1919-1924, 608 million barrels worth almost $400,000,000 and in- ereasing in value each year though decreasing in. quantity. ¢t “No Immediate Threat from Foreign Oil—Menace of Mexico’s Output Becoming More Remote” is the title of L. M. Fanning’s article in The Oil and.Gas Journal, October 30, 1924. See also similar contributions by Chas. E.. Bowles, now Assistant Secretary Mid- Continent Oil & Gas Assn., Tulsa: OILDOM: ITS TREASURES AND TRAGEDIES 243 as fuel on her railways, Mexico’s oil early cut down the nation’s coal bill.* As a source of artificial asphalt it may be credited with paving several Mexican cities. In mining it has materially reduced the operating costs. In both volume and value, petroleum has ranked first among Mexico’s minerals for seven or eight years. It is by far the foremost export, mak- ing up more than one-fourth of the total (increasing from 28 per cent of the value in 19238 to 35 per cent in 1924; the percentage being even greater in tonnage and in volume). It has brought $600,000,000 foreign capital into the country and has provided employment to many peons. The oil industry has helped to create a higher standard of living, having the habit of paying good and steady wages.+ Tampico, almost entirely dependent on petroleum, has risen from a hamlet of huts to a modern municipality of more than 100,000 inhabitants and with handsome suburban “colonies” occupied by oil men and their families. It has become, through oil alone, the leading seaport of the Republic. Though suffering itself from the inroads of revolutionists and brigands, the Mexican petroleum industry has promoted stability in Government through’ the payment of liberal taxes. Its major development came at a critical time when enforced idleness in other industries, notably in mining, cut off sources of Federal revenue. tall MEXICO’S NIGHTMARE OF NATIONALIZATION True Cause of Curtailment in Output of Crude. As in California, the oil deposits in Mexico are limited in area and extremely localized. In order to find new ones it is necessary to drill many dry holes. This risk has lately increased to more than 60 percent or three times the dry-hole hazard in the United States. The average initial and the average settled production have also slumped. Thus the costs of discovery and of pro- ducing have climbed to a high level. The production rate, however, would not have fallen off so fast, 50 percent in five years, if the Mexican Gov- ernment had encouraged the spending of greater sums in finding and de- veloping. The experience of the Transcontinental, subsidiary of the Stand- ard Oil Co. of N. J., is a case in point. It desired to explore for new reserves but could not because the government had failed to adopt a fav- * Of more than 12,000,000 barrels of oil kept for domestic consumption (per capits of about four-fifths barrels or 32 gallons) during 1924, about 6,000,000 went to interior markets and the rest to railways and for field use. This is equivalent to about 3,500,000 tons of coal, which at $8 a ton would have a value in Mexico of $28,000,000 or more than 56,000,000 pesos. t Aside from the revolutionary interruption in 1915, the petroleum industry has constituted the only consistently active and reasonably prosperous basic industry (for many years), although the year 1921 and the first half of 1922 saw many wide (and) variations in Mexican oil, according to the Latin American Division of the U. S. Dept. of Com. (Supplement to Commerce Reports, No. 20, 1922). During the oil boom, and up to early 1921, industrial and personal receipts had been on a very liberal scale. During the early Summer of 1921, a surplus ef fuel-oil stocks following the discovery of the great Toteco pool in February (1921) and of the Southern Amatlan-Zacamixtle in October (1920), and following also a decrease in demand owing to a general depression in the world markets, forced the price from a range of 40 to 50 cents a barrel down to a mini- mum of 10 cents a barrel. All construction programs were stopped, and contracting com- panies were forced out of business. Later came the great fire at Amatlan, the salt-water invasion of the wells, and controversies with the Government over taxes which caused further Suspensions. During the period of low prices, more than 20,000 Mexican laborers in the oil fields were laid off and compelled to leave the district on account of high living costs. All this reacted on the commercial interests. The purchasing power diminished; orders for new goods were withdrawn; stocks ran low, and only small supplies of neces- sary staples were imported. Imports from the United States dropped from $222,000,000 in 1921 (mostly received in the first half) to hardly $110,000,000 in 1922. 244 OILDOM: ITS TREASURES AND TRAGEDIES orable petroleum law permitting investments for continued development.* Navigating Towards Nationalization. During the last few years the Federal Government has drilled on its railway right-of-way through pro- ducing oil land and much nearer private property lines than is usually permitted in the United States. Thus the government has come into competition with the Mexican oil industry from which it has collected pro- duction and export taxes totaling 43 million dollars (U. S.)-in 1922, 30.5 million in 1923, 27.5 million in 1924 and 21 million in 1925. Since the adoption in 1917 of the present constitution the government has striven to nationalize the subsoil. In 1918, the producers, supported by their home governments, successfully resisted the government’s efforts to exact rentals and royalties on top of those paid to the private owners additional to the increasing taxes and tolls then being variously obtained. Confiscation Threatened Under New Law. Late in 1925, an oil law was enacted, effective January 1, 1927. It affirmed the nation’s ownership of the subsurface oil and provided for government concessions to confirm rights procured up to May 1, 1917.’ The new law accords with the famous Article 27 of the Carranza Constitution in denying the right of foreign companies to acquire concessions. To the many important producers who do not hold Mexican charters the new law has proven particularly em- barrassing, none the less because the form of confirmation was not an- nounced ‘until December 26, 1926, although they were expected to apply before December 31, 1926, under threat of confiscation of the land which they had paid for. Mexican Court Justice versus Intervention. Apparently this dispute between the Mexican Government and American and foreign oil companies has settled down to a court fight. Mexico’s Foreign Minister has actually invited them to seek redress in Mexican courts. But the operators have. misgivings in view of the personnel standard of the Supreme Court ¢ and of the miscarriage and procrastination of justice in the case of the late Mrs. Evans whose home was taken from her after the murder of her British husband. The Texas Co.’s “amparo” case is another illustration. The fifth favorable decision was nullified with the passage of the new law in 1925. The foreign operators do not desire arbitration since this proce- dure might recognize the right to confiscate their properties. The United States Government has intervened and even “invaded”’ at times when lesser values or principles have been involved.{ * All drilling in 1926, as previously, was done on land from the surface owners of which the subsoil rights had been acquired under laws in force before the Carranza Constitution went into effect, May 1, 1917. These were similar to those of the United States and all operations of the Transcontinental were performed under contracts with the owners who received rentals and royalties at rates approximating those paid here. See Oil & Gas Journal, March 8, 1927; also, The Lamp, February and October, 1926. * No one is qualified for a judge of this court if he has been convicted of any offense punishable with more than one year’s imprisonment. See Wall St. Jrnl., Jan.-Feb., 1927. ~ See Marcosson in The Saturday Evening Post, March 5, 1927, also the Public Ledger, March 1, 1927. Following are facts from American records: Of Mexico’s 90 million bbls. of oil produced in 1926 about 76 percent was by the 22 concerns listed by President Calles as recalcitrant. More than 148,000 Americans are stockholders in these companies and their investments have been estimated at $350,000,000 to $500,000,000. ‘They declined to give up legal titles obtained prior to 1917 for revocable concessions. The remaining 24 percent of Mexico’s production represénts some companies which had applied for concessions, Asked The Lamp in the fall of 1926: ‘‘Now the story is told, has Mexico reason to regret the entrance of the oil companies with their hundreds of millions for development, operations and taxes? When it is realized that out of every $3 received for Mexican oil, $2 stayed in the country ($1 to Mexican labor and $1 to tax’ collectors), the talk of exploitation of a helpless nation by foreign capital can be valued at its real worth.” See also Los Angeles Times, Dec. 7, 1926, and U. S. Commerce Reports, Apr. 18, 1927. OILDOM: ITS TREASURES AND TRAGEDIES 245 CHAPTER XI—GOVERNMENTAL RELATIONS OUR FEDERAL GOVERNMENT THE GREATEST OIL LAND OWNER, LESSOR AND CONSUMER OF PETROLEUM PRODUCTS “We have had many attempts at regulation of industrial activity by law. Some of it proceeded on the theory that if those who enjoy material prosperity used it for the wrong purpose, such prosperity should be eliminated and abolished. This is as sound as it would be to abolish writing to prevent forgery. We need to keep in mind forever that guilt is personal; let us not condemn the instrument but the evil doer.”— CALVIN COOLIDGE. “We could not ignore the Government as a real factor, or, because of its interest as a consumer, merge it with others in that category, for it is undeniable that the policies of Government, state and national, are important factors in our weal or woe, and the success and perpetuity of the Government itself depends largely upon the course of its industries—Amos L. BEaty, Chairman of the Board, The Texas Company. Manifold Federal Relations. More varied and extensive relations to the vil industry are maintained by the American Government than by any other government, such as that of either Mexico or Russia, where tragic nationalization* has been practiced in diverse degrees. The administra- tions in these two countries are primarily concerned with the government income that may be procured and not with the true prosperity of any pri- vate petroleum industry. Considering that the big bulk of the present production in the United States is derived from lands once part of the public domain and that our Government cooperates in finding oil and in avoiding wastes of all kinds that are detrimental to the legitimate indus- try, it may be correctly claimed that our Government contributes more than it takes. The Federal Government, that is, the people of the United States, is the greatest owner of oil lands, at least within our own national boundaries; it. is the leading lessor, receiving royalties from oil, gas and natural gasoline in the fiscal year ended June 30, 1925, exceeding $15,- 000,000; it acts as an advisory geologist and engineer; it is preeminent as a petroleum economist; it not only supervises the production from Indian lands but through the Supreme Court has directly operated oil wells on lands whose ownership has been in dispute (Red River boundary between Oklahoma and Texas); it is the world’s biggest buyer and consumer of petroleum products; it is the foremost publisher of literature on oil and gas, and it is outranked by the republic to the south alone as the champion collector of taxes and tolls on the output and traffic in petroleum (see Panama Canal and page 19; also Treasury Dept.).** Reasonable Regulations Good for the Industry.+ There are a few places where uniform regulations, worked out by those familiar with the subjects, would be salutary. One of these is where the producer in his greed com- mits waste at the well or in storage. We need rules of conduct and'an *Paralleling every argument against Government operations is one insistent note. That is the preservation of the vital initiative and enterprise of our people. Govern- ment can correct abuse without entry into business. If it can not, then democracy shall have failed—Herpert Hoover, quoted in Oil Bulletin, January, 1925. ** Publications of the Department of Labor, the Federal Trade Commission and the Interstate Commerce Commission have been quoted elsewhere to indicate their relations to oildom. See page 171 re the Government tanker fleet which made 12 percent of all American tanker tonnage in 1924; see also page 255 re retained tankers of about 400,000 tons capacity on January 30, 1926. t From address of Amos L. Beaty before the Ft. Worth meeting A. P. I., December, 1924. 246 OILDOM: ITS TREASURES AND TRAGEDIES umpire of the game at these points. There is nothing radical or alarming in the idea. Some of the oil producing states have taken notice of waste- ful practices and have acted to prevent them. In many cases the enact- ments have been crude and sometimes unworkable. This has been due to the fact that those skilled in the business did not take the lead or point the way. Town-lot drilling and line crowding are things to fret about. Doubtless something on that score might be done. It is an outrageous species of competition, worse than selling below cost, to force one to drill a well to each acre where a well to ten acres would do. Among serious operators there is no difficulty on account of waste of oil or overdrilling. They usually rise to the occasion and do what is right; it is the reckless operator, usually a stock selling promoter, that needs curbing. Activities that Benefit Both Business and Consumer. What is truly good for the Government is indirectly, as a rule, also beneficial to both producer and consumer, as detailed later on. Inquisitorial hearings, however, in- variably irritate the honest operators and rarely prove of any permanent value to the public. They often interfere with proper cooperation for the common welfare as in the conservatism of capital and the prolongation of natural resources. The oil industry as a whole resents particularly any uncalled-for Congressional attacks and the interference of the Federal Trade Commission.* On the other hand + the industry welcomes the valu- able services of the Geological Survey, the Bureau of Mines, the Bureau of Standards and the Bureau of Foreign and Domestic Commerce. Their activities advance the interests of both producer and consumer since they consist of research in the field and laboratory; the assembly, study and distribution of useful statistics; the promotion of commerce in mineral oil; and the investigation of and advising on methods and equipment that may increase recovery in field and refinery and often lower costs. The legiti- mate industry and the public are pleased with the efforts of the Justice and Post Office Departments to discourage dishonest promotions. The in- dustry especially is appreciative of the purpose, spirit and operation of the Federal Conservation Board.t What Congress Has Accomplished: The first session of the 69th Con- gress, ended last July (1926), passed its major measure for the benefit of the oil business, but this was vetoed by President Coolidge. It would have solved the vexed problem of oil leases on Executive-order Indian reserva- tions. Had the bill become law it would have accomplished five purposes: (1) Permitted exploration for oil and gas on reservations (of about 23,- 000,000 acres) not created by act of Congress; (2) given to the Indians all of the oil and gas royalties; (8) authorized the states to tax the produc- tion of oil and gas on such reservations; (4) extended relief to permittees and applicants who have in good faith sought to discover oil and gas under the general leasing act of February 25, 1920; (5) removed the necessity for further litigation in the courts concerning the leases under which, while they were in effect, valuable discoveries of very light oil were made on the *See The Texaco Star, May, 1924. t “Cooperation of the Federal Government in Discovery and Production of Petroleum,” by E. C. Finney, before A. P. I. meeting, Chicago, December, 1921. ~The Government furthermore creates investments opportunities through the leasing of public oil.lands. See Magazine of Wall Street. OILDOM: ITS TREASURES AND TRAGEDIES 247 Navajo Reservation in New Mexico. The only bill enacted for the good of the oil industry was that of Senator Ralph Cameron, of Arizona. Under its terms any oil or gas prospecting permit issued under the act of 1920, or extended under the act of 1922, can be further extended for two more years by the Secretary of the Interior under certain conditions.