NGI The Weekly Gas Market Report
Occidental Petroleum Corp. has purchased from Chevron deepexploration rights on 19,834 acres of land adjacent to its ElkHills holdings. Called the Buena Vista field, the Kern County, CA,property is seen by Oxy and some other producers as having hugepotential oil and gas reserves. Terms of the transaction were notdisclosed.
The Buena Vista rights, in addition to lands acquired at recentBureau of Land Management sales, are being integrated with Oxy’sElk Hills properties under a single management team. Oxy now holdsabout 23,000 acres near Elk Hills.
Exploration rights at Buena Vista begin below unitizedformations, or about 100 feet below the deepest-producing horizonin each section.
Independent deep-drilling proponents in California’s Kern Countyoil/gas fields to the east of Elk Hills are buoyed by Oxy’s move torevive deep drilling in its Elk Hills production fields after morethan a decade of inactivity. This news comes on the eve ofTri-Valley Oil and Gas Co., a Bakersfield, CA independent,beginning the first of three exploratory wells below 15,000 feet.
During the more than 50-year history of the oil/gas productionin this area, deep drilling has been applied relatively sparinglyand has produced few positive results. Nevertheless, events in thepast year, including a deep-drilled well blowout has causedTri-Valley, backed by nine smaller Canadian firms, to go after whatit considers substantial oil and gas supplies in the 15,000 to20,000-foot level. Oxy has added to the fervor with reports it isgoing to re-enter the U.S. Navy’s deep (24,500-foot) test well thatwas originally drilled when Elk Hills was part of the nation’sNaval Oil Reserve. Occidental will resume the testing with ahorizontal program.
“We find that fascinating,” said Joseph Kandle, Tri-ValleyO&G’s president, noting that Oxy’s move supports the deep-wellpotential of Elk Hills. “It is another feather in the cap verifyingthat this area is a major play. It validates what we have beensaying. It is significant to us that they are going to re-enter adeep well and do some horizontal drilling.”
The Elk Hills deep drilling test began in 1985 and continued fortwo years, Kandle said. The Navy then re-drilled in 1988 beforeabandoning the project. “You can see that new technology is comingup with new ideas again,” said Kandle, referring to the fact thatTri-Valley thinks the old drill data was misinterpreted.Tri-Valley is going to make a formal announcement on the start ofits drilling and the exact location of the first well within thenext few days — probably by the end of next week (Dec. 17),according to F. Lynn Blystone, CEO of Tri-Valley Corp., the parentcorporation to TVOG.
Called Project Ekho, the first test well is estimated to cost$9.5 million, consuming about 100 days of exploratory drillingoperations and reaching a depth of 19,000 feet. Tri-Valleyestimates the potential at four billion barrels of oil and 10 Tcfof natural gas. Permitting and regulatory requirements at variouslevels of state and local government have delayed the start of thewell until now, Blystone said.
Kandle and Blystone characterize the potential of deep drillingin the Kern County area as the largest onshore oil/gas prospect inthe U.S., if not North America.
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