Eric Watkins
Oil Diplomacy Editor
LOS ANGELES, Sept. 30 -- California Governor Arnold Schwarzenegger has signed legislation enabling future oil exploration and drilling in Wilmington oil field in Long Beach.
Under Bill 2165, California's State Lands Commission can negotiate a contract with the city and Occidental Petroleum Corp. to explore and develop the western end of Wilmington field, which includes tidelands mineral deposits.
In the past, California shouldered most costs for previous oil efforts in the tidelands deposits, but Occidental offered to take on that role in exchange for a larger share of the potential revenues—an offer that required the new legislation.
Occidental spokesman Richard Kline said the Los Angeles-based firm needs a new contract with more financial incentives to make the Wilmington deal worthwhile. The current agreement gives 95% of revenue to the state and 5% to Occidental—too little to allow the firm to recover its investment.
Altogether, Occidental is expected to invest more than $200 million to increase production by injecting water, carbon dioxide, or other material into some of the field's estimated 500-700 existing wells. Occidental would also drill as many as 200 new wells, Kline said.
Bill 2165 does not allow for offshore drilling or expansion of the existing drilling area. According to officials, Occidental would use directional drilling techniques to reach beneath the port's tidelands, increasing output by as much as 63%.
Long Beach city analysts say that under the agreement with Occidental, reserves could rise by 22 million bbl from the current 35 million bbl in the West Wilmington unit, where the new drilling is planned.
Any drilling must also comply with existing regulations of the South Coast Air Quality Management District, as well as the California Environmental Quality Act.
Wilmington, which produces about 8,500 b/d, is California's sixth largest oilfield. It has produced more than 2.5 billion bbl since 1932, when General Petroleum, an antecedent of ExxonMobil Corp., drilled the first well.
Last year, it was reported that the central area of Wilmington field is in the midst of a redevelopment project over the next few years, with Los Angeles city authorities approving the drilling of as many as 540 directional oil and water injection wells from central facilities (OGJ Online, Feb. 19, 2007).
Contact Eric Watkins at [email protected].
