Summary
HOUSTON, July 23 -- Occidental Petroleum Corp. has drilled six wells in an apparent giant gas-condensate field in California’s San Joaquin basin that has an estimated 150-250 million boe recoverable.
The discovery identified a new play concept that Oxy officials compared with an offshore deepwater structure. They said the concept is prospective underneath Oxy’s giant Elk Hills field southwest of Bakersfield and indicated it may be exploitable by other operators in the basin.
The discovery identified a new play concept that Oxy officials compared with an offshore deepwater structure. They said the concept is prospective underneath Oxy’s giant Elk Hills field southwest of Bakersfield and indicated it may be exploitable by other operators in the basin.
Analysis
It has been 34 years since California has seen a hydrocarbon discovery of this size. The estimated 150-250 MBOE discovery by Occidental petroleum will surely be followed very carefully by many other operators in California, particularly those in Kern County located at the southern part of the San Joaquin basin. This discovery is significant from a number of standpoints. As a result of the nearly 30 year moratorium on offshore drilling in California, the petroleum industry in California has been in decline. Many large corporations with California roots have merged with other companies (such as Unocal acquisition by Chevron and Arco by BP). Others have reduced their activities in California and have moved their headquarters or main E&P operations outside the state.
Much of the oil and gas industry activity in California in recent years has been limited to onshore fields. Given the age of many of those fields, including those in Kern County where the new discovery has taken place, enhanced oil recovery has been the main source of slowing the production decline in many fields. The new discovery in Kern County, especially with its new play concept, offers the hope for other new fields to be found in California. Kern County, accounting for about half of the total production in California, reached an all-time production high of 256 million barrels of oil in 1985, out of the 424 million barrels of oil (also a record high) for the entire state. Since then, however, oil production in California has been declining, reaching a 66 year low of 243 MBO in 2007.
According to Occidental more reserves are likely to exist outside the area that has been mapped. Similar structures lie within Oxy’s 1.1 million acreage position in California. Aside from the 34 exploration wells drilled in the past year, they plan to drill additional wells to exploit the other opportunities in the next 5-10 years. Oxy, as the largest gas producer, third-largest oil producer, and largest acreage holder in California, operates more than 7,500 active wells in 90 fields in the state. The company’s proved reserves in California were 708 MBOE at the end of 2008, accounting for about 24% of their worldwide reserves.
The Elk Hills new discovery in California’s San Joaquin basin raises the possibility of reversing the oil and gas production declines in California. This discovery is expected to spur increased exploration activities. Many of the advanced exploration technologies such as new geophysical methods developed over the last thirty years can finally find their full potential in California oil patch, leading to many other such discoveries.
Fred Aminzadeh consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
