CHEVRON BIDS FOR DOE'S ELK HILLS CONTRACT IN 1995

Chevron U.S.A. Production Co. has submitted a proposal to the U.S. Department of Energy to take over operations of Elk Hills field in California in 1995. The field is administered by DOE for the federal government under a management and operations contract with Bechtel Petroleum Operations Inc. that will expire in August 1995. At current production of 65,000 b/d of oil and 360 MMcfd of gas, Elk Hills is California's fourth largest oil producer and biggest gas producer.

June 7, 1993

2 min read

Chevron U.S.A. Production Co. has submitted a proposal to the U.S. Department of Energy to take over operations of Elk Hills field in California in 1995.

The field is administered by DOE for the federal government under a management and operations contract with Bechtel Petroleum Operations Inc. that will expire in August 1995. At current production of 65,000 b/d of oil and 360 MMcfd of gas, Elk Hills is California's fourth largest oil producer and biggest gas producer.

The U.S. government, which designated the area surrounding Elk Hills field as a naval petroleum reserve prior to World War I, owns 78% of the field. Chevron owns the remaining 22% interest.

CHEVRON'S BID

In a memorandum to employees in Chevron's western business unit (WBU), Greg Matiuk, WBU vice-president and general manager, said, "Through our many years of experience as operator (1944-75) and a partner at Elk Hills, we have discovered opportunities that if acted upon will have dramatic and profound effect on Elk Hills field."

Matiuk's memo also cited these benefits of Chevron operation of the field:

Saving "substantial" revenues in annual operating costs.
Extending economic life of the field.
Increasing ultimate hydrocarbon recovery, undiscounted cash flow, and net present value.
Applying Chevron's and "particularly recent WBU employee successes from the just completed rightsizing of our upstream operations."

The current work force at Elk Hills includes about 750 Bechtel employees, 60 DOE employees, and 21 Chevron employees.

BACKGROUND

Chevron's presence at Elk Hills dates to land holdings there before President Taft signed an executive order Sept. 2, 1912, that created Naval Petroleum Reserve No. 1 to ensure a supply of oil for the U.S. Navy.

The reserve blanketed what later became Elk Hills field. Although the land was set aside, the field was not discovered until 1919, when Chevron predecessor Standard Oil Co. of California completed the first commercial well.

Standard became operator when the field was unitized in 1944, continuing in that role until 1975, when the company chose to step aside as unit operator.

Williams Bros. Engineering Co. served as unit operator during 1975-85. Bechtel in 1985 won the operating/management contract, which was renewed in 1990.