By Michael A. Martorelli

The Bureau of Ocean Energy Management’ s( BOEM) oil and gas lease sale Number 262 in December 2025 will be the latest chapter in the long history of the energy industry’ s pursuit of offshore oil. It was not until 1962 that the federal government fully realized the revenue potential associated with leasing drilling rights to offshore tracts. That was also the year oil producers finally developed the technology to operate in several hundred feet of water. The industry’ s story from its earliest days to that watershed era features an unusual mix of science, technology and politics.

From Modest Beginnings to the Eve of a New Era

From 1859 to the end of the 19th century, the country’ s fledgling oil companies extracted more than 3.3 million barrels of crude from hundreds of wells scattered

The ENSCO 8506 offshore semisubmersible drilling rig in the Port of Galveston, Texas, in the Gulf of Mexico, April 7, 2019. throughout eight states. As early as 1883, geologists began suspecting that even more oil was trapped in pools under the country’ s shorelines, a notion the California State Mining Bureau endorsed in 1896. That year, an entrepreneur named Henry L. Williams started a new tradition by building a pier 300 feet out into the Pacific Ocean off the coast of Santa Barbara and drilling for oil in about 30 feet of water. Within a few years, other explorers had drilled dozens of oil wells in that area. That modest oil field never produced more than 75 barrels a day and was played-out by 1902.

Around that time, the companies that discovered the Spindletop and Jennings oil fields in the coastal areas of Beaumont, Texas and Acadia Parish, Louisiana, respectively, speculated that similar oil reservoirs also ranged some distance offshore. By 1919, geologists saw evidence of an extensive oil pool about 2,000 feet out into the Gulf of Mexico. Texas and Louisiana established procedures for companies willing to spend significant amounts of money for the right to explore for oil beneath their coastlines. But the cost of trying to access that offshore oil was prohibitive; moreover, the drillers didn’ t have the right equipment to do the job.

During the next several years, many companies contributed to the steady improvement in the techniques and processes needed to access the pools of oil they suspected of lying under the shoreline. Geologists advanced the science of underwater geophysical seismology. Contractors built pile-supported drilling platforms and submersible drilling barges. Marine companies converted shallowdraft barges and skiffs to haul equipment and personnel towards the open Gulf waters. And meteorologists improved their ability to understand and predict the nature of tidal movements and storms.

Actual drilling activities proceeded slowly. In 1927, geological and geophysical survey parties discovered an underwater salt dome and affiliated oil reservoir offshore Louisiana in Vermilion Bay. During the next two years, additional crews discovered similar geologic patterns south of Houma, Louisiana, as well as potential oil reservoirs as far as a mile out under the Galveston Bay. By 1935, companies were drilling hundreds of wells off the coasts of

20 FINANCIAL HISTORY | Fall 2025 | www. MoAF. org