Rising Oil Prices Offer Little Hope Locally : Outlook: Huntington Beach oilmen are skeptical that the recent jump in petroleum costs can save the industry here from extinction.

Crisis in the Middle East tends to bring macabre joy to the hearts of oilmen, but the skyrocketing petroleum prices resulting from the Iraqi invasion of Kuwait aren’t causing much excitement in this seaside city that oil built.

The terrain is still dotted with hundreds of oil wells, and offshore platforms loom beyond the wide, sandy beaches. But dwindling reserves and rising real estate values have long driven the local oil industry toward extinction, and the recent jump in crude oil may not even slow--much less reverse--that trend.

Therefore, local oil companies, which include independent owner-operators with a handful of wells and major international firms such as Shell Oil Co. and Chevron USA, are planning to just wait and see if the oil prices remain high.

“This has happened too fast and too furious,” said Jack Teberg, an independent operator who owns 22 Huntington Beach wells and is president of Independent Oil Producers Assn. of Huntington Beach. “This is not a normal, sustainable condition.”

Still, Teberg said higher prices might make him “a little more reluctant” to sell his wells to real estate developers.

Huntington Beach crude is a relatively heavy, low-grade oil, and it sells for less than West Texas Intermediate and other varieties of crude that are used as benchmarks in setting world oil prices. Huntington Beach crude dropped to a low of $10 a barrel in June but was priced Wednesday at about $16.50. The benchmark crudes, which normally cost $5 to $6 more than local product, were fetching more than $28 a barrel on the futures markets.

Carl Weaver, an independent operator who owns 33 wells and an oil equipment supply business, said a consistent price of more than $20 a barrel would be necessary to “change the complexion of the situation” in Huntington Beach, and he was not optimistic that it would occur.

And even if it did, most in the industry say, the steady decline of the local industry would not be reversed. Many of the city’s 900 producing wells now yield only a few barrels of oil a day, and production totals just 400,000 barrels a year--down from as many as 10 million barrels a year from 4,000 wells in the 1920s, according to city oil field inspector Mark Bodenbender.

The number of independent operators also has declined steadily with a precipitous drop occurring after oil prices fell in 1986. Teberg said the number of members in his association has fallen from 46 to less than 20 since 1986, and only about 50 to 75 independent wells are now in operation.

Major oil companies also have cut back their production. Chevron USA has been steadily scaling back its Huntington Beach operations, and the company now plans to shut its remaining 125 wells by November, said Bob Nettle, Chevron’s area superintendent.

He said it was extremely doubtful that even a substantial, long-term increase in oil prices would cause the company to change its plans.

Chevron’s move is symbolic of the forces that are pushing oil out of the city: Chevron owns the Huntington Beach Co., the city’s largest landowner, and has chosen to pursue real estate development rather than oil production. Real estate developers don’t like unsightly oil wells next to their fancy new houses.

Stricter regulation of oil wells by the South Coast Air Quality Management District and the city also have hurt small operators.

Still, Shell Oil Co., which operates 280 wells in the city and an additional 40 on an off-shore platform, plans to stay in the local oil business. Shell spokesman Bill Gibson said a sustained price increase could lead the company to bring about 10 to 20 previously unprofitable wells back into production.

Over the long term, Gibson added, Shell could invest in expensive technology to recover more oil from the fields if the price stayed high, but he cautioned that there was no certainty that Shell would make the investment funds available to the Huntington Beach operation even if the price did stay up.

High oil prices could also give a boost to several efforts at so-called “secondary recovery” that are now under way. Traditional drilling and pumping have recovered only about 10% of the oil beneath Huntington Beach, said South Coast Oil Corp. President Stephen Harris, and injecting water or steam into the ground and installing underground pumps can allow the recovery of an additional 20% to 40%.

Such secondary recovery programs, however, require the drilling of new wells, and that requires a long series of permits and reviews and often riles the real estate industry, Harris said. South Coast is still at work on a long-standing secondary recovery plan for a large area of downtown Huntington Beach.

One local firm, Angus Petroleum, recently gained permits to begin drilling secondary recovery wells in the eastern part of the city, Bodenbender said. Proponents of these efforts say they actually clean up the area, because existing wells are shut down and dismantled and the oil tapped via new wells that are drilled at an angle from a single, central location.

Harris said the price increases “would certainly help the economics” of the South Coast secondary recovery project, “but the irony of this is that we’re still not at the price we were at when we started this thing in 1981.”