Occidental Petroleum completed the acquisition last week of the U.S. government’s 78% interest in the Elk Hills oil and gas field in California for $3.65 billion. The field is the most prolific gas field in California, with current gas production of about 390 MMcf/d (divided between DOE and co-owner Chevron) – two-thirds of that is reinjected to enhance oil recovery.

Occidental CEO David Hentschel said he expects the field to eventually yield 1 billion boe (670 million bbl of oil and 1.9 Tcf of gas) net to Occidental primarily through the employment of new exploration and drilling technologies.

The field, which is 15 miles west of Bakersfield, CA, includes 47,000 acres of land, 450 million barrels of oil equivalent (boe) of proven reserves, 2,000 wells, 1,000 miles of pipeline, three gas processing plants and a 47 MW cogeneration plant.

In October of last year, OXY emerged the highest bidder among 15 other companies and consortia. Occidental intends to pay for the field with proceeds from the recently completed sale of its MidCon natural gas transmission and marketing subsidiary to KN Energy for $3.49 billion. That sale resulted in net cash proceeds to Occidental of approximately $3.1 billion.

OXY expects the field to immediately triple its year-end 1996 U.S. oil reserves and more than double its U.S. natural gas reserves. OXY’s current domestic gas production will increase 20% with 93 MMcf/d coming from Elk Hills. Its crude production will nearly double with 46,000 bbl/d coming from the new field. But under its operatorship OXY expects natural gas production from its share of the field to soar to 300 Mmcf/d since it will not be reinjecting natural gas to enhance oil recovery. Other agents will be used to lift the heavy oil, and production is expected to nearly double to over 80,000 b/d.

Rocco Canonica

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