§ How Oil Has Helped the Government. Elsewhere, at the end of Chap- ter XII, it has been pointed out how the petroleum industry, through its leaders, not only refrained from profiteering during the war but also con- tributed the great essential in the way of mechanical power which more than man power procured the victory. It has contributed to the economy and efficiency in the operations of the National Defense on land and sea and in air and water. Without automobiles, peace-time government would be slower. Gasoline has greatly simplified the transmission of documents. Airplanes cross the continent under the auspices of the Post Office De- OUR GOVERNMENT PROGRESSIVE Uncle Sam’s mail service by airplane is proving a valuable aid to American business. The saving: in time means quicker turn-over of capital and gains in other ways. Thus the Post Of- fice Department is a consumer of aviation gasoline as well as motor fuel for mail ‘trucks. Army and Navy planes likewise consume light fuel.. —Standard Oil Bulletin. partment in hours instead of days. Motor cars make it possible for mes- sengers to make The White House and return to The Hill in less than 15 minutes.* Oil has contributed heavily to the financial support of both State and Federal governments, and indirectly, through the gasoline tax in about 45 states, has built paved roads and permanent bridges (see bes low and Chapter XIII). Oil executives have assisted in introducing better business methods in Government administration, notably in establishing and building up the budget system. Treasured Income versus Tragic but Trivial Losses. Not ignoring such minor episodes as the escape of the elusive liquid from a naval oil reserve before its partial and delayed capturing,} it may be conservatively said that treasures derived by the Federal Government from oil and the oil indus- try measure more than ten times the tragedies entailed. Looking at the § Abstract of article by Geo. H. Manning in The Oil Trade, August, 1906. See also page 21, The Oil and Gas Journal, April 24, 1924, article by L. M. Fanning. *See The Lamp, April, 1922, inside back cover. j Referring to E. L. Doheny’s meritorious enterprise in drilling wells in the Elk Hills district for the Navy Department and in constructing essential storage in the Mid-Pacific. See editorial page, Oil City Derrick, May 1, 1925. Court evidence apparently convinced the jury at Washington just before Christmas, 1926, that Mr. Doheny’s motives were primarily patriotic. 248 OILDOM: ITS TREASURES AND TRAGEDIES matter from the mere money side, the Federal Government. has found the petroleum branch of the mineral industry the most profitable or “plum bearing.” Government income from taxes on the net earnings and excess profits of oil companies was almost $40,000,000 in 1919 (page 19) or be- fore the leasing law went into effect. Such income tax collected by the Bureau of Internal Revenue amounted to $94,500,000 in 1920, dropping below $22,700,000 in the dolorous year 1923 when the oil industry was in distress despite the removal of the excess-profits tax. The Federal tax totaled $36,400,000 in 1924, according to the latest published report of David H. Blair, Commissioner of Internal Revenue.t Federal taxes and royalties combined for the year 1925 may be estimated at a sum consider- ably greater than $50,000,000. Royalties alone approximated $15,000,000, but only 10 percent thereof reverted to the U. S. Treasury after allowmg 37% percent to the states within which the oil and gas were produced and after diverting 52% percent to the reclamation fund for use in western states. Wyoming, with its Salt Creek field owned almost entirely by Uncle Sam, received 86.2 percent of the 837% percent paid back in the fiscal year ended June 30, 1925; California, containing Naval Reserves Nos. 1 and 2, received 10.8 percent; Montana, Colorado and Utah received most of the remaining amount.§ The Government gathers no duties on the im- portation of petroleum although Mid-Continent producers have clamored for a protective tariff on Mexican crude oil; but considerable revenue (over 40 percent of the total in one year) has been received as tolls on the tanker traffic through the Panama Canal. DEPARTMENT OF COMMERCE AND BUREAU OF MINES Commerce Contact with Mineral Matters. Since a mining engineer be- came Secretary of Commerce, Government business pertaining to mineral resources, the mining industry and trade in metals and minerals as well ‘as their utilization gradually gravitated towards the Department of Com- merce as a great clearing house. Before the transfer of the Bureau of Mines on July 1, 1925, the Interior Department probably. had the most varied relations with the mineral industry in general and the petroleum branch in particular. It was likely for this reason that Secretary Work, in December, 1924, had been made chairman of the Oil Conservation Board. Today, through the Bureau of Mines, the Bureau of Standards and the Bureau of Foreign and Domestic Commerce, Mr. Hoover’s department is able to help the operating oil industry and mining in general along more lines of real usefulness than any other Federal department. Activities of the Minerals Division. This division of the Bureau of For- eign and Domestic Commerce was organized in July, 1924, to coordinate and make more effective the work carried on before by the Petroleum Di- t See “Statistics of Income,” edited by Edward White, November 1, 1926. .§ See “Government Waxed Fat from Investments of Oil Men,’ The Oil and Gas Journal, December 14, 1922; “State Control of Public Lands Deemed Unwise,” Christian Science Monitor, September 20, 1926. Crude oil production from Federal lands increased from 42 million barrels (9 percent of the total) to nearly 90 million barrels (about 12 percent of the Nation’s total) in 1925. Of the latter quantity, 12 million was derived from Naval reserves, 29.5 million from the Public Domain, and 48 million from Indian lands. Read opening address of Chairman Work of the Federal Oil Conservation Board, February, 1926, hearing attended by the author. OILDOM: ITS TREASURES AND TRAGEDIES 249 vision* and the Minerals Section of the Iron and Steel Division. Its func- tions include the collection and dissemination to Americans of information on foreign markets for petroleum and other mineral products, as well as data relating to foreign development and production of the various min- erals and non-ferrous metals and to current surveys of foreign and do- mestic mineral, metal and petroleum activities. The Petroleum Section carries on the assistance rendered the American oil industry by the former Petroleum Division in the marketing of petroleum products abroad and in supplying facts about foreign petroleum development, production and leg- islation. As a result of one notice published in Commerce Reports} under “Trade Opportunities,’ one American oil company obtained an annual ex- port business of $250,000. Supplements to this weekly, known as “Trade Information Bulletins’ are issued from time to time and deal with the petroleum trade and industry of a single foreign country. Thus “T. I. Bulletin No. 407” was entitled “British Petroleum Trade in 1925” and contained the usual Foreword by Julius Klein, Director of the Bureau of Foreign and Domestic Commerce. BARTLESVILLE (OKLA.) PETROLEUM STATION OF THE BUREAU OF MINES Its value to the oil industry is twofold—(1) The furnishing of technical information ; (2) the training of men for executives, engineers and technologists. Among the many “graduates”? from the research staff, now active in the industry, may be mentioned A. W. Ambrose, E. P. Campbell, F. A. Edson, H. C. George, H. H. Hill, J. O. Lewis, F. X. Schwar- zenbeck, E. W. Wagy and L. D. Wyant. The superintendents have been successively, Messrs. Lewis, W. P. Dykema, Ambrose, Hill, T. E. Swigert, M. J. Kirwan, R. A. Cattett, W. W. Scott and E. P. Campbell whom N. A. C. Smith succeeded in April, 1926. For further de- tails and view of the research staff see ‘““‘The Oil and Gas Journal,” January 6, 1927. * This division was worked up in 1923 by Henry C. Morris who had served as confidential assistant to the Director of the Bureau of Mines during and after the War. See “Com. Bur. of Real Use to the Am. Oil Industry,’”’ by Chas. E. Kern in The Oil and Gas Journal, September 6,. 1923; also issue to January 29, 1925: “Promoting Petroleum ‘Trade Abroad,’ which refers to Guy C. Riddell as the first chief of the reorganized Mines Division. Since July 1, 1926, Homer S. Fox has been acting chief. ft One of the most helpful of all Government periodicals; issued weekly, 64 pages; subscription only $4 .through Superintendent of Documents, Washington, D. C. 250 OILDOM: ITS TREASURES AND TRAGEDIES. Activities of the Bureau of Mines. Unquestionably, up to the time of the transfer of the public land mineral leasing unit to the Geological Sur- vey, the Bureau of Mines had carried on the most comprehensive oil work. As indicated in the index as well as below, its duties are still vast and varied. It compiles and issues monthly statistics on crude oil production, storage and transportation, and apparent consumption in the United States; also on refinery operations. It publishes bulletins based upon its researches covering the entire field of petroleum, natural gas and oil shale technology in relation to production, transportation, refining, storage and chemistry. Its most signal service has pertained to the conservation of petroleum (page 40 and index) of which it has been relieved only in part by the Survey. Viewed broadly, the Bureau of Mines and the Bureau of Standards (page 101) together may be regarded as a great board of con- sulting engineers which furnishes free but expert advice and information on oil and other topics for the good of the Government, the industries, the present consumers, and the ordinarily ignored posterity.* Contributions to the Conservation of Capital. The Bureau of Mines has not only prescribed and practiced immensely helpful measures for the con- servation of both mined and unmined petroleum but it has.experimented extensively in various ways to prevent vast financial losses. It has shown how the shutting off of corrosive waters in sands above the oil-bearing ones may not only lengthen the life of well equipment but will save the oil it- self from salt water invasion. In Kansas alone the losses from under- ground corrosion in the producing fields are believed to exceed $3,000,000 yearly.+ In many fields the deposition of wax from the crude oil entering | a well is a problem of major importance. In one Rocky Mountain pool the cost of removing paraffin from rods and tubing in 1924 was more than $500,000. Laboratory studies indicate that removal methods cheaper and quicker than those in use are possible (see also index). The use of elec- trically driven equipment has been recommended for the reduction of costs, and the standardization of oil field equipment has been advocated in co- operation with the Bureau of Standards. Committee Recommendations. Several changes in the Bureau of Mines work was recommended early in 1926 by Mr. Hoover’s committee.t It stated that the work of the Petroleum Division has been helpful and of direct value to the oil industry. It has included: (1) The collection and * For a summary of the annual report of the Bureau of Mines Director to the Secre- tary of the Interior covering the period before its separation therefrom, see Oil and Gas Journal, December 17, 1925. The present director is Scott Turner, experienced mining engineer. : 3 j Bulletin 233, 1925, “Protection of Oil and Gas Field Equipment against Corrosion,” by R. Van A. Mills; price, 35 cents; Superintendent of Documents, Washington. Among other very practical publications of the Bureau of Mines may be mentioned these other bulletins: No. 148, ‘Methods for Increasing Recovery from Oil Sands,” J. O. Lewis, 1917; No. 163, “Method of Shutting Off Water in Oil and Gas Wells,” F. B. Tough, 1918; No. 182, “Casing Troubles and Fishing Methods,” Thos. Curtin, 1920; No. 192, “Carbon Black,” R. O. Neal and G. St. J. Perrot, 1922; No. 194, “Principles Governing Production,” Carl H. Beal and J. O. Lewis, 1921; No. 195, “Underground Conditions,’ A. W. Ambrose,. 1921; No. 201, “Prospecting and Testing for Oil and Gas,” R. E. Collom, 1922; No. 207, ‘‘Analytical Distillation,” E. W. Dean, H. H. Hill, N. A. C. Smith and W. A. Jacobs, 1922; No. 210, “Oil Shale,” M. J. Gavin, 1924; No. 2384, “Manual for Oil and Gas Operations,” T. E. Swigart and C. E. Beecher, 1923. t This consisted of Messrs. H. Foster Bain, J. G. Bradley, D. M. Folsom, F. P. Han- away, J. V. Reynders, C. P. White. See the California Oil Bulletin, April, 1926, p. 425. OILDOM: ITS TREASURES AND TRAGEDIES 251 publication of statistics; (2) investigation of operating methods within the industry with a view to the reduction of losses in the production, stor- age, and transportation of crude oil and petroleum products, and to the dissemination of data in regard to improvements in operating practice; (3) research work into the characteristics of oils and the treatment and utilization of products. It recommended that the collecting of statistics be transferred to the proposed economic branch of the Bureau and that the method of collecting and the form of publication of these statistics be carefully revised to make the figures of greater value to the industry. Suggestions were also made for the investigation of operating methods. Contributions to the National Defense. An indirect aid in safeguarding our country has been through the conservation of the underground oil reserves by preventing water invasion, as already mentioned. Increasing the percentage of recovery obviously also promotes the national defense. During the war two particularly important accomplishments were credited to a Bureau of Mines man—the chemist, Col. George A. Burrell. .These refer to research work in chemical warfare of which he had charge, 1917- 1918, and to his discovery of a supply of helium in Texas. He initiated the Government helium program whereby this non-inflammable gas was extracted and finally used in dirigibles.