PXP wants to drill 22 wells using slant-drilling technology from platform Irene, which is 4.7 miles from shore, outside the three-mile limit of state waters. These wells would burrow on average 3,000 to 5,000 feet into the seafloor and reach as far as five miles from the platform to tap the reserves beneath submerged state lands.
Existing pipelines from platform Irene would transport the oil to processing facilities onshore, greatly reducing the risk of problems.
The agreement must win approval from county officials, the State Lands Commission, the California Coastal Commission and the federal Minerals Management Service, part of the Department of the Interior. It's a deal Rusch hopes will fall quickly into place so the company can begin sinking wells before the end of the year.
"There's an urgency to get on it as fast as possible," Rusch said, noting the surge in oil imports and the agreed-upon 14-year deadline for abandoning PXP's operations. In the highly speculative oil business, he said, PXP could drain this field in eight years or leave the oil in place. Right now, he said, it's hard to tell. "We hope to get as much as we can out of it."
Light, sweet crude for May delivery fell 45 cents to $110.42 in electronic trading Thursday on the New York Mercantile Exchange.
That's about four times the price of crude when Santa Barbara County rejected a similar drilling proposal from Nuevo Energy Co. in 2002. Environmental groups opposed the project, arguing that it would extend the life of offshore oil platforms in the Santa Barbara Channel, which are rarely disassembled.
Nuevo, like many oil companies, grew frustrated with its inability to develop offshore energy and sold platform Irene, its onshore oil processing facilities and its offshore lease to PXP in 2004. PXP had already acquired three other platforms off Point Arguello from Chevron and Texaco in 1999.
When Rusch learned that the objections to slant drilling focused on extending the life of offshore platforms, he approached Krop with the idea of setting a deadline to pull out. The sides spent months hammering out the details, including how to make such an agreement enforceable.
Under the terms, PXP would shut down its three platforms off Point Arguello by 2017, as well as its Gaviota gas processing plant. Five years later, platform Irene would also be closed, and removal would begin.
