A consortium of small energy companies hoping to strike oil in the western Santa Clarita Valley said it has found natural gas, but will not know until tests are completed whether the gas is of commercial grade.
"This is only conjecture until we test and see," said Robert Grey, president and chief executive of Riva Petroleum, a Vancouver company that has a 30% stake in the venture.
The consortium--made up mostly of small Canadian firms--expects to finish the testing in about two months.
The gas was found about six weeks ago at the Towsley Canyon site in the northern slopes of the Santa Susana Mountains, after drilling equipment got stuck about 16,000 feet below the surface, Grey said. Early indications show that gas reserves exist there, he said.
The consortium's target depth for oil is about 18,000 feet.
Grey and other members of the consortium have said they believe that oil reserves of about 600 million barrels exist in the immediate area. At $20 a barrel--about the current price for domestic crude--those reserves would be worth $12 billion.
But the consortium's search for the oil is considered highly speculative. Chevron Corp., which owns the land and would receive a percentage of any find by the consortium, has capped its own idle wells there and chosen not to do more exploration.
Whether or not the gas find proves commercially viable, Grey said he hopes to continue looking for oil. The consortium has spent $4.25 million so far, and Grey said Riva Petroleum has another $2.5 million in cash available for more exploration.
"We're wildcatters and we're shooting for the big one," he said.
Riva's partners in the consortium are Canadian oil companies Ossa Resources, with a 30% stake; Loumic Resources, 20%; Tusk Resources, 7%, and Layfield Resources, 5%. Samedan Oil Corp., an affiliate of Noble Affiliates in Ardmore, Okla., owns 8% of the venture.