+ During the late war, Director Manning served on the National Cooperative Committee on Oil and the Bureau itself rendered great service in many ways other than those mentioned. GEOLOGICAL SURVEY AND INTERIOR DEPARTMENT Cosmopolitan Character of Interior Department. In former years new bureaus found their way into the Interior Department if they could not logically be allocated elsewhere. As a result, it became the most com- prehensive and cosmopolitan of all the Government departments. Its rule ranged from Alabama to Alaska and from Florida to California. Its geologists and topographers climbed to the tops of ice-clad mountains and its engineers descended into the deepest mines. Its Bureau of Education encouraged reindeer raising in Alaska and taught the redskir various tricks. Through the Reclamation Service it drained the dismal swamps ~ “The Linde Air Products Co. developed the successful process (of recovering helium from the natural gas in the Petrolia field). The Navy Department contracted with this company in 1919 for designing, building and operating the only helium producing plant in the world, located at Ft. Worth. In April, 1921, the initial cost of production was $500 per 1,000 feet * * * since reduced to about $50. * * * The production on a commercial scale was forced on the Government * * *: (1) By military necessity; (2) in order to develop * * * processes by which helium can be obtained for a cost compatible with its use in commercial airships. The Government will later look to the great industries to carry on the work and permit it to return to its normal and rational pursuits. * * * Helium is truly a by-product of the petroleum industry; but is not an asset or a liability? The Navy has demonstrated the prac- ticability of helium-filled airships; the Government has developed processes for the recovery of helium; the Bureau of Aeronautics has developed a water-recovery apparatus which avoids the necessity for valving helium during flight; the Government has forced the design of cheap transportation—the helium tank car, without which the use of helium would be impracticable; American industries are established for the manufacture of all materials and equipment needed for constructing. and equipping airships. * * * From these facts, only one conclusion can be drawn—helium is an asset to the petroleum industry and one of no minor importance.’—Rear Adm. W. A. Morrert, before the A. P. I. meeting at Ft. Worth, December 12, 1924. See The Literary Digest, April 29, 1922, pp. 52-53. \ 252 OILDOM: ITS TREASURES AND TRAGEDIES and ‘watered the desert wastes, thus aiding and extending agriculture. Through the Geological Survey it likewise pioneered for petroleum and the mineral industry in general. Through the Land Office it lent aid to land seekers without interfering with the profitable retail trade of private realtors. Through the Patent Office it formerly promoted and protected the invention of devices and processes whether for reaping grain or for refining petroleum. In fact, it became so vast and varied that one of the world’s greatest office buildings, erected especially for the Interior De- partment, did not quite suffice to house the horde of clerks and other help employed in Washington alone. This department is still quite complex and even after the loss of the Bureau of Mines, July 1, 1925, is able to offer a variety of superior petroleum services to the public and particularly to the operators. More than ever before is it now operated on a business basis under the progressive direction of Secretary Hubert Work. Indian Office Important in Petroleum. The Office of Indian Affairs is charged with the protection of the health, wealth and happiness of the American Indian and his advancement to the competency of the average white man so that present restrictions may be removed and the privileges of full citizenship be conferred on him. The protection of his wealth alone is a tremendous task now that the possession of the dependent ones well exceeds $1,500,000,000. At the close of 1923 the value of both individual and tribal property, including that of oil, gas, coal and other minerals, totaled $1,011,000,000, a gain of $283,000,000 over 1922. It was $342,000,- 000 more than in 1913, the increase being largely due to the development of oil lands in the Osage country. In 1923, 54 million bbls., or one-third of Oklahoma’s output, was derived from Indian lands. The revenue that year from oil and gas leases approximated $37,000,000, of which over'$30,500,000 went to the Osages alone and nearly $5,600,000 to the Five Civilized Tribes. Since then the Navajos of New Mex- ico have also participated in petro- leum income following discoveries on the Hogback and Rattlesnake domes. In his administration, Comr. Chas. H. Burke is ably assisted by J. G. Wright. who long has superintended the Osage Agency at Pawhuska.* THE DIRECTOR OF THE U. S. GEOLOGI- CAL SURVEY Probably no other Government official has been longer or more consistently concerned with the conservation of petroleum than George Otis Smith, who has been on his job over 16 years, while directors of other bureaus have come and gone. One of his most practical appeals to the oil industry was his able address, “‘A Produc- ing Program for Profits,’ before the Inter- national Petroleum Congress, published in “The Oil Trade,’’ November, 1924. / * See annual reports of the Commissioner of Indian Affairs; Marcosson’s “Black Golconda.”’ page 197; magazine section, Washington Star, August 31, 1924. “Navajo Leases Sell for $4.72 an Acre,” Oil Trade, November, 1923; “Sale of Ute and Navajo Leases,” Oil and Gas Journal, June, 24, 1926. OILDOM: ITS TREASURES AND TRAGEDIES 253 Nomen, —Rig and Reel Magazine. HUNTING FOR OIL IN ESKIMO LAND, ALASKA A typical scene on the tundra or the low Arctic coastal plain where Philip S. Smith and his associates of the Survey have been “‘mushing’’ on the Government’s mission of lo- cating new oil deposits for the future supply of the U. S. Navy. Geological Survey’s Search for Structures. The opulent Osages owe greatly to this Government organization their procural of liberal bonuses (up to $14,200,000 at one auction, March 8, 1924) and their receipt of large royalties. Probably no equivalent petroleum area elsewhere in the world has been so completely covered with structural maps before the successive and final development of its various and numerous domes, anticlines and -terrace structures as the 1,500,000 acres* of this leading oil county in Oklahoma. Most of the acreage on each structure was leased at the Pawhuska auctions only after the Geological Survey had initiated in 1917 its extensive field work in the Osage “nation,” and in many cases had is- sued advance reports with maps and sections as guides to the prospective buyers in the event that they wished to avail themselves of such inex- pensive but money-saving and money-making information and advice.+ It was considered the most promising undeveloped territory at the time of our entry into the war and the investigations by the Survey were made in * Almost the same as the total land and water area of Delaware, 2,370 square miles. This acreage was bought from the Cherokees by the Federal Government for the Osages at only 70 cents an acre. ; + David White, chief geologist of the Survey for many years, lamented the lack of information, betrayed by the bidders in the size of the bonuses paid. ‘Although some had examinations made by geologists for their exclusive benefit, many tracts with favor- able structures were neglected and large bonuses paid for others that may never yield oil in commercial quantities; * * * all the more unfortunate since later leases require drilling within nine months after approval date. * * * (In drilling unnecessary dry holes) the loss of the driller in bonuses, labor, equipment, supplies and transportation and even his loss of time and opportunity through fruitless boring in an area of dis- tinctly unfavorable structure constitute an economic waste that affects the military effi- ciency of the Nation.’’ See Bulletin 686, U. S. G. S., p.. X; also The. Oil Weekly, September 16, 1922. 254 OILDOM: ITS TREASURES AND TRAGEDIES response to the imperative need for increasing to the utmost our petroleum supply. K. C. Heald had immediate charge of this important work.t The Survey’s Explorations in Alaska have been concentrated on Naval Petroleum Reserve No. 4 since this area of more than 35,000 square miles. near Point Barrow was set aside early in 1923 by President Harding. Mapping of this northernmost part of the United States has involved four seasons of.the most strenuous labors of many Survey men. They have traveled thousands of miles by dog team in the dead of winter and by canoe in the equally trying days of summer. During the summer of 1926 Dr. Philip S. Smith, chief Alaskan geologist, and G. FitzGerald, topog- rapher, tried to complete the major problems of geography and geology in this polar desert where the annual rainfall is under 10 inches.* | Increasing Value of the Survey’s Service. The work of the Geological Survey in connection with oil continues to increase in value. The appli- cation of geology to practical affairs is shown by the fact that in four oil fields extensively developed the early geologic mapping indicated the ex- istence of oil in the ground. Many costly mistakes would not be made by beginners in the oil business if they would study the maps and reports, particularly the bulletins, issued by this constructive branch of the Gov- ernment as results of its scientific investigations. The direct service of George Otis Smith, the director, and his highly trained staff of courageous and conscientious: geologists, geographers and others can not be measured in terms of mere money. More appreciated by the industry is the indirect service of these men (and women) after their liberation for private work where a “living wage” is paid more in harmony with their worth.+ Public Land Relations and New Leasing Duties. The Survey has acted ‘on more than 25,000 cases referred to it in the administration of public The big Burbank field was found six years ago by that strong believer in geological science, E. W. Marland, in the western part of Osage County where but little detailed work had so far been done. He paid $12.50 an acre in May, 1920, for his lease on the discovery tract of 160 acres, and less than a year later only $5 an acre was paid for two leases by others, one adjoining and another two miles away. In September, 1922, Gypsy (Gulf Oil) paid $10,000 an acre, and in May, 1924, Cosden and Midland each paid almost $12,500 an acre. * From Nenana, on the Government railway in the heart of Alaska, they proceeded along the mail route, down Yukon River, and on for 600 miles to the town of Kotzebue on the Arctic Ocean. See Bulletin 783-E, U. S. G. S., 1926; press bulletin 6331, April 8, 1926; “Oil Developments in Alaska,’’ in which, before the February, 1926, meeting of the Am. Inst. Min. Engrs., P. S., Smith stated that the entire output since 1904 was worth less than $1,000,000, but that there are four fields in which petroleum has _ been found in seepages: (1) Yakataga, southwest of Mt. Elias; (2) Katalla on the coast in south central Alaska; (3) Alaskan Peninsula on west coast of Cook Inlet from Iniskin and Oil Bays southwest to Chignik; (4) northern Alaska now held as Naval P. R. No. 4> See also The Rig and Reel Magazine (of Parkersburg, W. Va.), May and June, 1924; “Hunting Eskimoland for Oil,” by Guy E. Mitchell, U. S. G. S. + ‘The foundation for the more general acceptance of the geologist by the oil industry, which prevails today, was largely laid by the series of. intensive studies of known oil fields made in the early 1900’s by the U. S. G. S. The reports on pools examined in Pennsylvania by R. W. Stone and F. G. Clapp; in Ohio by W. T. Griswold and M.- J. Munn; in Coastal Texas and Louisiana by C. W. Hayes and. Wm. Kennedy as well -as by G. D. Harris and A. C. Veatch of the Louisiana Survey; and above all, California by Ralph Arnold, Robert Anderson, Harry Johnson and others, for the first time made available details covering a number of widely distributed pools. About 1907, many of the men who had made these early reports established themselves as consulting geologists and from this period until 1918-1914 geology won its way. rapidly into the industry. Since 1914, the employment of geologists has been fairly general.”—From “The Geologist and the Petroleum Industry,” by E. DeGolyer, A. P. I., Ft. Worth, December, 1924, OILDOM: ITS TREASURES AND TRAGEDIES 255 lands. A few years ago the areas classified and reserved were as fol- lows, in millions of acres: Coal, 65; petroleum, 65; oil shale, 4.1; phosphate, 2.7. Before the middle of 1925, it had been involvel with the public domain only in an investigative and consulting capacity. At that time the Survey relieved the Bureau of Mines of its public land mineral leasing duties.’ To quote Director Smith: “Secretary Work’s transfer of the mineral leasing supervision * * * permits a new line-up of the Interior Department’s activities in promoting development of the public domain. The protection of the public estate, the guidance of the development of its resources, the promotion of wise use of the products therefrom are practical objects, all summed up in the one word, conservation. So it is that to the land classi- fication activities of the Geological Survey are now added the supervision of the leasing of the oil, coal and other minerals, on the public and Indian lands. The two types of work are closely related and have had some in- formal connection in the past, but now they may be directly coordinated so that the oil geologist and the oil engineer, for example, will work in close contact on their common problem of wise administration of the re- sources in public ownership.” , Oil Shale Work Foreshadows New Fuel Supplies. The development of our huge oil shale resources was arrested by the Drake discovery of petro- leum in 1859. About 1910 interest in our Western shale-beds was re- newed. * * * Our Government, realizing the rapid depletion of our oil resources, undertook to foster interest in and assemble data regarding our shale-beds. In 1913 the U. S. Geological Survey sent a body of field investigators to examine the colossal deposits in Colorado, Utah and Wyo- ming (page 120). Thus began the research that has been kept up in field and laboratory since that time. * * * In doing this work the Sur- vey effectively illustrated one of the high functions: of a federal govern- ment, namely, to play the role of pioneer and experimenter, foreseeing the social and economic needs of the nation, and doing the necessary ground work of research in that important period before the incentive of imme- diate profit has begun to draw private investment and initiative into the field.* (On “Nationalization” see below and pages 243-5.) STATE AND TREASURY DEPTS. AND INDEPENDENT BOARDS The State Department Aids in Foreign Oil Development. It has been of indirect assistance to the American operators in connection with oil problems by insisting on the recognition of treaty rights and other guar- antees, such as most-favored-nation clauses and mandade provisions. The Department of State has stood steadfastly for the principle of the “open door” or equal opportunity in the Dutch East Indies, Mesopotamia and Persia.j Under the able administration of Secretary Kellogg the Mexi- can Division of the Foreign Office is now preoccupied in protecting Amer- * Abstracted from The Century Magazine, February, 1921, p. 542, “Defeating the Oil Famine.” See also, ‘Oil Shale of the Rocky Mountain Region,’ Bulletin 729, by Dean E. Winchester, U. S. G. S., 1923; “Geol. Survey and Land Office Do Big Oil Business,” Oil Trade, December, 1926. t In an excellent article in Mining and Metallurgy for July, 1922, Attorney L. H. Woolsey outlines the limitations of the State Department and tells how it can be of further help in oil development abroad. See also address by Arthur N. Young, Ph. D., economic adviser of the Department of State, at the Institute of Politics, Williamstown, Mass., 1925. 