Business review; Oil in Alaska

From the national educational radio network here is a Business Review ASSOCIATE PROFESSOR ROSS Wilhelm of the University of Michigan Graduate School of Business Administration presents his views in the commons of business and economic activity. The recent discovery of oil on the North Slope of Alaska promises to significantly increase American oil reserves and perhaps to help reduce the prices of petroleum products. The oil discovery on the shore of the Beaufort Sea and of the arctic ocean gives every indication of being a major find and may prove to be one of the world's largest oil deposits. The payoff for the oil companies owning the leases promises to be handsome. The great return which the oil companies hope to reap from their discovery will not be clear profit however the risks and costs of exploration for oil in Alaska are far higher than anywhere else in the world. As a consequence it will take many years of production for the oil companies to recover the tremendous amount of money they spent in finding the new oil field. Experiences indicated the companies have had to spend two and a half to six times more in their exploration and drilling efforts in Alaska than for comparable work in

California and the Texas coastal area. And Ed. The odds against success in drilling wells in Alaska have been much greater than is the case in many other areas of the hundred ninety seven Wildcat wells drilled in Alaska since 1057. One hundred forty nine have been dry holes. The combination of very high drilling and exploration costs and a very low probability of success adds up to a situation where an oil company had to have hopes of bringing in a major discovery in order to justify the great risks. The cost in seeking oil in this unfriendly climate are seen clearly in the history of rig 162 which was the one which eventually brought in the new field last year according to the publication petroleum today rig 162 especially designed for use in the Arctic region. The rig is enclosed with a steel sheeting and is heated with massive air heaters so the men can work in the coldest weather rig 162 was originally shipped to Alaskan 1057 to drill a wildcat well on the Alaskan peninsula. The first hole that was drilled to a depth of fourteen thousand three hundred seventy five feet and

it cost the company seven million dollars in a year and a half a time. The result was a dry hole. The reg was then moved to an area south of Anchorage and then later to an area near Mt. McKinley. All of these holes also proved to be dry to be dry. In 1965 the rig was used to drill a test hole for the Atomic Energy Commission who used it for a test of the differences between the seismic rays waves of earthquakes and atomic explosions in 1066 Reg 162 was back on oil work and it was dismantled packed up into 20 ton packages which were flown over the brook mountain range to the north slope over three million pounds of pipe fuel trucks rigging and other equipment were flown north with Reg 162. Another hole was drilled on the North Slope. This one went down thirteen thousand five hundred feet before they gave up another dry hole in 1067 Reglan 62 was loaded on to tractors and moved fifty six miles to a new site here another well was drilled and this was the one that proved successful and opened up the North Slope oil field. Now that the North Slope field

has been brought in the really big investment in this game of petroleum exploration and production will be made. It's expected that it'll take two or three years of additional work before the field begins production. In addition there will be a major problem in moving the oil from the North Slope to refineries into your gasoline tank. Because the Arctic Ocean is frozen over most of the year it's expected the pipeline will have to be built to the southern Alaskan ports where the oil will be loaded on tankers and moved to the mainland. We hear a great deal of nonsense from people who should know better about the undesirability of big business and yet any examination of the North Slope operation makes it clear that no other organization other than a huge win could have undertaken the great risk an investment which was necessary to carry this through to success and further it's not at all certain that just one big organization alone would have or could have carried the entire project to completion from one thousand nine hundred forty one thousand fifty three the United States government sought to develop the north slope into an oil producing area. The federal government sank thirty six Wildcat wells in the portion of the North Slope which had been set aside as a naval

Petroleum Reserve. And while several of the government's Wells hit oil sands after spending 15 million dollars on the project they finally gave up and stopped the north your experience shows that while we need big organizations to carry through such projects we simply cannot rely upon one organization such as the federal government to do the job. We have big businesses because there are industries such as petroleum refining automobile steel aluminum and chemicals where the nature of the jobs to be done are such that only big groups can accomplish the tasks that was Associate Professor Ross Wilhelm of the University of Michigan Graduate School of Business Administration with his views and comments on business and economic activity. Business Review is recorded by the University of Michigan Broadcasting Service. This is the national educational radio network.