CA Gas Well May Need to be Horizontally Drilled

Results of the latest fracing in a relatively shallow (2,000-foot-deep) exploration well near Delano in California's southern central valley indicate a horizontal drilling program is going to be needed to prove the potential of what Tri-Valley Oil and Gas Corp. is calling the far West's largest natural gas field ever.

The Bakersfield, CA-based producer, which brought in the initial vertical well in early April (see Daily GPI, March 12) expects to be drilling horizontally for the rest of the field, which it envisions as a 40-well project to tap an estimated 3 Tcf of reserves that could equal or exceed all remaining gas reserves in the state.

"We have confirmation of the gas in place, but we don't have confirmation of deliverability because all we have is a vertical well," said F. Lynn Blystone, Tri-Valley's CEO, responding to questions about the drilling site's progress. "We're going to have to do what Texaco and Enron are doing in the same formation farther to the south --- put a horizontal leg on a vertical well with a million-pound frac on it."

Enron Oil and Gas is drilling (for oil) about 10 miles south; Texaco is about 17 miles south and about 2,000 feet deeper in the formation there.

Ultimately, Blystone said it will take a large energy operator --- like Texaco, Enron or perhaps Calpine ---- to quickly drill the whole field over the next two years with the relatively more costly horizontal drilling. Tri-Valley would take a smaller share of the more rapidly developed field, rather than spend 20 years drilling it out with independent smaller investors.

"A big company could drill it out in a year, looking at 40 locations," said Blystone, who expects to go back to his investors with the initial horizontal drilling proposal at the end of this week. He also noted that Tri-Valley is looking at borrowing more to finance a bigger share of the drilling program.

"We see a chance now for Tri-Valley to take bigger shares of both this (Sunrise-Mayel No. 1) project and the Project Ekho (deep drilling northwest of Bakersfield)," he said, noting that interest in gas exploration among lenders has picked up on recent months with the state's continuing supply shortfalls for both natural gas and electricity.

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