256 OILDOM: ITS TREASURES AND TRAGEDIES ican oil properties in the Tampico region from ruthless confiscation and eventual nationalization as already effected by the Soviet Government. The Treasury Department Collects Income Tax. Through the Bureau of Internal Revenue this department comes in close and extensive contact with the American oil industry. Within its Income Tax Unit (“I. T. U.”) there gradually grew up the Natural Resources, now the Engineering Division,* devoted to the appraisal of mineral and timber producing properties and the auditing of tax cases concerned with natural resources. Of the engineer- ing sections into which this Division became divided the most important since the war has been the Oil and Gas Section with which the author was identified during most of the 88 months in which he served as a valuation engineer. Valuations were generally based upon data supplied by the crude oil and gas producers for the determination of depletion allowances under the various revenue acts, also for the determination of profits or losses resulting from the sale of petroleum properties. At one time, from 1922 to 1923, over 50 valuation, assistant and associate engineers were employed on oil and gas cases, but very few of them in the field. The Oil Relations of the I. C. C. The Interstate Commerce Commis- sion, through the Bureau of Service, supervises pipeline and railway trans- portation of petroleum. There is hardly a mile of our 265,000 miles of main line track over which petroleum products do not move, chiefly by means of 153,000 tank cars. About 80,000 miles of pipeline are devoted exclusively to the moving of mineral oil. The carlot movement of petro- leum and its products in 1925 aggregated over 1,951,000 carloads or 5% percent of the total carload traffic originated that year in the United States. This exceeded by 55 percent the similar shipments of 1,258,000 carloads in 1920.t | The U. S. Shipping Board Once a Big Consumer. Since this body has been steadily disposing of its bottoms to private owners and operators of marine vessels, its consumption of fuel oil and other oil products has been declining. Of steel tankers alone it owned on June 30, 1926, 29 of 242, 663 deadweight tons after transferring 12 of 131,680 tons to Gov- ernment departments and selling 109 of 1,073,150 tons. Of 8 concrete tankers it had lost 1, transferred 3 and sold 38. GOVERNMENT NEEDS AND THE NAVY DEPARTMENT Our Federal Government the Greatest Consumer. Departmental de- mands now aggregate 20 million barrels per annum. No single commer- * Originally this was organized in 1918 as the Oil, Gas and Mines Section through the cooperation of Ralph Arnold, Carl Beal, Jas. L. Darnell, J. O. Lewis, G. B. Richardson and BE. W. Shaw. The first head was Ralph Arnold, who was followed by J. L. Darnell. After the segregation of the Oil and Gas Section the chiefs thereof were as follows, in order of succession: Frank Herald, C. F. Powell, Norval. White, Russell Beall, S. M. Green- idge and W. N. Thayer. The present head of the entire: Engineering Division is Andrew Walz; assistant head is Samuel Hatchett. Chief of the Oil and Gas Section is Geo. W. Campbell assisted by Percy L. Ports as reviewer and Wm. G. Cullen, who are probably the oldest valuation engineers in point of continuous service. Stanley Sears is now chief of the Mining Section, E. L. Lindsay of the Timber Section, Frank Eddingfield of the Appeals Section, and J. M. Clark of the Appraisal Section. J.C. Dick, of Utah, was head of Natural Resources when the author entered the I. T. U. in May, 1920. His successor was C. F. Powell, who was followed by Albert H. Fay and S. M. Greenidge. t Abstracted from address of Director Wm. P. Bartel before the A. P. I., Tulsa, December, 1926. See The Oil and Gas Journal, December 9, page 88. OILDOM: ITS TREASURES AND TRAGEDIES 257 cial consumer of petroleum compares with Uncle Sam in this respect. This quantity is almost half as great as that required by all the oil burning locomotives on the American railways (page 96). Louisiana, the seventh state in oil, alone barely supplies as much. The entire output of Ohio, Pennsylvania and West Virginia together in 1926 would have to be taken to fill the bill in crude equivalent. Naturally the Navy needs more petro- leum products than any other department, although it still consumes con- siderable coal—about one-third million tons, costing annually about $2,- 800,000. The demands of the Department of Justice is likely the least of any. Army trucks and postal airplanes require both gasoline and lubri- ecants. The Treasury Department, through the Supervising Architect, must see that all the Federal buildings throughout the country are kept warm in winter time. The Government, however, does not look favorably upon the use of oil for heating where coal is available.* The Navy’s Increasing Call for Liquid Fuel. Coal is not altogether in disfavor, for in some places or for some purposes it is preferred because of local economy or peculiar requirements. About 340,000 tons measure the annual demand of the Navy for solid fuel at a cost of about $2,800,000. About 7,350,000 gauges the peace-time need of the Navy for liquid fuel including fuel oil (7,000,000 bbls.), gasoline (190,000 bbls.), Diesel oil (110,000 bbls.), and lubricating oils (50,000 bbls.). In time of war this consumption would immediately increase to four or five times the above stated quantities, depending upon the theater of action.} Buying and Storing Petroleum Supplies. These products are purchased usually under annual contracts for delivery at the various ports within the United States most convenient for the use intended. Bids are invited according to advertised specifications. For the storage of these products the Navy has constructed at a number of naval stations and fuel depots the usual type of containers known to the commercial oil world. The total capacity for fuel oil storage is 7,244,000 bbls., 3.4 times what it was six years ago. The more important storage points are at Pearl Harbor, Hawaii; Yorktown, Va.; Portsmouth, N. H.; Guantanamo, Cuba; Puget Sound, Wash.; Melville, R. I.; Balboa and Cristobal, Canal Zone; Cavite, P. I.; Hampton Roads, Va.; San Diego, Calif. Additional stocks are at Boston, Key West, Charleston and Norfolk. Only a few of these are dis- tributing points for naval Diesel oil, but many of them carry gasoline supplies for trucks, launches and hydroplanes. * Post offices and custom houses on the Pacific Coast are occasionally heated on a small scale, using fuel oil to generate the steam heat. The author recalls receiving bids for such oil of about 18 degrees B., early in 1911, while he was acting as custodian of the Federal building in Les Angeles. ‘The District of Columbia is reasonably close to coal fields; but both economy and convenience dictated the construction of a central oil burning plant about two years ago. See ‘“‘Government to Heat Buildings with Oil,’ by { Production from Government lands during the five years before 1926 was as follows, in thousands of barrels, according to the Oil Conservation Board: Sources 1921 1922 1923 1924 1925 Crude’ from’ Naval Reserves is coco. ecccke cc eeae 2,154 7,205 11,427 13,032 12,371 Cnirdetfrommeubie Oma nies sce cies cece ee ee 9,215 20,997 36,574 12,647 17,226 MPOtals CLUudey PECHOlCUM « «sau cisitisiccs dere eee 11,3869 28,202 ~° 48,001 25,679 29,597 Output from Indian lands under Government supervision exceeded 596,795,000 bbls. of oil during the 26 fiscal years 1899-1924, and approximated 48,486,000 bbls. during the year ended June 380, 1925. SKETCH MAP - GEOGRAPHIC RELATIONSHIP ELK HILLS FIELD TO OTHER | ‘OIL FIELDS OF. KERN co. Accompanying Report ible eee Petroleum Engineer (Toe me mene oy cee ta were ea 18 viten SS, California oe Mining Bureau COLLOM State oi ta Gas Supervisor ra ae ste oo ty ne SA || fe ee NOS som wd ae st eet =e hd - 1. |. | ae one Y \d 8°" SrawoAro FA, J eee ip > ae eo, ¢ @e oil Fields ZZ Buttonwiliow Area THE DOHENY LEASE (Pan American Co.) MAP OF ELK HILLS NAVAL RESERVE No. 1. (California) Showing situation of lands owned by producing oil companies within and adjoining the Reserve, which drained and threatened further drainage of the Reserve, and made leasing necessary, to save the Navy’s oil for the Navy. s.0.¢0 “p0.co PO CO BRBBBZ,.P oO COU sess. pene {. AND zed ee CO -_.UW \ me P.O CO PO ot’ a 2 LEGEND. . PACIFIC Ol CO STANDARD Ol CO sf CALIF ey NAVAL RESERVE NP] UNDER LEASE TO PRN AMERICAN CO. wmsnsnse BOUNDARY OF NAVAL RESERVE [0] Y Y NAVAL RESERVE LEASE TO BELRIDGE OU. CO J MISCELLANEOUS PRIVATE LANDS OILDOM: ITS TREASURES AND TRAGEDIES 259 Unknown Underground Reserves. As a source of supply for the future and for emergencies, there have been set aside certain areas of public lands as Naval Petroleum Reserves, following field work by the Geological Survey. Reserve Acres Location Reserve Acres Location NOL ys noe cee 31,892 Kern Co., Calif. - IN Oae4 28s sich 22,400,000 Pt. Barrow, Alaska INGapZEN ah ciske icteiers 10,417 Kern Co., Calif. Shale No.1. 36,550 Garfield Co., Colo. INGstlOger crete ine 9,321 Natrona Co., Wyo. Shale No.2 . 86,584 Uinta Co., Utah Reserve No. 1 is under lease almost in its entirety to the Pan-American Petroleum Co. The Government brought suit for the revocation of this lease, winning in the lower courts. Appeal to the Supreme Court was to have been heard as this book was in press, late in 1926. Reserve No. 2 is under lease to various oil companies under sliding-scale royalties up to 30 percent or more. Owing to the fact that Pacific Oil Co. (now part of the new Standard Oil of California) is the owner of alternate sections within this reserve, its use as a source of future supply is of little value. The average monthly royalty received by the Navy from these two re- serves approximates 225,000 bbls. Measured in money (a secondary con- sideration) at $1.30 a barrel this would mean an annual income of $3,510,000. sapsoanes as —The Lamp. SCENE IN THE DEVELOPED PART OF THE ELK HILLS DISTRICT, CALIFORNIA _This district (in Kern County which has produced almost as much oil as Mexico) con- tains Naval Reserves No. 1 and No. 2 of 31,892 and 10,417 acres, respectively. Elk Hills became a large producer in 1920 after some completions were made in 1919. It is still largely undeveloped although yielding at the rate of 35,000 barrels daily in June, 1926. Among fields in the San Joaquin Valley it now ranks next to the immense Midway-Sunset. Reserve No. 3 was under lease to the Mammoth Oil Co., a Sinclair sub- sidiary. The lease was invalidated on September 28, 1926, by the U. S. Circuit Court of Appeals and the defendant ordered to make restitution of the oil removed. It had been yielding a monthly royalty of only 5,000 bbls. Reserve No. 4, as elsewhere related, lies within the Arctic Circle in Alaska. Its inaccessibility makes it of doubtful value even if oil in large ‘quantities be discovered.. CONSERVATION WORK ACCOMPLISHED AND REQUIRED Wide Field for Conservation Work. In recent years public-land legis- lation has sought to promote the best utilization of the water power, the conservation of flood water, reserving of coal land from agricultural entry, and the protection of the .oil industry from. itself, by discouraging pro- 260 OILDOM: ITS TREASURES AND TRAGEDIES duction in advance of possible needs. All these efforts towards wiser use of the great natural resources of the West were made by the Federal Government in its capacity as the largest landowner. The protection of the public estate, the guidance of the development of its resources, the promotion of the best use of the products from the national domain are practical objects, all summed up in the one word conservation. World’s Richest Owner of Fuel and Phosphate Reserves. The United States owns about 30 million acres of coal lands with valuable coal de- posits of over 200 billion tons. It has one-half million acres of phosphate lands which can supply 8 billion tons of this essential fertilizer when needed for American farms. There are 4 million acres of oil shale in the public domain from which possibly 60 billion barrels of oil can be ex- tracted when prices warrant the higher cost of its development:, Before that time, however, there are millions of barrels yet to come from wells on Government lands, the amount now being taken from public and In- dian lands, representing one-tenth of the nation’s annual petroleum pro- duction (about 75 million barrels in 1924, or more than the entire country produced in 1900). Kssentials for Safeguarding This Vast Estate. To protect this for fu- ture generations and permit its economic development to supply present needs requires foresight and administrative skill. Five years ago Con- gress enacted the general leasing law which established the system of leasing mineral deposits on public lands to private operators, the Govern- ment to receive bonuses and rentals as well as royalties. There are now (December 1, 1925) outstanding 211 leases on Government coal lands and 422 on oil and gas lands. To supply this policy a new line-up of mineral leasing activities was affected in the Interior Department through the organization of a conservation branch in the Geological Survey. In this enlarged unit were placed geologists and engineers designated to act as technical advisors and administrators in the classification of the public lands. In addition, their duties consist of inspecting mine operations and cooperating with the private operators to avoid waste in the production of minerals on the public domain. Oil and Gas Leasing Work Was Reorganized in the Conservation Branch. Three field divisions (California, Mid-Continent and Rocky Mountains) were established under jurisdiction of district supervisors or engineers in charge. They were given full authority and responsibility to conduct operations and represent the Government in problems necessitating im- mediate decision not involving departmental policy, in place of the old practice of referring all questions of administration to the Washington headquarters. * * * A feature stressed by the Geological Survey is the scientific examination of mineral areas of the public domain to promote and guide development. * * * With the creation of this new unit it is believed that the custodial care of our natural wealth of oil and gas, coal and other minerals has been placed on a practical administrative basis. Engineering efficiency, avoidance of waste, and the wide use of these re- sources are now being practiced and future public interests are being pro- tected.* 3 * These three preceding paragraphs have been extracted from Secretary Work’s recent review of advance in conservation of natural resources. OILDOM: ITS TREASURES AND TRAGEDIES 261 Conservation of Private Deposits not Controlled. Uncle Sam is helpless to prevent waste of oil and gas in their production from privately owned properties. He can only educate and advise if consulted. Since neither Congress nor the executive offices of the Federal Government have power under the Constitution to control such productions or to regulate the same, the only available remedy lies in judicious state legislation. State laws alone can prohibit the blowing of gas into the air in order to get through to the underlying oil.+ THE ORIGINAL OIL CONSERVATION BOARD AND ITS SECRETARY Designated by President Coolidge, December 19, 1924. Since then the late Mr. Weeks (at extreme left) was succeeded by Dwight F. Davis (see page 130). General Counsel (not in photograph) is Charles W. Waterman; Secretary, Edward S. Rochester. Technical and Advisory Committee—George Otis Smith, Maj.