The heyday of L.A. oil production has long since passed, but months of rising oil, gasoline and diesel prices have prompted drillers to take a closer look at the basin.
Thirty-nine new wells were drilled in 2004, three more than the prior year and more may be on the way. As of July 30, oil companies have filed 82 “notice of intentions” to drill this year with the state, compared with 34 for the like period last year.
“High prices for gas may not be attracting new interest, but it does enable those of us already here to put more resources into development and recovery,” said Hal Washburn, co-founder of Breitburn Energy Co., a Los Angeles independent oil company owned by a Canadian real estate investment trust.
With few exceptions, the major oil fields in the Los Angeles area were discovered by 1930 and production peaked in 1969, when 11,000 wells produced 165 million barrels annually. Today, the region produces 30 million barrels of oil each year.
Estimated remaining onshore reserves in the Los Angeles basin range from 319 million to 622 million barrels theoretically enough to supply the area with enough gasoline for just a year or two.
The major oil companies have mostly abandoned the basin, selling assets to independents like Breitburn that use high-tech sensors and engineering tools to help extract the remaining oil. Breitburn sites include Santa Fe Springs and the West Pico drill site in east Beverly Hills.
There are several hundred producers regionally, ranging from mom-and-pops with one well to Aera Energy LLC, a joint venture of Exxon Mobil Corp. and Royal Dutch Shell affiliates, with onshore operations in Brea and Huntington Beach. Nearly all the oil produced in the state is refined in California facilities.
The crude pumped from the basin historically has been heavier than the benchmark West Texas Intermediate light sweet crude, selling at a discount as a result. California’s benchmark, Kern County’s Midway Sunset, was $52.50 a barrel on Aug. 17, compared with the West Texas September futures price of $63.25. In the 1980s, California crude often sold for $12 to $15 a barrel.
But with developable land at a premium, it’s unclear how long the remaining open oil fields will be pumped even with rising oil prices.
Breitburn’s real estate development arm is becoming an increasingly important part of the business. After developing wells at the Santa Fe Springs site, the company in 2001 sold 22 acres minus the mineral rights to Proficiency Capital LLC for a recently completed light industrial park.
The company is considering similar projects at its other sites. “Oil fields remain some of the last big parcels of developable infill in L.A., but we want to do it in a way that preserves oil production,” Washburn said.
