FIRST U.S. FPS AT CENTER OF CONTROVERSY OVER CALIFORNIA OFFSHORE OIL

Exxon Co. U.S.A. remains ahead of schedule with its $2.5 billion Santa Ynez Unit (SYU) further development project in the Santa Barbara Channel off California.

Initial SYU development, of Hondo field, involved the first commercial use of a floating production system (FPS) off the U.S. It may be the only FPS scheme ever dictated by politics.

Hondo Platform A produces into a tanker converted into an offshore storage and treating (OST) vessel moored permanently nearby. Exxon opted for that arrangement because it was rebuffed in its initial efforts to bring SYU oil to shore for processing and tankering the crude out of the Santa Barbara Channel from a new marine terminal along the Santa Barbara County coast.

Tanker liftings have occurred regularly at the OST without significant incident. The OST has processed 115 million bbl of oil to date at a rate of about 25,000 b/d. Because of capacity limits, Exxon began pursuing plans for an onshore processing complex that could handle 100,000 b/d and thus eventually decommission and remove the OST.

PROJECT UPDATE

This fall, Exxon began installation of topsides for what may well be the last platforms to be installed off California, barring an unlikely 180' turnabout in public attitudes there.

Construction work on SYU Platforms Harmony and Heritage is expected to be complete in time for production start-up as early as yearend 1993, Exxon said. The company previously projected a 1994 start-up.

ln addition, work on the nearby onshore oil and gas processing plant at Las Flores Canyon is more than 85% complete. Exxon completed offshore pipeline tie-ins this spring (OGJ, Apr. 13, p. 32).

Platform jackets were installed in 1989. The three story topsides started arriving in late September from Aransas Pass, Tex., via the Panama

Canal. The McDermott Inc. derrick crane barge hired for construction had to go around South America in a 100 day journey.

All three platforms are in more than 1,000 ft of water outside the 3 mile state boundary. Exxon expects production from the two new platforms will reach 80,000-90,000 b/d and 90 MMcfd of gas. Hondo production in 1991 averaged more than 20,000 b/d of oil and 30 MMcfd of gas.

Platform Hondo came on stream in May 1981. Exxon submitted its plans for further SYU development soon thereafter, calling for as many as three additional platforms in the unit. However, persistently low oil prices and costly new regulations caused Exxon to defer the fourth platform indefinitely. It also shelved plans to build a new marine terminal.

PROSPECTS OFF CALIFORNIA

"Unless OPEC does another number on us, we don't see any more new platforms in the foreseeable future" off the California coast, said John Donovan of the California Coastal Operators' Group (C-COG).

"The Santa Barbara Channel is one of the few places where there are (significant) domestic oil reserves," said Tom Tibbitts, Exxon's regulatory affairs manager.

About 10 years ago, government and industry officials predicted as many as 40 new platforms off Central California in the wake of a drilling boom there.

Some expectations were that total Offshore California production could peak at as much as 500,000 b/d-although state officials put out much more conservative estimates-in the early 1990s, up from 69,000 b/d in 1985.

Current production from the California Offshore Continental Shelf is only 111,000 b/d, plus 64,000 b/d from platforms in state waters. Chevron Corp.'s Point Arguello project is producing about 50,000 b/d and 13 MMcfd of gas, about half of capacity because of regulatory snafus blocking tanker transport.

There are 23 operating platforms on the OCS and five in state waters, only a few of which were installed since the mid-1980s.

REGULATORY VICTIMS

Other ambitious projects off California have fallen by the wayside because of regulatory hurdles and unrelenting environmentalist opposition.

Shell Oil Co. suspended plans to develop San Miguel oil field in the northern Santa Maria offshore basin after voters in San Luis Obispo County rejected an onshore facility in 1988. ARCO's Coal Oil Point project in state waters was blocked by local and state agencies the year before.

"Dollars are now being spent internationally because (other nations) are encouraging us," Donovan added, comparing that with the attitude of state and federal agencies whose "environmental regulations don't encourage further offshore development."

Still, Donovan maintains, "The industry is not walking away--there are still leases out there that industry is interested in."

Shell's Bill Gibson agrees. Despite withdrawing its San Miguel project because of the current regulatory climate, Gibson said, "We still think the Santa Maria basin holds significant oil and gas reserves that will be important in the future."

Tibbitts said Exxon would have second thoughts about developing reserves off California "if we were able to start all over again."

TRANSPORTATION CONCERNS

As occurred with initial SYU development, a key issue for Exxon is sure to be transportation of the crude oil.

Santa Barbara County's policy requires transport by pipelines unless that is not feasible.

However, Exxon contends tankers are cheaper and allow more market flexibility.

Tibbitts said Exxon has not decided where and how it will transport its oil yet, but it may also apply for a tankering permit through the Gaviota marine terminal adjoining the Point Arguello Project. Exxon has refineries in Texas and in northern California, but Tibbitts noted, "The market's been in Los Angeles since 1987."

Exxon is covering its bases by participating in two competing Santa Barbara-Los Angeles pipeline proposals. The existing All-American pipeline to Texas has available capacity, but Tibbitts said a decision to use it for increased SYU production has not been made.

Copyright 1992 Oil & Gas Journal. All Rights Reserved.