California Oil Producers Revive Old Wells

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High crude oil prices and new technologies mean small independent oil producers in Southern California are finding it profitable to re-activate old oil wells.


In California, gas prices are high, so small oil wells, many of them neglected since the 1980s, are once more coming into their own. From member station KPCC, Debra Behr reports.

DEBRA BEHR reporting:

Signal Hill is a postage stamp of a city, two and a half square miles bordered by Long Beach. Born out of the oil boom in the 1920s, it once had so many oil derricks it was called `Porcupine Hill.' Homes have now replaced most of them, as they have across the LA basin. But oil is still being pumped. Giant horse-head and grasshopper pumping units rock incessantly in restaurant parking lots, neighborhoods and on golf courses.

Eighty-one-year old Bob Lee owns four oil wells in Signal Hill, a stone's throw from million-dollar hilltop homes.

Mr. BOB LEE (Oil Well Owner): Originally, the property has had 20 wells drilled on it. They were drilled in 1928 or thereabouts. This is one of the most prolific 10 acres in the world. It has recovered over 13 1/2 million barrels of oil. That's only one-third of what's here.

BEHR: Lee's wells, once owned by ARCO, originally produced 4,000 to 5,000 barrels a day, the easy oil, as it's known in the business. Today, he's lucky to pump 25 to 30 barrels a day out of the one that's producing. But that's not bad for a 77-year-old well and it's especially sweet at today's prices for California crude oil.

Mr. LEE: I'll say $50 a barrel. It's making a little money right now and I'm very happy with that.

BEHR: During the lean years in the late '90s when California oil was cheap, around $12 a barrel, and electricity prices were skyrocketing, independent producers shut down their less-productive wells. There are about 3,000 idle wells in the LA basin, 20,000 statewide. But now many owners are investing to get them pumping again. Again, Bob Lee.

Mr. LEE: We have one well here that's 7,200 feet deep. The engineers tell us we have an excellent chance of getting a 50-barrel well.

Professor IRAJ ERSHAGHI (University of Southern California): All of the idle wells can be put back on production after we do a little study to find out what needs to be done.

BEHR: That's Professor Iraj Ershaghi, the head of the petroleum engineering program at the University of Southern California. California's oil fields have yielded about 27 billion barrels of oil. Typically, producers have walked away after extracting only 20 to 30 percent of the oil underground.

Prof. ERSHAGHI: Right now there are technologies out there that you can produce 50 to 60 percent of what's in the ground. Now 26 billion barrels added to the California reserve, that's a lot of oil.

BEHR: California consumes 1.8 million barrels of oil a day, but it produces only 700,000 barrels a day. All the rest, over a million barrels a day, is imported.

Mr. HAL WASHBURN (CEO, BreitBurn Oil): We're trying to suck a little harder to get a little more out.

BEHR: Hal Washburn is CEO of BreitBurn Oil, an independent with 513 active and 200 idle wells in LA and Santa Barbara counties.

Mr. WASHBURN: Every barrel we produce is one less barrel that has to come along the coastline in a tanker, and that's the way we look at our role.

BEHR: Companies like BreitBurn use new horizontal and extended-reach drilling that allow them to reach oil up to five miles away from their rigs in inaccessible or even highly developed areas.

The state of California is waiving fees to encourage oil producers to get their idle wells pumping. That's good for small producers like Bob Lee, but it's really the current price of oil that makes the risk of the investment easier to bear.

Mr. LEE: I think you have to be a half-gambler and a half-entrepreneur and you have to be able to deal with losses. You could go down there and lose your money and it's all down at the bottom of that hole and you ain't going to get it back. So there's always that chance that you might lose it.

BEHR: Lee says he'll take the gamble. He'll probably have to drop about half a million dollars into that idle 7,200-foot well to get the oil flowing again. If all goes well and the price of crude holds steady, that well could be in the black in less than two years.

For NPR News, I'm Debra Behr.

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