Electric power interruptions curtail California oil and gas production


Sam Fletcher
Senior Writer

HOUSTON, Feb. 12�Electric power disruptions are curtailing oil and natural gas production in California, including some gas supplies for the very plants that generate electricity, industry officials said Monday.

In one incident, electric power to a gas field was interrupted in order to shift electricity to 2,000 residences. But the gas production that was curtailed by that loss of power was contracted for direct supply to a power generator that could have produced enough electricity for 4,000 homes, said John Martini, spokesman for the California Independent Petroleum Association (CIPA), in an interview with OGJ Online.

At various times, the loss of electric power in California has shut down oil and gas production in the field; its transportation through pipelines; and downstream refining and processing, he said.

No one knows for sure how much of California�s oil and gas production has been curtailed as a result of electrical power outages.

�Things are so fluid that the focus has been on addressing the issues, not studying the results, although it would be useful to look at that in the future,� said Martini. However, he said producers may be reluctant to reveal those proprietary numbers.

�Power shortages have affected every segment of business out here, but none more than the oil and gas industry,� Martini said. �Many producers have had power interruptions more than 20 times in the last 3 months. Some have already maxed out the number of times they�re supposed to be interrupted for all of 2001.�

As a result, the integrity of some wells may be damaged and production lost through the lag time in bringing production rates back up, he said.

CIPA officials are working with legislators on a state bill that would require earlier notification to interruptible customers of pending power curtailments and limit the number of hours such interruptions can extend. They also are working on legislation to prioritize critical industrial users of electricity, �so that those fueling power plants would be the last to be interrupted,� Martini said.

Industry officials also are reminding both federal and state officials that 21 tcf of proven gas reserves off the West Coast should be opened to development. �It does no good to bring new power plants on line if there is no gas to fuel them,� Martini said.

�Most of the California fields are on the cheaper interruptible power rates because historically there have been few interruptions,� said Donald Macpherson, president and CEO of Macpherson Oil Co. in Santa Monica, Calif. But interruptible customers lost their power supplies under California�s Stage 3 Power Alert during most of January, he said.

Since then, there have been rolling blackouts of electric power �mostly in northern California, because of restrictions on the movement of power from southern California to northern California,� Macpherson said.

The oil fields offshore and around Bakersfield are in southern California. �But most of the gas fields are up north,� said Macpherson.

Moreover, he said, California�s demand for electric power is �relatively low� during winter months but will increase in the summer with air-conditioning.

Even before the electric power crisis, California�s production of heavy oil had already been adversely affected by the rapid ramp-up in natural gas prices toward the end of 2000.

The industrial co-generation power units that produce steam for injection in California�s heavy oil fields are all gas fired, said Macpherson, who is active in that business. He�s seen the prices that he pays for gas rise from $3/Mcf last summer through $6/Mcf in the fall to $14/Mcf in December.

�At $14/Mcf, you have to rethink the economics for heavy oil,� he said.

Curtailment of steam production and injection can be debilitating for both the steam-flooding and the huff-and-puff methods of producing heavy oil, he said.

In addition, he said, those and other co-generation plants provide to utilities about 30% of California�s total electric supplies. But the industrial owners of those co-generation plants haven�t been paid for their power since November.

�PG&E (Pacific Gas & Electric Co.) made partial payment in January, but Edison (Electric Co.) did not pay anything,� said Macpherson, who operates co-generation facilities.

Meanwhile, he and other co-generators have been requested to keep supplying electricity to those California utilities in exchange for �a kiss and promise� that state officials will come up with some scheme to help the utilities pay those and other bills.

Some solution must be found by next week, before �the whole house of cards collapses� and lenders force the utilities into bankruptcy, Macpherson said.

Related Articles

Deloitte studies oil supply growth for 2015-16

02/04/2015 A Deloitte MarketPoint analysis suggested large-field projects, each producing more than 25,000 b/d, could bring on 1.835 million b/d in oil supply...

BG’s 2015 budget ‘significantly lower than 2014’

02/03/2015 BG Group plans capital expenditures on a cash basis of $6-7 billion in 2015, a range it says is “significantly lower than 2014” due to “a lower oil...

BP trims capital budget by $4-6 billion

02/03/2015 BP PLC plans an organic capital expenditure of $20 billion in 2015, down from the previous guidance $24-26 billion. Total organic capital expenditu...

IHS sees second-half end of US output surge

02/03/2015

Expectations are moderating about growth of oil production in the US this year.

Gazprom Neft starts shale oil production in western Siberian field

02/03/2015 JSC Gazprom Neft reported start of shale oil production from the Bazhenov formation during tests of two wells in southern Priobskoye field in centr...

Anadarko reports 2014 loss, remains upbeat about Wattenberg

02/03/2015 Anadarko Petroleum Corp. announced a 2014 net loss of $1.75 billion, or $3.47/share diluted, including a net loss of $4.05 billion associated with ...

CNOOC cuts capital budget, starts production from Jinzhou 9-3

02/03/2015 CNOOC Ltd. is slashing its capital budget for 2015 by 26-35% to $11.25-12.86 billion compared with last year’s budget. Capital expenditures for exp...

MARKET WATCH: NYMEX crude oil stays positive on lower rig count

02/03/2015 Oil prices on the New York and London markets closed higher Feb. 2 on positive momentum generated by a falling US rig count, suggesting cuts in pro...

Obama’s proposed fiscal 2016 budget recycles oil tax increases

02/02/2015 US President Barack Obama has proposed his federal budget for fiscal 2016 that he said was designed to help a beleaguered middle class take advanta...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Cognitive Solutions for Upstream Oil and Gas

When Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected