Oil Flux Redux : New Methods Tap Crude Deposits That Others Left Behind

A 30-foot-high sound barrier surrounds an entire block in a residential neighborhood here, and all that can be seen from the street is an ungainly 10-story tower seemingly mummified in plastic.

There appears to be little activity, only faint but steady clunking, grinding and hissing sounds. It is an oil-drilling rig at work, trying to find hard-to-reach petroleum still buried beneath this seaside city.

Most of the easy-to-reach oil has long since been pumped out of the sand and shale beneath Huntington Beach, but the drilling goes on. The methods, however, are different now, and the chance of financial success less than in decades past.

Still, with a wildcatter’s love of a gamble, Angus Petroleum is digging 30 wells from its single site here, using proven “secondary recovery” techniques to tap about 11 million barrels of crude oil.

Should the oil price increases resulting from the Middle East crisis be sustained, more such projects could be on the way. Yet in an era of environmentalism and rising real estate values, any new drilling program faces barriers far more difficult to penetrate than the porous ground beneath the city.

John Charmichael, vice president in charge of California operations for Dallas-based Angus, said the project began in 1982. The company Charmichael then worked for, Xtra Energy, began to consider the feasibility of buying mineral rights from myriad independent oil operators in order to gain control of a large enough piece of the Huntington Beach oil field to make secondary recovery practical.

“By 1985, we saw that the play would work, that we could get enough leases,” Charmichael said.

The company then began looking for surface sites to do the actual drilling. But Xtra Energy balked at the high cost of buying all the necessary leaseholds and real estate, and it sold out to Angus in 1985.

Meanwhile, city officials were supporting the project, Charmichael said, not only because of the promise of added revenue but also because the project would involve the consolidation of many oil sites.

That is because the Angus drilling plan involves so-called “directional drilling.” From a single square block area, 30 separate wells will descend, curve and radiate outward into different parts of the field in a “spider” pattern. This technique eliminates the need for 30 surface sites, each with one well drilled straight down.

Although the project called for removing 38 existing oil-pumping sites, getting approval for a new drilling project was no easy task. Many local residents fiercely opposed the Angus plan, and a long legal battle delayed drilling for more than two years.

Finally, though, the Angus permit--with 58 specific conditions--was approved, and neighbors were placated with a $1-million trust fund to make up for any decline in property values resulting from the project.

Drilling began last June, and the rig now hums away 24 hours a day, the plastic sound barriers keeping the decibel level just below the permitted levels. Drilling all the wells will take about 18 months.

Not all the holes will yield oil. The recovery method Angus is using, called water flooding, means that 13 of the wells will actually be used to inject water into the underground oil field. A mixture of water and oil will then be pumped out by underground electric pumps through the other 17 wells. The mixture will later be cleaned and separated.

Charmichael said that Angus has committed $30 million to the project and that it expects to pump out 11 million barrels of oil over 20 years.

The Middle East turmoil will not have an immediate impact on the economics of the project. Charmichael said the company had planned on an average price of $20 a barrel and that even with the recent price increase, Huntington Beach crude--a heavy, low-grade oil--was selling for just $16.50. Better U.S. grades such as West Texas Intermediate sell for much more.

Stephen Harris, president of South Coast Oil Co., which is working to gain approval for a similar secondary recovery project in downtown Huntington Beach, agreed that recent price changes alone will not significantly change the economic feasibility of new oil-drilling projects.

South Coast has been working to acquire mineral rights and approvals for its project since 1981, and Harris said crude oil prices still have not reached the level they were then. South Coast intends to use directional drilling, water flooding, and another secondary recovery process involving the injection of steam into the ground to recover 15 million to 30 million barrels of oil.

The two major oil companies operating in Huntington Beach--Shell Oil Co. and Chevron Corp.--have long been using secondary recovery on their large field there. But Chevron is gradually phasing out its local oil operations. A Shell spokesman said the recent price movements would have no immediate effect on the firm’s local operations.