-Gen. Edgar Jadwin, Rear Adm. H. H. Rousseau, and Harry H. Hill. THE FEDERAL OIL CONSERVATION BOARD, 1925-1926 Purpose of Appointing the Board. It was created Dec. 19, 1924, by Pres- ident Coolidge, not to serve as a salve or sinecure for “lame ducks” but to utilize established Government machinery in an earnest effort to accomplish four more or less related objects: (1) To coordinate and strengthen the current conservation work of the Federal bureaus; (2) to find all facts that might shed broader and better light on the needs and means for both public and private saving of natural resources in oil and gas as well as their ultimate products; (3) to invite and invigorate complete and sound cooperation with the oil industry itself, and (4) to disseminate the results of its investigations so that the millions of American consumers may do their share to avoid waste of the very products which at any time may be indispensable for the National Defense. Part of the President’s Letter Creating the Board. “It is evident that the present methods of capturing our oil deposits is wasteful to an alarming degree in that it becomes impossible to conserve oil in the ground under our present leasing and royalty practices if a neighboring owner or lessee desires to gain possession of his deposits. Developing aircrafts indicate that our t E. B. Reeser, vice-president, Barnsdall Corp., quoted in Nat’l Petroleum News, Decem- ber 2, 1925. See also ‘“‘A Big Step toward Conservation,” in which W. C. Teagle told the Federal Oil Board how fuel oil and the new cracking process influence petroleum economics; reprinted in leading periodicals and. abstracted herein on page 268. 262 OILDOM: ITS TREASURES AND TRAGEDIES national defense must be supplemented, if not dominated, by aviation. It is even probable that the supremacy of nations may be determined by the possession of available petroleum and its products. I am advised that our current oil supply is kept up only by drilling many thousands of new wells each year, and that the failure to bring in producing wells for a two-year period, would slow down the wheels of industry and bring about serious industrial depression. The problem of a future shortage in fuel and lubri- cating oil, not to mention gasoline, must be avoided, or our manufacturing productivity will be curtailed to an extent not easily calculated. We are not today, however, facing an under supply of oil. The production of our 300,000 wells is in excess of our immediate requirements. That overpro- duction in itself encourages cheapness, which in turn leads to wastefulness and disregard of essential values. Oil, of which our resources are limited, is largely taking the place of coal, the supply of which seems to be unlimited, but coal can not take the place of oil in most of its higher uses, on land or sea or in the air.” 7 Unostentatious but Effective “Modus Operandi.” The Secretaries of Commerce, War, Navy and ‘Interior organized themselves early in 1925 and lost no time in tackling their big job, aided by an able Secretary in the form of an experienced publicist, E. S. Rochester. Work was prose- cuted principally along three lines: (1) Conferences between themselves and their consultants in the different departments; (2) questionnaires sent to producers, refiners, marketers, engineers, geologists and economists as well as others competent to furnish facts or to express opinions of value; (8) semi-public hearings which marked momentous progress in coopera- tion and understanding between Government and Industry. The hearing held in February was a noteworthy one, in that never before, to the writer’s knowledge, had such a spirit of good-fellowship been shown at any similar meeting. On this occasion there gathered together the ablest representa- tives of the oil business and of the Federal.Government which included Cabinet members and petroleum experts. Oildom’s Answer Anticipated Inquiries. In August, 1925, the A. P. I. Committee of Eleven, for the purpose of allaying public fear as to failing supplies of petroleum, presented in book form a very fine report on “Supply and Demand.’’* There were 13 instead of 14 points in the Summary of Conclusions: (1) No imminent danger of exhaustion of our petroleum reserves; (2) a sufficient supply of oil will be available for National defense and for essential uses beyond the time when science will limit the demand by developing more efficient use of or substitutes for oil, or will displace its use as a source of energy by harnessing (an other) natural energy; (3) current supply and demand (see Chapter XIII) can not stay in balance, since the amounts of both are constantly changing; (4) petroleum recover- able by present methods of flowing and pumping from existing wells and acreage thus proven is estimated to consist of 5,300,000,000 bbls. of crude oil; (5) thereafter there will remain in areas now producing and proved 26,000,000,000 bbls., a large part of which can be recovered by im- proved and known processes such as flooding, air and gas pressure, and * Although this committee consisted of leading lights in Oildom and its report was rather comprehensive because it was not confined to petroleum but included oil shales and coals as future sources of supply, it was subjected to severe criticisms from members of the Institute. See p. 142 The Oil and Gas Journal, November 5, 1925; also Oil Bulletin, September and The Oil Weekly,.: August 21, 1925. OILDOM: ITS TREASURES AND TRAGEDIES 263 mining, when price justifies; (6) deeper drilling will disclose deposits hitherto unavailable in producing fields—tantamount to the discovery of new fields—and through more perfect production methods the deep oil may be recovered; (7) the major U. S. reserves lie in about 1,100,000,000+ acres of land underlain by sedimentaries in which geology shows oil possi- bilities; (8) additional reserves appear in the vast deposits of oil shale, coal and lignite, from which liquid fuel and lubricants may be extracted if, and when, the recovery cost is justified by prices; (9) Latin America has large petroleum resources for the output from which the United States is a natural market and the supply therefrom must inevitably influence the drain on our reserves; (10) availability of future petroleum supplies from the vast area above mentioned depends upon adequate incentives to the exploration which has so far supplied all the nation’s needs for oil in peace and in war*; (11) more efficient utilization will lengthen the supplies, as, for instance by doubling or trebling the motor car mileage per gallon of gasoline; (12) through improved methods, prin- cipally the cracking process, the refining branch has already increased the yield of gasoline, now the major product of petroleum, and in consequence of the draft on fuel oil for additional cracking this former main product may eventually be removed from (the cheapening) competition with coal (see pages 95-99); (13) (wilful?) waste in the production, transportation, refining and distribution of petroleum and its products is negligible. A Scientist’s Sidelight on Our Future Oil Reserves. In Mining and Metallurgy for April, 1925, appeared the results of an independent study of this subject,t the summary of which follows: (1) Our reserves are being rapidly depleted; (2) our consumption is steadily mounting; (3) substitutes for gasoline are known to be insufficient to meet the situation; (4) our ownership in foreign oil is limited; (5) stability of prices and certainty of supply cannot be assured with imported oils; (6) the threatened deple- tion of our reserves entailing the passing of the United States from the position of supremacy in the world’s natural petroleum production, shows the wisdom of Great Britain’s support of her nationals in the acquisition of potential oil reserves throughout the world. President Coolidge wisely grasping the situation, appointed a Federal Commission to study the petroleum problem confronting the nation. This Commission is receiving cooperation from the entire industry and its findings will be looked upon with the utmost respect. It is asking the oil industry to propose the remedies to prevent waste and to work out ways to obtain the highest. possible degree of efficiency of such oils as we have. ~ + Some authorities discount this high estimate since explorations over a long time and wide expanse within some of the states included entirely have resulted in little or no yield. * There must be: (a) Security in the ownership of oil lands and of the right to lease; (b) conditions of exploration and development by owners or lessees allowing exercise of initiative, liberty of action, play of competition, and free working of the supply and demand law; (c) prices that will give a return to producers, refiners and distributors commensurate with the risks and capital involved. The McGraw-Hill Book Co., 370 7th Ave., New York, published ‘Supply and Demand”; price, $3.00. ¢ By ~Cassuis A. Fisher, consulting geologist and fuel engineer, Denver, Colo.; with the U. S. G. S. and Bureau of Mines, 1896-1912; U. S. Naval fuel exploration, Alaska; co-author with Ralph Arnold and Jas. L. Darnell of the original ‘Manual for the Oil and Gas Industry,” which was revised by the author and others in 1921 for the Bureau ' of Internal Revenue. See also ‘‘Checking Up on Our Fuel Wastes,” by Floyd W. Par- sons in Nation’s Business, February, 1926; “Plenty of Oil in Sight?” by J. O. Lewis in The Compressed Air Magazine; abstract in The Literary Digest, September 4, 1926. 264 OILDOM: ITS TREASURES AND TRAGEDIES : THE FEDERAL OIL BOARD’S FIRST REPORT * Concise and Comprehensive was this timely report tendered President Coolidge, September 6, 1926. A preliminary statement pertained to the present status of the oil industry which transports the crude from 300,000 wells through 90,000 miles of trunk and gathering lines, 400 tank steam- ships and many jf tank cars to some 500 refineries. The industry has about $10,000,000,000 invested in producing wells, transportation, refining and marketing equipment. Under “Distribution of Use” it was shown that in 1925 the crude petroleum produced was split by refinement into 49.3 per- cent gas and fuel oil, 23.4 percent straight-run gasoline, 9.1 percent cracked gasoline, 8.1 percent kerosene and 4.2 percent lubricants. Other topics taken up were “Known Fields,” “Possible New Fields,” “Improved Meth- ods of Recovery,” “Better Control of Production,” “Better Utilization of Crude,” “Better Mechanical Devices,” “Foreign Sources,” “Supplies from Oil Shale and Coal,” ‘Reinforcement of Supply,” “Control of Flush Flow,” “The Right of the State,” “Aid to Engineers,” “Voluntary Agreement of Owners,” “No Monopolistic Control,” “Government’s Own Problem,” “Pro- duction from Indian Lands,” ‘‘Legislative Remedy for Osage Leasing Evils,” “National Defense Requirements,” ‘Naval Storage Reserves,” “Continuation of Inquiry,” ‘‘Cooperation of States,” and “Cooperation Within the Indus- try.” Some of these subjects are considered below.t | Sources of Future Supply: (1) Reserves of about 4,500,000,000 bbls. available by flowing and pumping from more than 38,000,000 acres of proved and producing oil land; (2) possible discovery of new sands in- known areas by deeper drilling (as actually occurred at Spindle Top, sum- mer of 1926); (3) possible discovery of new fields (such as the Seminole, Okla., July 16, 1926); (4) improved methods which will recover a larger proportion of the oil out of the sands; (5) better utilization of crude oils * Chairman Work’s Significant Prelude. ‘This first report presents certain facts con- tributed by the oil industry or gathered by Government scientists. Facts and opinions re- ceived from these sources have been weighed with open minds, without conscious prejudice or thought of confirming theories preconceived. There are two sides to this nationally im- portant question * * * ; each has its proponents, and both sides are entitled to re- spectful consideration. (1) Many producers claim that the supply of petroleum, hitherto» equal to the demand, probably always will be and, should time prove the contrary, that substitutes for both lubricants and gasoline will be devised. (2) Other producers argue that almost every natural resource is limited and may be exhausted by wasteful use. They cite depletion of soil fertility, timber, and even fish in the sea, the exhaustion of old oil fields and the diminishing flow of all wells. They argue further that without discovery of new fields the present rate of output can not be maintained, and therefore urge that, as new discoveries are uncertain, improved methods of recovery, less waste, more ground ° storage, and checking of competitive haste in drilling are economic provisions that should be enforced. These conflicting opinions are based partly on facts and partly on conjecture. Such opinions are valuable only in proportion to the logic of their reasons, which therefore must be understood and analyzed. It is hoped that this first report, conscientiously pre- pared under the direction of this board by scientific men burdened with exacting daily routine duties, may furnish a concise picture of the true conditions * * #*.” + 142,000 tank cars altogether ; used more for distributing refined products than for carrying crude oil. t Abstracts of the report have appeared in all periodicals on petroleum including Nat’l Petroleum News, Oil Trade, The Oil Weekly and Petroleum World. For the most complete reproduction of the report see C. E. Kern’s article in The Oil and Gas Journal, September 9, 1926. The Outlook for September 15, 1926, editorially reviewed the report on page a The complete report is\sold by the Supterintendent of Documents for 10 cents. OILDOM: ITS TREASURES AND TRAGEDIES 265 by diversicn from less to more essential uses—such as conversion of fuel oil into gasoline; (6) better control of the flush flow from newly discovered fields; (7) economies in consumption by improved mechanical devices; (8) supplies from distillation of oil shales and coal; (9) foreign oil fields. Proven or Known Oil Fields. In addition to the proven reserves at any one time, the known fields have in many cases proved of larger extent than at first estimated, due to the extension of the “fringes” of such fields. Par- ticularly is this the result of opening new sands and in some instances the extension of known sands by deeper drilling. There have been great ad- vances in the art of deeper drilling during the past few years. The first successful well drilled—in 1859—was to a depth of 69 feet. The capacity of machinery for deeper work was steadily developed until, in 1925, an oil well 7,591 feet was completed in southern Calfiornia.