In a potential frontier region that contains ample ports, e.g., New 

 England, each (major) drilling company will identify two or three poten- 

 tial ports which can meet the needs for setting up a temporary base of 

 operations. There is uncertainty associated with the offshore leasing 

 process and companies are not sure which tracts (if any) they will own 

 an interest in until after the sale. Therefore, neither options nor 

 acquisitions are likely until after the lease sale. 



Recognizing the uncertainty faced by the oil companies, a mud 

 company or service company will sometimes establish a base in a port 

 that is convenient to the lease area and that possesses the necessary 

 site requirements; then the mud company or service company may attempt to 

 make an arrangement with one or more oil companies by offering free dock 

 space in exchange for the contract for mud and/or drilling fluids. This 

 strategy may result in several oil companies operating out of a single 

 base. Since the service industry is so highly competitive, three or 

 four such bases may possibly be set up in different ports. 



After a temporary base is established, the company will probably 

 continue to develop the site into a permanent base, if offshore 

 discoveries merit increases in onshore development. The desire to stay 

 in the same location reflects industrial inertia fostered by a 

 familiarity with the capabilities and limitations of the temporary site. 

 If another site were selected, additional unproductive efforts such as 

 altering the supply system associated with transportation, hiring a new 

 labor force, and closing down the temporary base would increase present 

 costs and would offer returns only in the future. The only two possible 

 reasons for relocating the supply base are: (1) need for additional 

 land space or waterfront for significantly increased activity, or (2) 

 selection of a site closer to the offshore leases. The latter cause is a 

 real possibility under the frontier lease system, as large areas are 

 leased simultaneously and the possibility of discovery exists in each 

 leased tract. Companies, however, are aware which tracts are considered 

 most likely and, therefore, attempt to minimize the necessity for re- 

 locating their supply base by selecting a site close to the "best" 

 tracts. 



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