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.

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