In
early April, oil prices hit $57 per barrel. At prices that high, fields that
were once deemed “uneconomic” and abandoned are becoming more enticing,
including in some unexpected places — such as the heart of a city. Smaller,
independent oil companies are working in urban environments — Los Angeles
and Long Beach, Calif., and Houston, Texas, for example — and producing,
in some cases, thousands of barrels of oil a day, despite the unique challenges
of the urban environment.
To gain the city of Long Beach’s
approval to develop a large oil field beneath it, oil producers had to create
a special “facility” for production — four manmade islands in
Long Beach Harbor that were designed to look like resorts rather than oil rigs.
Photo courtesy of Occidental Petroleum Corporation.
Independent companies have more freedom to take the time and effort involved
in producing oil in such a challenging environment, and the oil in these fields
is a more important asset for smaller companies, says Andy Lazzaretto with the
city of Santa Fe Springs, Calif., in Los Angeles County. While oil has been
pumped in California since 1865 and the Los Angeles basin remains productive,
few major oil companies remain there. “Why drill in L.A. when you could
drill in Saudi Arabia?” Lazzaretto says.
But for Hal Washburn and Randy Breitenbach, founders of BreitBurn Energy, the
timing was right in 1988 to develop the old oil fields in Los Angeles: Oil prices
were low, and the major companies were leaving the basin. They thought they
could revitalize the fields using new technologies, such as subsurface imaging
and mapping programs that had recently become available on personal computers,
and directional drilling. The fledgling company bought a couple of existing
wells in fields in affluent neighborhoods in Los Angeles, including the Beverly
Hills field. Over the years, BreitBurn has accrued 10 properties in nine different
fields in Los Angeles, producing about 4,000 barrels per day from the L.A. basin.
Operating in these areas is “a lot different” than producing oil in
the middle of nowhere, says Dennis Graue, reservoir engineering manager for
BreitBurn. “It’s very demanding, very rigorous and we have to be extremely
conscious of every little thing we do,” he says. “But for us, it’s
a way of life.” Many requirements exist for oil operations in the city,
and maintaining the relationship between the neighbors and the company is a
balancing act.
For example, in the Beverly Hills field, drilling rigs and wells can’t
look like what they are, Graue says. “We operate 40 to 50 wells in the
field but you can’t see or hear” any part of the operation. All of
the wells are enclosed in a building designed to eliminate noise and emissions,
and to match the décor of the neighborhood. “Many of our neighbors
don’t even know that they’re living on an active oil field,”
Graue says.
The same holds true in the port city of Long Beach on the Wilmington oil field,
the fourth largest oil field in the continental United States, first discovered
in 1932. After the citizens of Long Beach voted to make oil production illegal
in 1956, engineers developed a plan the city would allow: By the time production
started in 1965, four human-made islands in Long Beach Harbor had been created
where all the production facilities would be located.
The islands look like a resort, with palm trees, waterfalls, sculptures and
what look like high-rise condominiums that contain the drilling rigs. “Oil
production and treatment operations are thoroughly disguised, camouflaged, soundproofed
or placed underground,” says Bill McFarland, human resources manager of
Occidental Petroleum Corporation’s operations at Long Beach. Of the wells
drilled into the oil field, 300 are inactive, 700 are producing 32,000 barrels
of oil and 9 million cubic feet of gas per day, and 400 are injecting water
back into the reservoir.
Another challenge facing urban oil developers is the ever-rising cost of property
and the fact that oil fields are “pretty much the last open land to develop
in Southern California,” says Richard Baker, deputy director for the Southern
California region of the California Division of Oil, Gas and Geothermal Resources.
Land around the Brea oil field, for example, which first began producing oil
in 1880, was sold a few years ago and developed into expensive housing lots
that surround the still-operable wells, Graue says. The East Coyote field in
L.A. has been developed into a golf course, and BreitBurn still produces oil
there.
In Santa Fe Springs in L.A. County, BreitBurn has been both consolidating oil
operations and developing the land for housing and industry, Graue says. The
oil field beneath the city has been in continuous operation since the 1920s,
and many of the wells look like traditional oil wells, unlike those in Beverly
Hills, he says. In some development areas, those wells are being moved underground
and out of the way for any buildings that will go in. As development encroaches
on traditional oil fields, “it’s interesting to watch how the companies
adapt,” says Lazzaretto, who has been working with BreitBurn on the redevelopment
plans.
In other oil-producing parts of the country, such as Louisiana, the interface
between oil production and urban land use doesn’t seem to be an issue,
says Bob Sprehe of the Louisiana Department of Natural Resources. Drilling is
either offshore or in more rural areas, he says.
In Texas, where the majority of oil production is in the vast open western lands,
small producer Ballard Exploration recently started exploring wells in urban
areas of Houston that formerly produced oil but had been abandoned since the
1930s, according to a March 2 article in the New York Times. The article
said that current oil prices were “luring wildcatters to urban areas written
off until recently as uneconomical by the energy industry.”
But since the New York Times article was published, Ballard has “pulled
out,” says Wes Johnson, spokesman for the Houston Department of Public
Works and Engineering. With so many stringent requirements before a company
can even begin to drill in an urban area, such ventures are probably not worth
investors’ time and money, Johnson says.
Megan Sever
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On March 16, the Senate set the stage for opening the Alaska National Wildlife
Refuge (ANWR) for oil exploration and drilling, after accepting the Bush administration’s
proposed budget that relies on revenues from lease sales by 2007 from the contested
region. The administration and others say that the oil there is necessary in
a time of high oil prices and increased dependence on foreign oil imports, but
environmentalists question the value of going into what they call the last pristine
wilderness in the United States for an uncertain quantity of oil.
While the U.S. Geological Survey (USGS) plans to revise its economic valuation
of oil from ANWR this spring, based on oil prices and new drilling technologies,
more data would be necessary to update the current assessment, which stands
between 6 and 16 billion barrels. “The biggest issue,” says David
Houseknecht of USGS, is that data from the only well ever drilled in ANWR 20
years ago is proprietary and therefore unavailable, and the question remains
as to what a modern 3-D seismic survey could find.
“One of the wild cards right now,” Houseknecht says, “is what
will happen to exploration as permafrost continues to deteriorate” in the
entire North Slope. Permafrost is necessary for companies to build roads and
other infrastructure for drilling, so its disappearance due to warming climate
may actually increase pressure on ANWR, he says — which is smaller and
more accessible than the nearby National Petroleum Reserve-Alaska, and therefore
faster to explore.
Naomi Lubick
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