* At various stages in development it has usually been asserted that no greater depths could physically be attained, yet almost every year demonstrates the pene- tration to still lower levels. As many of the sands slope into the earth, deeper drilling of known sands will bring still further production as well as the discovery of deeper sands underneath those now being exploited. Possible New Fields. Certain parts of the country are known by their geology to be impossible of appreciable oil production. Such positively barren areas are estimated to aggregate 43 percent of the total of the United States. But this does not warrant the assumption that the re- maining 1,100,000,000 acres of the country, or any large part of them, will be found oil bearing. Considerable portions thereof have already been drilled for oil or water. It is a certainty that we are learning each year more of geologic structure at the hands of * * * geologists, but the percentage of dry holes in new exploration is increasing. To assert that no new fields will be found would be to deny a very strong law of prob- abilities. We may conclude that such fields will be found, but obviously no forecast of their importance can be given. Improved Methods of Recovery. Estimates of the amount of oil left underground vary widely. Oil experts generally believe that no more than 25 percent of the oil can be recovered by ordinary methods. Some au- thorities consider it to be less than one-sixth. During recent years, con- siderable investigation and experimentation has been made with different methods of forcing out the contained oil with water, air, or gas pressure— either directly from the surface or through the proposed method of sink- ing shafts and driving galleries. Authorities on these methods believe that thereby a second crop from known sands can be obtained as great as that already recovered. * * * Such a result would add a total of over 13 billion barrels to our supply from known fields. It is the impression that developments have proceeded so far as to give firm belief in much further recovery from the known sands over and above the issued esti- mates as to the supplies available through present methods. Better Control of Production. There are subsidiary phases of over- production which deserve attention, as they lead to economic waste. At the initial opening of new fields the gas pressure is strong and the flush flow of wells is very large, rapidly diminishing to more settled produc- * Only a few weeks after the Oil Board made its report the world’s depth record was broken again in that state in the Brea-Olinda or Fullerton Field near Los Angeles. An electrically driven rotary bored to 8,046 feet by October 1, 1926. 266 OILDOM: ITS TREASURES AND TRAGEDIES tion, and the opening of new fields is in most instances followed by a fever of drilling. Due too often to divided ownership in small areas, the drain- age of which is threatened by adjacent. wells, a rush of drilling leads to enormous flush flows which temporarily glut the market (pages ~ 76-78) and force much oil into fuel consumption, and, through over-releasée’ of the gas, diminish the amount of oil that can be ultimately obtained by flow and pumping.* Not a Monopolistic Menace. The voluntary cooperation proposed (namely unit development and production) should include the landowners and operators in a single field or pool (a relatively small unit of produc- tion), so that the possibility of monopolistic control need not be feared. Indeed, cooperative regulation of either the development or the operation of a single pool could control but a small percentage of the country’s pro- duction. The largest} flush pool in recent years—Santa Fe Springs in California—contributed 11 percent to the output in 1923, and no pool con- tributed more than 8 percent to the output of either 1924 or 1925. Indeed, the three exceptional pools during 1925—Smackover, Long Beach, and Tonkawa—together accounted for only 16 percent of the country’s produc- tion. Even the flood from the Cushing field at the time of its maximum yield in 1914 and 1915 is to be credited with only 17 percent of the na- tion’s output in those years when the total yield was but a third of that of. 1925. Instance of Cooperative Control. The Salt Creek Conservation Com- mittee prorated production in 1922 and 1923, reducing the output to per- haps one-third of the capacity of the 600 to 700 wells then producing. The effect of the committee’s restrictions was a matter of only 8 or 9 percent of the country’s production during that period. The question of the coun- try-wide influence of such cooperative action on either supply or price would, moreover, under any legalized procedure, be always subject to “ap- * Control of Flush Flow. The common right of adjoining owners to reduce to possession respective oil and gas in the pools tapped by wells drilled on their lands should involve some recognition of correlated obligations, so that in the drawing of oil and gas by one owner from the common reservoir the producer should recognize the right of the neighbor to so much of the oil as is withdrawn from underneath his property, less a reasonable allowance for the cost of production, the hazard of the undertaking, and a reasonable profit thereon. The right of the State under its police powers to prevent the action of one owner from depriving other owners of a common property, and to prevent waste or destruction of the common property by one of the owners, seems reasonably clear. The right of the State to prevent the waste of natural resources is rendered more im- portant in this matter by the newly discovered role of gas in the oil sands. Gas is more than a commodity of smaller commercial value associated with the oil; it is the efficient agent provided by nature for bringing the oil within the reach of man. Dissolved in the oil, the gas makes the oil flow more freely to the well and there forces it upwards. The longer the gas is retained in solution the larger is the recovery of oil. Waste of gas is therefore a double waste, and the impairment of the gas pressure * * * by one owner may prevent neighbors from recovering any of the oil beneath their land * * *. The authority of the State to prevent the waste of natural gas * * * applies as well to the dissipation of gas pressure without which great quantities of oil would be entirely wasted. Geologic science and engineering practice as well as economic considerations of waste afford a broad foundation on which to base State legislation. If the several oil- producing States should protect property rights in oil produced from a common under- ground supply, it undoubtedly would have some effect in the direction of stabilizing pro- duction, of retarding development whenever economic demand does not warrant, and of making the business of oil production more economical. * * #* + Considering a year’s yield and not the maximum daily production for which Smackover ‘with about 430,000 bbls. daily in a week of May, 1925, holds the record (Author’s note). OILDOM: ITS TREASURES AND TRAGEDIES 267 propriate and adequate governmental scrutiny,’ quoting from counsel of the American Petroleum Institute, “to the end that these owners might not be stimulated to undue haste and wasteful competition in the develop- ment of their properties and trade, but might have a greater liberty to consult the economic conditions of the industry from time to time.”’} EXTRACTS FROM ADDRESSES DELIVERED AT THE HEARING OF THE OIL BOARD, FEBRUARY 10-11, 1926 George S. Davison, President Gulf Refining Co.: Disregarding the wastes of former years, * * * for the year 1925 full 98 percent of the crude was transformed into salable products, though a part of this was as a matter of economy used in the refineries as fuel in place of coal. * * * Unless restricted by law, the refiner is likely to work up his crude petro- leum into products which will bring him the largest net return, with the exception that it is generally found necessary to supply customers with some products at a loss in order to maintain their patronage for other products in which there is a profit. * * * There have been many changes in marketing practices. These have been caused by the severe competition among the factors in the industry. This same cause will doubt- less lead to further changes in the future. Just as those changes which have been made have had the effect to better the service and lessen the price to the consumer, it is fair to assume that the future changes will + Other Cases of Noncompetitive Control. (1) For a decade, the Cabin Creek Field in West Virginia has been an outstanding example of an economical drilling program having a definite purpose of high recovery at low cost and at a rate adjusted to demand. The field is owned by a single company (Pure Oil) and has been operated as a unit with the definite purpose of meeting only the requirements of the company’s refinery and that for the longest possible time at the least possible expense. This two-fold aim * * * was sought through planning the economic spacing of wells and through conserving the gas pressure in the oil-bearing sand. Freedom from the pressure of competition has made possible at Cabin Creek a remarkably controlled production curve for the field, bearing little re- semblance to the decline curves of other fields. Thus the output from this field was the same last year as eight years before. (2) Another example of an oil. pool favored with noncompetitive control is Rainbow Bend, in Cowley County, Kansas, where three large companies owned only undivided interests in the surface over the pool. This was dis- covered at a time of overproduction (in 1923), but in spite of transportation tacilities permitting rapid development, wells were put down cautiously, * * * dry holes reduced to a minimum, gas was not permitted to escape and reduce pressure, storage requirement was kept down—all factors making for economy. Such a pool, though small, acts as a desirable reserve slowly drawn upon, since it did not reach its peak of production until 1914 months, as compared with 114 months for the larger and more spectacular Wortham, Tex., pool, where the control was divided into 91 competitive blocks. It was significant that the price of crude began to rise just after the crest of the Wortham flood of oil passed, and Rainbow Bend slowly attained its maximum output while the price was at its best. (3) The Reagan County, Tex., field, a somewhat more productive pool, was controlled by two companies (Marland Oil being one), which cooperated rather than competed, with resulting conservative rates of development, spacing of wells, and holding back production during times of greatest overproduction. The decline in Reagan County pool had not begun 214 years after its discovery. It serves in a way as a reserve to be drawn on when its output is needed and the price compensates the owners. Under such conditions supply is responsive to control. (As illustrating the lack of cooperative control the Board refers to the Santa Fe Springs Field, which is considered in Chapter XIII, under ‘‘Financial Losses and Con- servation.”) Strangely conditions abroad favor conservative development and more com- plete recovery of underground oil than in the United States. Mexican examples include the Alamo pool, of the Penn.-Mex. Fuel Co., and the Casiano pool, of the Mexican Pe- troleum Co. se : 268 OILDOM: ITS TREASURES AND TRAGEDIES also accomplish the same purpose, but I can not see that these changes in marketing practices will tend to accomplish the result of conservation which the commission is considering. Amos L. Beaty, Chairman of the Board, The Texas Co.: Nine-tenths of the country’s petroleum production, being drawn from privately owned or State lands, the same proportion would seem subject to State laws of con- servation. * * * It is true only to the extent that State conservation laws are permissible under the Federal Constitution; for property rights flowing even from the State itself are protected by the Federal Constitu- tion. * * * Should the States legislate the uses to which a particular product, privately owned, shall or shall not be put? Assuming, but not conceding, that the State could enforce an act forbidding the burning of residual oil under boilers, should the State undertake such a thing? I submit that it is infinitely better to allow economic laws their play. It would be scarcely a step from a legislated use to a legislated price. * * * If fuel-oil were withdrawn from the smoke-stack market it would be cracked into gasoline. Oversupply and resulting cheapness lead to waste, no less in gasoline consumption than in that of other products. One out- standing result would be the placement of a handicap upon railroads and industries now burning oil and the building up of motor-bus lines and other unnecessary competition. The natural trend is strong enough and should not be stimulated by legislation. * * * The legislatures of the oil-producing States have enacted laws touching many of the subjects + + *, These enactments are varied and far from uniform. * * * Public sentiment varies still more. * * * It is not easy to obtain legis- lation for the benefit of an industry. * * * Legislators are often jealous of State sovereignty and independence, * * * seldom willing to follow advice from industrial leaders. They listen, obtain a smattering of the subject, then feel prepared to change bills submitted. * * * Year after year, in State after State, those conducting business on a nation- wide scale find it necessary to attend hearings and go into arguments on matters fundamental and known to business men * * * in order to prevent serious injury through foolish laws. * * * Not many of the States. are interested as much in conservation of oil as they are in its de- velopment. States that produce none are anxious to become producers. Those producing little are anxious to produce more; to them no argument favoring conservation would have a strong appeal. I seriously doubt if the great oil-producing States of California, Oklahoma and Texas * * * would listen to a plea to hold back production for future generations, * * * especially since limitations would mean higher prices. * * * It makes but little difference whether the waste is of oil or of money; it is to be deplored. Every competitive enterprise involves more or less eco- nomic waste; it is to be expected and is unavoidable. The purposes of civilization have not wholly failed if people are given remunerative em- ployment, even though they are engaged in work which is unessential to some extent. But that philosophy should not be carried too far. Millions of dollars could be saved by the adoption of proper practice in lieu of ir- rational drilling. * * * A proposed measure (to remedy the drilling evil) was given final study by the (Institute) committee with the result that there was no support for it. It was felt that the owner of a frac- a OILDOM: ITS TREASURES AND TRAGEDIES 269 tional drilling site, without expending his money or taking any risk, would be enabled to realize as much as if he had done so. This would be unfair to the real operators * * * and portions of every oil pool would be cut into fractions solely for the purpose of ebtaining this unfair advan- tage. It might be * * * feasible to reverse the idea and allow the owner of a fractional site to drill upon it, making him liable to those whose property should be unduly drained. * * * I would unqualifiedly ad- vocate an act to make valid and enforceable agreements among operators to suspend competitive drilling operations for given periods. It often happens that pools are extended and oil brought to the surface to: be dumped upon the market when there is already a large surplus. This oc- curs because each producer is unwilling for his neighbor to gain an ad- vantage through aggressive development and drainage. * * * The greatest good will come through channels other than legislative. Occa- sionally legislation may be needed. * * * In such cases it should be framed by those expert in the matters involved. *.