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A New Oil Boom

Fledgling firms use technology to tap into reserves in abandoned wells and give a new lease on life to a 19th century industry.


Peering into the screen, as his desktop computer analyzes the faults and folds of the city's geological foundations, Hal Washburn chronicles the progress of an unlikely new growth industry in Los Angeles: oil production.

Four years ago, Washburn's fledgling firm, Breitburn Energy, took over Occidental Petroleum Corp.'s oil fields on the Westside. Today, the tiny upstart company is pumping 50% more oil than Occidental was when it shut down operations.

Plugging past production data into a computer that simulates conditions 6,000 to 10,000 feet deep, Washburn estimates that there are several million more barrels of recoverable oil, "enough to keep these wells in business for another 50 years," he said.

Breitburn is just one of many small companies applying state-of-the-art technology to old oil fields, giving a new lease on life to a 19th century industry that until recently appeared to be more relic than resource in Los Angeles.

After acquiring two former Chevron properties, one in Inglewood and one outside Beverly Hills on the site of the Beverly Center shopping mall, Stocker Resources reports an overall increase in production at those locations of more than 35%.

From Breitburn's wells at the Veterans Affairs Medical Center near Westwood to others at Beverly Hills High School, from the Inglewood hills to Farmers Market in the Fairfax district, abandoned urban oil fields are getting a second look and old wells are being brought back online.

Just a few years ago, Los Angeles seemed to be at the end of a historic era that began with Edward L. Doheny's 1892 oil discovery just west of downtown. At one time, before Alaska's vast resources were tapped, California was vying for top billing as the nation's leading oil-producing state. Until the 1980s, the Los Angeles area accounted for more than 20% of that production.

But as oil prices fell during the 1980s and production declined, the giants that dominated the business in California started looking elsewhere. Occidental, Chevron, Mobil, Texaco and Unocal began forsaking the region for richer plays overseas, and Arco restructured its Los Angeles operations. Thousands of local wells were abandoned. By the end of the last decade, the L.A. Basin's percentage of statewide production was down to 10%.

The exodus, however, had less to do with the amount of oil left in the ground than it did with the economics of getting it out.

"The majors have too much overhead, and at a certain point it isn't profitable for them to stick around," said Dan Kramer, executive director of the state's Independent Petroleum Assn. "It's a different story for independents, who typically contract out much of their fieldwork, don't have R & D costs and don't operate refineries."

Such operations can succeed on smaller profit margins, Kramer said.

"If we can improve recovery by just 1% or 2% over what Chevron did, we can do OK," said Larry Morton of Stocker Resources.

Buoyed by higher oil prices and technological advances that have made oil prospecting much more precise, the new generation of small, independent companies is targeting reserves that, many experts believe, are still sizable.

"California still has more unexplored reserves than any state south of Alaska," Kramer said. And a lot of that oil may lie under the L.A. Basin.

"I think it is fair to say that the major oil companies extracted barely 10% to 15% of the recoverable oil in the general Los Angeles area," said Iraj Ershogi, director of USC's petroleum engineering program.

With the technology available, Ershogi believes that producing companies can economically pump 25% to 40% of the local reserves. And if the same increase takes place statewide, he estimates that California can meet its own oil needs for at least 40 years.

In addition, a 25% increase in one oil field alone would mean significantly more money for the state. Ershogi noted that the largest local oil field, in Wilmington, has generated $4.5 billion in revenue for the state.

The challenge comes in equipping many of the new, relatively small companies with the know-how to get the oil out of what Ershogi describes as one of the most geologically complex basins in the world.

With a $175,000 grant from the U.S. Department of Energy, USC has just opened a technology transfer center to familiarize small producers with the full array of high-tech tools. It is one of 10 similar centers being established nationwide.

The technology provides a window on the subterranean world well drillers are probing. They can see where they are going and what to avoid. Computer imaging of the geology allows drillers to better aim at "sweet spots," the oil-soaked sandy strata that are most productive, while avoiding rock formations that don't give up their oil or sandy layers where water is more plentiful than oil.

"For companies who have been producing 94% water and 6% oil, this is a godsend," Ershogi said.

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