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Coincidentally, the great oil chase comes at the very time a supply glut has been depressing petroleum prices. While the U.S. economic recovery has jacked up prices, the cost of benchmark Arab light crude (about $16 per bbl. as of last week) is only slightly higher, after adjusting for inflation, than it was just before the 1973 Arab oil embargo. Yet so vital, still, is oil to the world's economy that companies must constantly hunt for vast new "elephant" fields to replace dwindling reserves. And U.S. firms are increasingly being driven abroad by the shortage of easily extractable oil in the lower 48 states and by environmental restrictions that prevent exploitation of oil-rich regions like the Santa Barbara Channel, off Southern California.
The risks could be as great as the potential rewards. Among other hazards, the oilmen are having to cope with a corrupt bureaucracy in Russia, rebellion in Colombia, civil war in Africa and demands from angry tribespeople in Papua New Guinea. Not the least of the problems is bringing the oil to market from some of the most remote spots on earth: required are hundreds, even thousands of miles of pipeline through jungles and deserts and across sometimes squabbling political jurisdictions whose refusal to cooperate can sink a project.
A look at the oil rush around the world:
THE FORMER SOVIET UNION. When Kazakhstan's President Nursultan Nazarbayev ended a three-day visit to the U.S. last February, he took home a Clinton Administration pledge to boost aid to his country from $91 million last year to more than $311 million in 1994. The unspoken reason: Kazakhstan's huge oil reserves, which Washington would like U.S. firms to develop. "We're talking about the greatest number of super-giant oil fields outside the Persian Gulf," says an Energy Department official.
Chevron has encountered obstacles in Kazakhstan that go well beyond the hostile climate. Executives were dismayed to find the Kazakhs clinging to outmoded production methods developed 20 years ago, when the region was still under Moscow's rule. Safety became an issue too. "The safety equipment is outdated, but by law we have to follow Kazakh practices," says Bret Thibodeaux, a Chevron consultant. "They insist that we use their safety equipment instead of our own."
The biggest hurdle for Chevron will be getting the crude to market as production increases from 30,000 bbl. to 700,000 bbl. a day by 2010. Russia has restricted the flow of Kazakh oil through a Russian pipeline to the Black Sea port of Novorossiysk because the crude contains corrosive sulfur -- a problem Chevron plans to rectify by year's end by installing special cleanup equipment. The high cost of removing the toxins has forced Chevron to cancel some roadbuilding plans and to recall about 10% of its 250 U.S. employees.
Rather than rely on the aging and limited-capacity Russian pipeline, Chevron is considering alternatives that include construction of a $1.2 billion, 1,200-mile line to Novorossiysk. The fate of that proposal and others has yet to be resolved in what Chevron concedes have been "difficult" negotiations with Russia and Kazakhstan over issues ranging from transport routes to financing.