* * The work of this board has greatly stimulated research. Already * * * strides have been made, the result largely of interest awakened by the question- naire. I have in mind the increased recovery of oil from the sands and recovery from abandoned sands. A few—not many—realized how much oil is left in the ground and abandoned apparently forever under present practices until the President sounded the alarm. * * * It is rather shocking to think that with all the brains and engineering ability, with all the inventive genius for which our country is renowned, we should be unable to recover more than one-fourth of the oil in a stratum under- ground. What we are actually engaged in is a mere skimming operation. * %* * Opportunities (for improvements) here are enormous, the re- ward for success fabulous in amount, and we expect invention on the same scale. Walter C. Teagle, President Standard Oil Co. of N. J.: (“Fuel Oil and Its Influence on Conservation.) In any discussion of conservation the public thinks in terms of Government action, new laws, artificial restric- tions, or some form of controlled operation in the use of raw materials as the only measures for their preservation against future needs. The av- erage man fails to realize that true conservation is economical use. Gov- ernment action may bring about economical use of a raw material, but generally conservation is more certain of attainment by science and eco- nomics. Science, through research, improves methods of production and manufacture. Economics, through price, creates the market. Price ex- pands or contracts production and consumption and is generally the in- centive to research. Price is the controlling factor in conservation and so the influence of price is paramount in any consideration of the sub- porte ,. * The price of fuel oil permits its substitution for coal. * * * It has been suggested that this use be eliminated by law or change in practice which will restrict the production of fuel oil. Such restriction would re- sult in higher prices an dwould limit the use. This condition, if due only to higher prices, would not of itself be a guarantee that the crude petro- leum was being economically used. Two other factors must be consid- ered: (1) Whether economical use of this raw material is not being at- 270 OILDOM: ITS TREASURES AND TRAGEDIES tained under existing conditions; and (2) whether an attempt to change these conditions by new laws and practices will not raise prices of gasoline and fuel oil unduly and thus make the consumer’s cost of the limitations on use out of proportion to the advantage derived. The petroleum industry has passed through 3 interrelated phases. In the first two the value of a barrel of crude was determined practically by the price paid for a single product. In the early history crude got its value from its kerosene content. With the exception of a comparatively small percentage of lubricating oil, the other by-products were negligible value factors. The kerosene price governed the price of crude; the dis- posal of the by-product—fuel oil—was more important than the amount realized. When gas and electricity began to displace kerosene the advent of the motor car inaugurated the second phase. Kerosene lost its place to gasoline as the product determining the value of a barrel of crude. The price realized for the fuel oil continued to be merely incidental. As the motor car came into more general use increased demand for gasoline was met largely by running additional quantities of crude, increasing to just that extent the surplus of the by-product—fuel oil—for which a mar- ket had to be secured in substitution for coal. The third phase of the cycle of change was reached when the inventive energy of the industry was rewarded in 1912 by the commercial utilization of the creacking still, which for the first time obtained a major product from a source other than crude. This invention and the various processes which materialized dur- ing the next few years were limited to the cracking of distillates. * ™ * The price differential between gasoline and the fuel-oil value of the fuel and high sulphur crudes was the incentive for the further development of the cracking processes, perfected within the past two or three years, and the industry is thus for the first time in a position to produce gasoline from them. Every grade of crude is now a potential source of gasoline. What was formerly the by-product—fuel oil—can now be converted into gasoline. The effect is the same as if we had found a new raw mate- rial from which motor fuel could be made. Another source of supply has been created with a lower cost today for the raw material. * * * This is a distinct and revolutionary change from the days of a spread of as much as 15 cents a gallon between tank-car markets for gasoline and fuel oil. Gasoline produced from the initial distillation is, therefore, no longer the controlling factor in determining the value of a barrel of crude. The price of the by-product—fuel oil—has ceased to be incidental. * * * Although the discovery and development of the cracking principle has not only revolutionized the petroleum situation but has effected a conservation measure of incalculable value, it is doubtful if its significance is as yet fully grasped. Cracking has doubled our potential gasoline resources. It has proven that with price incentive further progress in the conversion of the less valuable products of petroleum into the more valuable is. certain of accomplishment. * * * The existence of the cracking process and the relatively low price of fuel oil are national safeguards against the uneco- nomical use of our crude resources. The inevitable conclusion would seem to be that the conservation of petroleum to meet. the See of the future depends upon price. jy ale ~ OILDOM: ITS TREASURES AND TRAGEDIES 271 COMMENTS ON THE -OIL BOARD’S FIRST REPORT * I am impressed most favorably.—J. C. Donnell, Pres., Ohio Oil Co. ’ A broad-minded view—altogether reassuring.—Judson C. Welliver, Di- rector of Public Relations, American Petroleum Institute. A mass of essential facts * * * covering every phase of the prob- lem of the country’s present and future supplies.—Bradstreet’s. The most instructive document relating to the petroleum industry ever issued in Washingtcn.—Mark L. Requa, U. S. Oil Administrator, World War. . A good piece of work—the most constructive “investigating” ever exe- cuted by a government body.—Petrolewm World of Los Angeles. The President’s Board does not reflect upon the Committee of Eleven’s estimate of a billion acres awaiting prospecting.—New York Times. The opinions expressed are conservative and in favor of encouraging legitimate oil development, free from useless state and Federal interfer- ence or control.—Inland Oil Index. The Oil Board saw its origin in a scare and lives up to it in a scare report. But there is nothing that need scare the consumer if the facts are carefully examined.—Nation’s Business. The report dispels rumors that the board was considering the testimony to the effect that drastic methods, probably intervention, would be recom- mended to assure adequacy of future supplies. —National Petroleum News. The report will meet with general approval. In its emphasis on coopera- tion the board avoids dangers incident to impractical compulsory schemes destructive to individual initiative—W. S. Farish, Pres., A. P. I., 1926. The board has refused to recommend dumping the duty of regulation upon the Federal Government, a most welcome and refreshing reversal of the tendency exhibited by reform for a generation. Admirable for the general principles asserted.—Chicago Daily Tribune. : Misinterpretation of some important findings as given in the prelimi- nary report is common. A careful review shows that above all there are no grounds on which to base the apprehension of an “oil famine.” The six-year estimate considers only the measure of the petroleum in present- known fields where there are producing wells.—The Oil Trade. Report about six years’ supply at present rate of consumption has ap- parently been construed in some quarters to mean that the figure repre- sented the total available reserve in the ground. This is far from the condition existing or the intent of the board. Oil men were rather * * * pleased at evident intent of the Government to cooperate with the indus- try in its effort to perform efficiently Barron’s. The report is very constructive. It indicates a willingness on the part of the Government to cooperate with the industry in husbanding present resources and to look with approval upon the efforts of the oil companies to assure themselves of future supplies by incursions into and exploitation of foreign fields. It will be observed that the report speaks of the neces- sity of going into foreign oil fields—George H. Jones, Chairman, Stand- Grannis. Co.07,N, J. The report is a careful, conservative document. It is again made clear that the most useful thing yet accomplished has been to set a large num- ber of people to thinking about the problems of petroleum and the public. If they think wisely and follow up their conclusions with, action, there is no great cause for alarm in the fact that the known proved reserve of petroleum under present conditions of supply is equal to only six years’ demand.—Mining and Metallurgy. » * The members of the Board are as happy as boys with: red-topped boots’ because of the character of letters it has been receiving from both factions in the oil industry.. Every one has been of a commendatory nature.—Staff Special in National Petrolewm News. 272 OILDOM: ITS TREASURES AND TRAGEDIES CHAPTER XII. HUMAN FACTORS AND BENEFICIARIES “The foundation of business is confidence, which springs from integrity, fair dealing, efficient service, and mutual benefit. * * * Hquitable consideration is due in business alike to capital, management, employes, and the public.”’—From ‘‘Principles of Business Conduct,’”’ by Judge Edwin B. Parker.* | THE MEN WHO TOIL AND WIN THE OIL No Recent Census of Workers in the Oil World. The number of wage earners reported on pages 63 and 83 refer to the middle of 1919 and do not include the figures for the “higher-ups.” They totaled 152,011, but would easily exceed 200,000 if to the former were added the number of accountants, chemists, engineers, economists, foremen, geologists, lawyers, managers, salesmen, superintendents, technologists, and numerous others who are identified with oildom. The number now directly employed surely exceeds 300,000—fully a 50 percent increase in six years. “The Oil Indus- try’s Answer’’+ of April, 1924, claims that there are close to 750,000 em- ployes in all branches, with 3,000,000 dependents. Participants Compared to Players on a Baseball Team. Such a compari- son has already been made, on page 66, but. is amplified here. The finders —pioneers or prospectors—may be looked upon as the “pitchers,” since they start the ball agoing. The drillers and producers become the “bat- ters” for they sometimes deliver gushers or “flies,” which in turn mean so much for the consumers or “fielders.” 2.82 —. 3.85 Calif. Petroleum........ 5.65 2.96 3.26 Sinclair’ Consol s3e soe nil nil 0.95 General Asphalt........ 3.56 6.04 5.78 okelly Oiltvs << erence 1.36 0.05 4.43 General Petroleum...... HEDGE ariel 5.49 South: Renn .Oilteaeoeee Nive se 87 Gulf Orn? Corpse os 3.29 4.40 7.99 Standard WCaliie ys een DAS Lee 3.46 Houston2Oiut72 see 3.97 8.93) (238750 standard, And vecssesee 4.68 4.55 5.84 Humblej Oise cirRties 7. 2589) 1b 625. 12295 StandaraacKy.5 aeeeecrete QZ 2 iO San Os0.4 Indep. Oil & Gas....... 1.62 1.42 5.12 Standard Nit dso 2.10 3.30 4.72 Marland¥Ona scene ae 1.52 0:23 280 Standard, UN:-Y sop 1.66 2.42 3.62 Mid-Continent Pet...... Nilowec Oe Oh e4.68 Suni Oho aes 1.38 1.90 3.40 OhioM Osteen 2.54 -1.90 <°3.90:- (Tex: Baer C2 G&G Onna nil 04 .86 Pacihie “OW ese ees 2.55 8.40 4.70 The Texas Coe scone 1.24 4.02 6.02 PanvAm sub asian es 7.96 5.67 9.95 Tide “Water? Oil. 24 145 ocleOo 2.81 Pan Am. Western..:.... ates 4.34 8.47 Union: Oile Cality ose 2-23 Vets yi urate: Phillips Petroleum...... 3.92 3.82 5.12 Vacuum Oiler ence 5.42 7.02 9.73 Prairie Oil :& Gas...:;. 3.68 4.30 6.58 White Eagle O.& R.... 2.938 2.24 3.04 A par value of $25 a share appears to be popular with oil companies, and in line with the extension of stock ownership among employes there has been noted a recent trend to reduce the original par of $100 to the smaller unit. Among those who retain the $100 par value are Atlantic Refining, Houston Oil and South Penn. A limited number have not assigned any par value to their common stock. Otherwise comparisons may be made in the above table both vertically and horizontally. In the latter way it will be seen that the figures reflect a remarkable recovery of practically all these companies from the depressed condition prevailing in 1923. Only three of the 38 were guilty of backsliding. Ratio of Profit to Par a Superior Criterion. Of greater significance to the investor who may not be satisfied with the combination of greater safety with smaller rate of return (offered by older operators), is the percentage which the net for dividend and surplus makes of the par value of the com- mon. From the foregoing table, with the knowledge of the par value, the rate of return may be calculated quickly (see end of chapter). However, if the market price is below or above par, as it usually is, the new buyer of stock must calculate rate of yield on other than par value. Among the * See chart of 50 oil companies published by Ward, Gruver & Co., 20 Broad St., N. Y. + On basis of the new $25 par value instead of the old $100 par, for the sake of uniform somparison. South Penn changed to $25 par early in 1927. OILDOM: ITS TREASURES AND TRAGEDIES 337 higher rates for 1925 may be mentioned 52 percent on par for Humble, 39 for Vacuum, 38.5 for Simms, 31.8 for Gulf, 31.3 for Pacific, 30 for Phillips, 24 for Texas, 23.4 for Standard of Indiana, 22.3 for Marland, about 20 for Pan American Petroleum & Transport, and nearly 19 for Standard of N. J. Rates not quite so good include those of Pure Oil, 14.8 percent; Standard of N. Y., 14.5; California Petroleum, 14; Barnsdall, 13.2; Stand- ard of Calif., 13; South Penn, 11.9; Atlantic Refining, 11.5; Tide Water, 11.2, and Union Oil of Calif., 11. Dividend Rates More Regular. While the earning rates on par in 1925 ranged from 52 percent for Humble down to 1 percent for Sinclair, the dividend rates did not depart so very much from the average, disregarding the companies that pass dividends for an entire year. In 1925 Standard of Nebraska and Vacuum paid at the rate of 20 percent on common, Standard of Kentucky at 16, Shell Union at 14, The Texas Company at 12, and the following at 10 percent: Continental, Ohio Oil, Standard of Indiana and Standard of Ohio. California Petroleum, Pure Oil, Prairie Pipe Line and Standard of California paid 8 percent. Union Oil of Calif. distributed at the rate of 7.2 percent on its issued common stock, Atlantic Refining at 7 percent on its preferred and none on common. Gulf Oil and Marland each at 6 percent, and Standard of N. J. at only 4 percent (see end of chapter). 1925 Swelled Total Treasures in Dividends. Dividend payments during 1925 probably totaled a little more than those of the preeminently pros- perous year 1920, and have never been equaled in any other year. Improve- ments over 1924 were not restricted to any one area nor to operators in any particular branch of the industry. At least 10 companies paid extra dividends in cash or stock. Three other sources of larger payments were increased dividend rates by 9 or more companies, resumption of dividends by a few, and the making of initial payments by others. The only im- portant omission was the passing of two quarterly payments by Prairie Oil & Gas. Like a few others, its best years were 1919 and 1920 in each of which it. paid $5,040,000 or 28 percent on its capital stock.* The five foremost dividend-payers in 1925 were: Standard of N. J., 14 million on preferred and 20.4 million on common, making total of 34.4 million dollars; Standard of Ind., 22.5 million; The Texas Co., 19.7 million; Standard of Calif., 18.9 million, and Pan American P. & T., 16.5 million. Other im- portant payers (on common) included: Standard of N. Y., 14.3 million; Shell Union, 14 million; Vacuum, 12.4 million; Pacific Oil, 7 million; Gulf Oil, 6.6 million; Ohio Oil, 6 million; Marland, 6 million; Pure Oil, 4.9 million (plus 1.7 million on preferred, making total 6.6 million) ; Associated, 4.2 million. The Texas Co. leads all independents with a total of $210,- 000,000 paid to the end of the third quarter of 1926. Since the dissolution of 1911 the leading Standards had disbursed the following totals (in millions) to the middle of 1926: * Reduced to 8 percent in 1923 and 1924 following a 200 percent stock dividend in 1922. On cash dividends are considered here: the subject of stock dividends will be taken up in the next edition of this book and possibly in a separate volume devoted exclusively to petroleum finance and commerce. Standard of Ind. promises to distribute $33,000,000 in 1926 to its numerous stockholders. This should be within $2,000,000 of both preferred and common dividends that will have been declared by Standard of N. J. in 1926. See Wall Street Journal, November 17, 1925, May 24, 1926, August 16, 1926; also ‘‘Dividends from deficits,’ Barron’s, August 30, 1926. 