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CA Deep-Drilling Hits Snag; Fracturing to Prove New Supplies

CA Deep-Drilling Hits Snag; Fracturing to Prove New Supplies

Deep drilling in the southwest end of California's central San Joaquin Valley is awaiting more testing work to prove that backers' claims of substantial new oil and gas supplies below 15,000-foot depths are, in fact, commercially available.

Tri-Valley Oil & Gas Co., operator of the Project Ekho No.1 well about 45 miles northwest of Bakersfield, says it is extensively evaluating procedures since California oil and gas fields have no history of fracturing at extreme depths, let alone the high temperatures and pressures involved in Ekho.

Spurred on in part by the current sky-high natural gas prices and prospects for them continuing to be well above historic averages, Tri-Valley's latest move is to attempt to fracture a deep-lying tight sand formation at the 18,100 to 18,600 level, according to Lynn Blystone, Tri-Valley's Bakersfield-based CEO who just returned from two weeks scouting longer term E&P prospects in the Middle East.

An internal document from Tri-Valley called the fracturing "a pioneering effort to disprove the old and outdated concepts of over two decades ago" that are skeptical about fracturing at these excessive depths, temperatures and pressures for which there is relatively little precedent.

"There has never been anything done in California like this," Blystone said. "It is not impossible; it is just going to require a lot of (pre-drilling) modeling to give us a good first shot to do it.

"If we successfully fracture this well, we have a super giant oil field with a huge amount of associated natural gas."

An experienced geological engineer who is familiar with California's San Joaquin Valley said it has been commonly known in the industry that formations at the super-depths "are tight and as such, probably not producible."

Hoping to complete the fracturing by year end, Blystone said the current estimates for the Ekho No.1 well-the first of a series Tri-Valley intends to drill with backing from a number of small Canadian producers-envision up to 15 million barrels of oil and about 18.3 Bcf of associated natural gas.

"When we frac[ture] this well we are going to have a field," Blystone said. "Because when we drilled the well earlier we were looking for a fractured formation already in place to get the production. This particular hole is not fractured, so we are in tight sand. If we can show that the tight sand can be fractured, then we are okay.

"We're looking at potentially $500 million (worth of oil and gas) out of this one hole; that is why we are really testing this carefully to get the right protocol."

Blystone said the fracturing is a continuation of the ongoing testing and will not drive up the E&P program's budgeted cost. He maintains that even with the need to fracture on well No. 1, Tri-Valley's costs will be "half the cost" of what a rival Canadian-based deep-drilling effort is spending-per-well on neighboring acreage.

The California geological engineer/consultant said fracturing at the extreme depths "will certainly add to the cost considerably," noting that keeping fractures open below 15,000-foot depths becomes a real problem and the use of "gels" or special agents are applied in response.

"Technically, it is possible," the engineer/consultant said. "The real question is the economic viability. If gas prices stay high, though, I suppose it can be done."

"As long as you know that you can get production by fracing, then no one is going to squawk at the added cost," Blystone said. "We demonstrated with this well that the oil and gas we postulated was there is present. Now we just have to make it commercially available."

In an internal document dated Sept. 28 and aimed at answering skeptics on the Tri-Valley board, itself, Joe Kandle, Tri-Valley president, projects in oil alone that Ekho first well could bring in $600 million gross revenues, based on $40/barrel prices that occurred in recent months.

The internal communications said Tri-Valley has the potential to drill up to 50 locations in a 320-acre block tied to Ekho No.1. Extrapolating the bullish expectations for this first well for all of the additional ones, and the projections get into the billions of dollars of gross revenues.

Richard Nemec

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