Generally rising crude oil prices pumped up the drilling rig count (53) in California to a 22-year high in July, and a lot of the action is in "urban plays," previously dormant or downplayed fields from the state's rich history of oil and natural gas production that are suddenly stirring new drilling.
In some cases they are areas now surrounded by residential development, and as such, operators are having to adhere to a long list of local restrictions regarding noise and environmental protection.
In Whittier and Carson, two Los Angeles suburbs with deep histories involving oil and gas production, the new urban push is taking place, as captured in a business report in the Los Angeles Times last Friday.
Both cities have put together more than 90 requirements that drilling operators have agreed to adhere to for the opportunity to do some new exploration and production (E&P) work in old fields.
In Whittier, a 100-year producing field shut down by Chevron Corp. in 1990 after 70 million barrels of production following an historic estimate of being a 700 million-barrel field, now has attracted the interest of Santa Barbara, CA-based Matrix Oil Co., which has hopes of pulling another 70 million barrels from the field.
A settlement agreement was jointly announced last Friday by the city and Matrix involving the E&P company's right to drill in a 7.5-acre area near the base of the Whittier Hills about 20 miles southeast of downtown Los Angeles. Matrix officials indicated the long list of mitigation measures were taken from an earlier agreement between the county and Houston-based Plains Exploration & Production Co. (PXP), which produces about 9,000 boe of oil and natural gas from an 84-year-old field in southwest Los Angeles (see Daily GPI, July 8, 2008).
Whittier has sought to have environmental improvements made to the oilfield lands at the same time it develops an added revenue stream for the city. Royalties of 30-50% are included in the settlement, which the city characterized as "both parties feeling that their efforts and goals are now best served through the consummation of this settlement." Los Angeles County elected officials will have to ratify the agreement.
In Carson, near the Los Angeles-Long Beach ports, Occidental Petroleum Corp., the state's largest oil E&P and the nation's fourth largest, has proposed "disguising" its drilling rig around a warehouse-like facade. In addition, pumps would be placed underground, and all the equipment will run on electricity and the oil produced will all go directly to the nearby Carson refinery that Tesoro recently purchased from a unit of BP plc.
In addition to agreeing in Whittier to preserve wildlife and nature areas in the oilfield, Matrix plans to install a seismic monitoring station with automatic shutoff capability in the case of earthquakes. In addition, operations will be restricted for most of the spring and summer to accommodate migratory birds.
All of this activity is prompted by oil prices that have stayed higher than $90/b. Those potential energy profits are why Whittier now thinks it has met its stated goal in the settlement: "to maintain the open space assets available to the public while generating an income stream to the city and [creating] the wilderness preserve that would support city services without tax increases far into the future."
Historically, Southern California was one of the largest fossil fuel basins in the world. The rise in oil prices has renewed interest in the state's old plays.
Thirty miles east, Whittier has carefully worked out the potential resumption of drilling on up to 1,200 acres of former Chevron and Union Oil production fields -- still producing -- that the city purchased from the oil companies in the mid-1990s for conservation purposes.
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