338 OILDOM: ITS TREASURES AND TRAGEDIES Standard, (Ned. 2 epid settee ee eas 88.2 Prairie: Pipesit4 ves bask ee 63:5 Standard,] Naw Jey COM ae iene casters so hee eu S Prairie (O.&' Gone ee eee ee BLS * Standard Imds comics irekcevottins tes cee 174.8 Magnolia is .c. Reh eae PAU poe alee 43.8 Standard se: Galilee eae Riise cioealato tie 158.8 Vacuum: Olt 286 ce See ee eee 36.6 Standard avn Vesa hs hoeedaccm aeheee 136.8 Standard, Kyocii. ice ccs cae eee 18.0 Ohio OUR aa Se Ba ae or Be Ieee 12253 Humble! \6oc8e is i ee 15.8 ) N N \ \ Es: A TYPE STUDY IN OIL—THE TEXAS COMPANY Reasons for Selection. This concern was chosen for the type study in this edition because (1) it has a splendid reputation, (2) represents the independents, (3) operates in all but three states, (4) is best known abroad next to the New Jersey and New York Standards, (5) has enjoyed a healthy, steady, harmonious growth for over 25 years, (6) is unusually well bal- anced, (7) has officials of high character, broad minds and friendly feelings toward the helpful activities of the Government,* (8) is physically and *In 1922 the general counsel of The Texas Co. was selected by Uncle Sam to serve on a high commission requiring courage, tact and dispatch. The N. Y. Tribune contained one of many complimentary editorials: ‘‘President Harding’s nomination of an able Democrat, Attorney Edwin B. Parker, to the General German Claims Commission, shows a spirit of generous non-partisanship. The appointment is wholly admirable * * *,”’ “All for Each—Each for All’’ is the motto of this great corporate family. “Its affairs cover the entire range of the petroleum industry and extend over the face of the earth.”— Editor Lefevre in The Texaco Star, October, 1922. ‘‘Around the World with Texaco,” is the title of a book by the globetrotter, C. S. Dennison. It is popular with pupils and teachere who like real and recent geographic facts liberally illustrated. OILDOM: ITS TREASURES AND TRAGEDIES 339 financially strong enough to withstand the worst winds, (9) is famous for its efficiency and (10) pays annual dividends of almost 20 million dollars or little less than either one of the two leading Standards, considering common stock. Born at Beaumont in 1901. Its predecessor, The Texas Fuel Co., was “spudded in” near Spindle Top (pages 40-41 and Chap. VIII) but 77 days after the great Lucas well began to belch forth. The Texas Co. was incor- porated April 7, 1902, with a capital of only $3,000,000 and only 119 stock- holders. Natural growth caused successive increases in capital which has been $164,450,000 par since 1921.* The stockholders numbered 32,826 in September, 1926. The original roll of 12 employes grew to 27,000 by 1920. In 1917 the company was authorized directly to produce oil, so the Pro- ducers’ Oil Co. was dissolved. About the same time the Texas Pipe Co. and the Texas Pipe Line Co. of Okla. were formed, also The Texas Co. of Mexico. The big event of early years was the 1903 purchase of Sour Lake, the pool which to 1926 produced more oil than any other in the Gulf Coast field except Humble. The company’s development of its 800 acres brought Sour Lake up from 45,000 bbls. in 1902 to 8,848,000 in 1903 (then half the output of all Texas).{ Operations were extended into Oklahoma with the opening of the Glenn pool (1906) and intensified with the deeper (Bartles- ville sand) development in the Cushing district (1914). The pipe line from West Tulsa to Port Arthur was built in less than 5 months (by June, 1907), but the most sensational scene was laid in July, 1920, at West Columbia, 50 miles west of Galveston. Here the company during one week produced from a single well oil worth $80,000 daily and reaching a maximum rate of 33,000 bbls. daily, probably the most profitable producer for any six-month period in history. (See view of Abrams No. 1, page 320.) A Few Physical Facts. Usually but 10 percent of controlled acreage is cwned by an oil company in fee. The Texas Co., however, in 1925 thus held almost 30 percent of its 1,690,000 acres. Its 3,114 domestic wells aver- aged 18.7 bbls. per well per day; its 23 Mexican wells 88.2 bbls., making a combined average of 19.2 bbls., nearly thrice the average for all the 306,100 wells in the United States, December 31, 1925. Of 453 domestic wells com- pleted that year 27 percent proved dry; of 7 Mexican, 57 percent. In 1925 about 21.2 million bbls. of crude oil were produced and 21 million were bought in the United States; respectively %4 million and 2% million in Mexico. Of the total, 45.4 million bbls. 34.4 million were run through the company‘s refineries in Illinois, Louisiana, Oklahoma, Pennsylvania, Texas and Wyoming. Gasoline recovery increased from 40 percent of 35.9 million bbls. in 1924, to 44 percent from 34.4 million in 1925. Pipe lines now measure almost 5,000 miles and the tankage, 40,000,000 bbls. The company owns or leases 5,400 tank cars which each averaged 11,400 miles of travel in 1925. Its 19 steam tankers and 4 motor vessels carry yearly about 3.5 million tons or 20,000,000 bbls. of oil.+ — *In the fall of 1926 was created the new corporation, The Texas Co. of Del., with $250,000,000 authorized capital. This harmonizes better with its huge assets. ~ Further details in Texaco Star, April, 1926; Barron’s, March 8 and May 10; Wall Street Journal, April 25, 1924, under ‘“‘Texas Company Tells Operating Story: First of Large Oil Companies to Outline in Detail Operations in Its Departments.’’ H. G. Lapham, a director, stated in Barron’s, December 20, that late in 1926 refinery runs and reruns totaled 140,000 bbls. daily, six-sevenths at the Port Arthur plant. 340 OILDOM: ITS TREASURES AND TRAGEDIES Financial Information. Only one other independent had a gross income in 1925 greater than the $208,000,000 of The Texas Co. Deducting $48,600,000 for cost of materials left a little less than $160,000,000 as the earnings. Operating expenses approached $90,000,000, and after allow- ing for depletion and other deductions, including dividends of $19,700,000 there remained a surplus which added to that of 1924 ($95,200,000, less adjustments) brought the surplus up to $113,500,000 on January 1, 1926. Following is the consolidated income statement for 5 years, values expressed in millions as of December 31 of each year: 1921 1922 1923 1924 1925 Gross ‘earnings “during yearuae . ie cece ee ae $102.6 ‘$131.0 $118.4 $139.6 $159.4 Operating: “expenses ete sere ie ee es eee 73.0 80.6 87.5 89.1 89.4 IN Gt Car MIN SS rece cilse cia oe er eee ee eee $29.6 $50.4 $30.9 $50.5 $70.0 Changes in crude inventories, etc..............-.0% 10.6 7.4 6.5 4.8 8.3 Depletion; déepr.; “hederal@taxesiis: cue eee ee ee 37 16.4 16.2 19.2 Papi k Net income for dividends and surplus......... $9.3 $26.6 $8.2 $26.5 $39.6 Previous surplus “wath cadjustments!.. 6 os see ae cle Oo23 88.0 99.9 88.4 93.6 Balance before dividends. aoe ce eee $101.6 $114.2 $108.1 $114.9 $133.2 Dividends paid. during Weare... cise eeiciee teens 18.1 19.7 19.7 19.7 19.7 New-surplus-at: end “of year’s ese cies ees seers $83.5 $94.5 $88.4 $95.2 $113.5 —Texaco Star. MOFFAT DOME, COLO., WHICH THE TEXAS CO. (JOINTLY WITH THE TRANS- CONTINENTAL) FIRST DEVELOPED All assets of The Texas Co. must approach $500,000,000 in value at the close of 1926 considering its rich reserves in 8 states and in Latin America, its growing production of over 65,000 bbls|. daily (3 percent of the United States total, mostly settled and worth more than the $500 a bbl. carried on the books), its refining capacity of about 160,000 bbls. daily (especially the huge capacity for cracking by the Holmes-Manley process, and last but not least, its world wide good will which has not been capitalized in the records. Oil lands and stocks of merchandise are largely undervalued by this modest wh el OILDOM: ITS TREASURES AND TRAGEDIES 341 company according to the balance sheet which shows total assets a little below $400,000,000. The strongest proof of success is found in the fact that net profit for dividends and surplus exceed $300,000,000 to the end of 1926. BALANCE SHEET OF THE TEXAS COMPANY AS OF DECEMBER 31, 1925 (in millions) Fixed Assets: Basic Liabilities : Refineries and terminals......... $70.25 Capital stock (common)......... $164.45 Lands, leases, wells, equipment... he Sy LUSae custete cu ercbereus asters hale ataie' reese 113.4% Pipe lines and tank farms....... 52. : ——-- Sales stations, facilities, etc...... 41.33 Capital and surplus dete thetshecs $277.92 Ships and marine equipment..... 29.10 Reserves for depletion and Tank cars, other ry. equip....... 5.82 depreciation ............ $96.58 : LOLP AMOLtIZa tion aa. .es 4 2.43 Totaletixed: assets). encseie tnt $254.11 99.01 Current Assets: Mejorm liabilities ies... : seamed tsa a ioe $397.64 (a) Securities $1.14 mil. and deferred charges. thos etic Fee we —Texaco Star. PART OF THE TEXAS CO.’S TERMINAL AND REFINERY AT PORT ARTHUR Review and Recent Events. This company is firmly entrenched financially as shown by its modestly appraised assets and its enviable earning record of a quarter-century. It has never failed to pay dividends although, like other oil operators, its earning in 1921 and 1923 did not cover these require- ments. In 1925 its earning rate on par was 24 percent, or far better than the average. Its dividend rate was 12 percent. Current events have fore- shadowed additional benefits to stockholders. One, has been the boost in its gasoline business by the introduction of Texaco high-test motor fuel (see Philadelphia Ledger, August 13, 1926). Another has been the purchase ITS TREASURES AND TRAGEDIES OILDOM 342 ‘ayeiqd "I “‘Y ‘usoquveg “fF ‘Y ‘snyy, Aran, ‘staeqd “Y “A ‘usmypelg “O “O ‘Apeed “f£ “M ‘(qUepiserd) sowpoH “DO “Y ‘TeMyooy Weqry ‘paedoys “f “A ‘AqpuUeW OL “A ‘resulfed “DO \L—Mor w0z0q ‘usydey “H ‘f¢ ‘plogy uemMaieyg ‘enysouog ‘f ‘LT ‘(6gg esed aes) weydey ‘5 ‘H ‘sepouy “W ‘A ‘(JUepisetd ootA) ust0y “fF “Q—MOL eTPPprIL ‘sInoq “VW “H ‘usedieH “W ‘SewfOH “HM 'M ‘pueBljoH siAviy, ‘uoImeH “W “H *XOF ‘D'S soi oof “43009 “jy, UYyoR ‘(pre0oq oy, jo UBUIIeYyD) AJeOgG ‘"T ‘VW ‘e3poqd ‘d ‘A ‘Il@H “M ‘A ‘TAStH “AW ‘Y4Vq AVspyY ‘Ao1w9g “g ‘souof H0N[H ‘TepAug "WH ‘UBUssoT “A “Y—Mor doz ‘FySIL 0} F597 9261 ‘CZ HOUVW ‘SMYOM UNHLUV LYOd OL LISIA V NO SHUAGTIOHMOOLS S.ANVdWOO SVXOUL FHL dO. dWOS "L075 oopxay ay2 fo alaafaT sovipy fo fisazin0pj— OILDOM: ITS TREASURES AND TRAGEDIES 343 of the Southwestern Petroleum Co. with 7,000 bbls. daily production without public financing or issuance of stock although the net cost approximated $11,000,000. With a good grip on foreign and domestic trade and with working capital (current assets minus current liabilities) close to $125,- 000,000, the company is advantageously situated for further absorptions. Its stock has been very steady on the market, low of 1925 being 42% and high, 55; highest price since 1919 being reached on June 23, 1926, when it stood at 56, 124 percent above par. At this rate the 6,578,000 shares should be worth $368,368,000. No wonder that the new Texas corporation is justi- fied on the basis of $250,000,000 capital so as to provide for a stock dividend after November 1, 1926. Net income for 1926 was $36,000,000. D. J. MORAN A Vice President of the Texas Co. Since March 18, 1924 He is a native of Ohio and a graduate of Case School of Applied Science (at Cleveland). He has been with this company since 1908, the time of the Glenn Pool excitement. Previously he had been attached to the Buckeye Pipe Line Co., Ohio Oil Co., and Oklahoma Iron Works. In 1920 he became vice president and general manager of The Texas Co. of Mexico. A. L. Beaty is chairman; R. C. Holmes, president; T. J. Donoghue, G. L. Noble, C. N. Scott, W. W. Bruce, vice presidents; C. P. Dodge, secretary; C. E. Woodbridge, treasurer. A QUARTET OF MONEY-MAKERS—TWO STANDARDS, TWO INDEPENDENTS Combined Assets and Earnings. Many oil companies evidenced their highest earnings in 1925 in contrast with the low ones in the lean years 1921 and 1923. Of the four compared herewith, Standard of Indiana is the oldest, having been organized a dozen years ahead of the two independents, Gulf Refining and The Texas Co.’s forerunner. The collective gross income of these three and Humble Oil and Refining Co. probably totaled between 800 and 900 million dollars in 1925. Their net profits aggregated $150,- 000,000 out of which $51,000,000 was paid in dividends, leaving almost $100,000,000 for surplus addition. The accumulated surplus of all four actually exceeds the cost of the Panama Canal. Assets on December 31, 1925, totaled $1,534,000,000 or 10 times the net profits. COMPARISON OF PROFITS, DIVIDENDS, SURPLUS AND ASSETS FOR 1925 IN MILLIONS Stand., Ind. The Texas Gulf Oil Humble Netatinro fits macercins, «7s tints © aise en thcavateideeuel avec s $52.9 $39.6 $35.0 $22.6 Dyyaiden ds: Bascererscte cto. tia oS et orcas ees oae.c! thay cbiellaye cues yeritas hee 22.5 TOT 6.6 Dal SUrpluseec Ore vd dtr tier ver oetene setters ei « Gideon eae $30.4 $19.9 $28.4 $20.5 SE OURS TIE US pe LG Ge peo lites ienardseee ae eee Mts olen siokenomens tne tt ie. < $142.1 $113.5 $108.0 $50.8 Tataltassets,: Deca ol 5c eaicistie eis eats slelelsMalsle ei. carats (a) 451.8 397.6 427.6 (a)256.9 (a) Accumulated depletion and depreciation reserves for Standard Oil of Ind. and for Humble Oil & Refining Co. have been added to their assets appearing in official statements in order that comparison may be made with the Gulf and The Texas companies on the same ‘basis. Much of this matter has been abstracted from Barron’s for March 29, 1926, and supplemented with additional data. + Barron’s, June 14, 1926. + Wall Street Journal, August 28, 1926. 344 OILDOM: ITS TREASURES AND TRAGEDIES Comparison of Capital and Earning Rate. The par value, $25 a share, is the same for all, but the number of issued shares is different. Both Gulf and Humble carry funded debt as part of their capital liabilities, and until 1926 Humble owed the additional sum of $31,000,000 (to Standard of N. J.) now cancelled through the issue of new. stock, bringing its total up to 3,000,000 shares. On December 31, 1925, capital and surplus liability for each was as follows in millions: Stand., Ind. The Texas Gulf Oil Humble Oil Number of shares issued..........:.. Mea ie 9.08 6.58 4.4 1.75 Naluenof-shares) issued apart). ce an ee $226.3 $164.45 $109.77 $43.75 Bonds -ands notestie eee eee eee none none 42.90 56.00 Total capital liability................- $226.3 $164.45 $152.67 $99.75 Capitaliestr plus ee eet acai eee een (a) 63.1 113.47 107.96 50.8 Capital and surplus,.........:...+..0- $289.4 $277.92 $260.63 $150.55 (a) Besides $79,970,000 earned surplus, making total surplus $142,070,000. COMPARISON OF THE PER SHARE BASIS FOR THE YEAR 1925 Net “profit. per shares eee ee tees eee ee $5.84 $6.02 $7.97 $12.93 Dividendssperushares ein ee ee ee 2.50 3.00 1.50 1.20 INewasurplusepermsharescenuctenti ene 3.34 3.02 6.47 11.73 Total-surplusepersshareseene ate nee ee 15.70 V2 24.59 29.05 Total: assets’ per-share. nie ee ene 50.00 60.00 97.00 146.00 Earnediion)anvested! capital (a)iaac occa tee 11.7% 10.0% 8.2% 8.8% Harnedvonscapitalustocion Gb)