The Offshore Imperative: Shell Oil’s Search for Petroleum in Postwar America

2 Testing the Waters

29 2 Testing the Waters Royal Dutch/Shell emerged from World War II desperately short of crude oil. It had lost key production in Europe and Asia and failed to obtain equity in the enormous reserves of Saudi Arabia and Kuwait. As a partial remedy, the Group negotiated in 1947 the largest long-term purchase contract in the history of the industry to take one-half of Gulf Oil’s Kuwait production. Still, as it recovered from the war and expanded, Royal Dutch/Shell lacked enough of its own crude to match rising sales. Aggressive exploration, therefore, became its prime directive. By the early 1950s, Group companies participated in practically every area open to exploration. They were often the first to enter frontier areas, and with their strong technological background they were not afraid to tackle those with complicated geological structures, unlike some other major oil companies that sought large, simple structures. In the early postwar period, Shell Oil undertook one of the most successful campaigns within the worldwide Group to acquire more oil and gas sources. By 1950, petroleum had eclipsed coal as the main source of energy for Americans. Relatively cheap and easy to transport, oil and gas accounted for nearly 60 percent of national energy consumption. With a booming American economy, demand for petroleum resources seemed insatiable. Although the industry had made some major discoveries in the 1930s, American oil reserves were at a near-record low. Many U.S. oilfields came out of the war worked over and depleted; exploration for new fields had been largely postponed during the conflict. The United States was the oldest and most intensively explored producing region in the world. The most obvious oil, contained in structural traps, had already been discovered. To find new fields, new kinds of traps and oil would have to be found using new exploration concepts and technologies. Research at Shell Oil’s Bellaire E&P laboratory became essential to the company’s drive to replace reserves. The race against depletion in postwar United States would prove to be as technologically challenging as anywhere in the 30 The Offshore Imperative world. The biggest challenge was the move offshore. Confined to the domestic oil province but excluded from the best onshore prospects, Shell Oil looked offshore to improve its declining competitiveness . The E&P organization adopted a strategy of gradually getting its feet wet, acquiring leases in shallow water that the company could develop without having to make great leaps in technology. The Gulf of Mexico was the perfect place to do this. Its waters were mostly calm. Its seabed sloped gently, providing a relatively flat bottom and shallow water miles out from shore. And it was near established oil centers. In fact, drilling in shallow water involved little more than an extension of marsh techniques. The company’s successful experience in the 1930s and 1940s in finding and producing oil at Weeks Island and other wetland areas of south Louisiana gave it the skills and confidence to test the open water. After the war, Shell acquired large acreage from the state in the shallow bays around the Mississippi River delta and made some major discoveries, particularly in the East Bay between the South Pass and Southwest Pass of the river. The East Bay fields, along with other major ones in the Main Pass area, changed the company. Shifting the exploration focus and the corporate E&P budget to the newly established New Orleans area positioned the company as one of the most successful early pioneers in the Gulf. As an aggressive developer of offshore seismic capabilities and one of the original sponsors of mobile drilling technology, Shell Oil vaulted ahead as a leader in the new offshore game. During the 1950s, it continued to push the boundaries of technology and water depth to expand production in this new frontier. The company took a calculated gamble, but it was one that paid sweet dividends . Most people in the industry agree that offshore Louisiana made Shell Oil. Wetland Bonanzas Oilmen began addressing the challenges of marine environments long before they began to think seriously about drilling in the open waters of the Gulf of Mexico. Exploring such environments was at first an incremental process, involving the adaptation of land-based equipment and technologies to particular locations . As early as 1896, companies had drilled in ocean waters from piers extending off the beach at Summerland, California. In 1911, Gulf Oil drilled the world’s first oil well in inland waters at...