U.S. dependence on foreign oil wanes as domestic production booms
In a downtown Los Angeles skyscraper, Hal Washburn is drilling for oil.
Using a black high-definition computer screen, the petroleum engineer traces the ghostly white outlines of century-year-old vertical oil wells punctuated by the bright green and red of more recent efforts. The newer wells flare with what look like thousands of tiny hairs; the hotter the color, the greater the amount of oil.
“Today, we drill a lot of wells on the computer before we drill underground,” said Washburn, chief executive of Breitburn Energy Partners.
The new crude being tapped — on screen and in real life — comes from Santa Barbara County’s Orcutt oil field, one of the state’s oldest, previously thought to be in terminal decline.
“It’s been a huge home run for us,” Washburn said.
Domestic energy producers like Breitburn have helped reverse the nation’s once-escalating dependence on foreign oil by finding new ways to figure out the secrets buried beneath our feet.
U.S. net petroleum imports have fallen to about 47% of the nation’s consumption, down from a record 60.3% in 2005, Energy Information Administration statistics show. It’s been 15 years since the nation’s reliance on foreign oil has been this low.
Several factors figure into the import decline, but a big one is a little surprising: U.S. petroleum exploration is experiencing a quiet renaissance with the help of technology and new drilling techniques.
The number of oil rigs in production in the U.S. has reached a 24-year high, according to oil field services company Baker Hughes. In 2005, domestic production was 1.89 billion barrels. This year, experts say, production is expected to surpass 2 billion barrels.
Over the last decade, geoscientists and engineers have come as close as technologically possible to creating a transparent image of the underground, bringing new life to old wells and finding billion-barrel formations, called “elephants.”
“What’s happening across the U.S. demonstrates how technology again and again opens new doors, and also old doors, that people thought were closed forever,” said Daniel Yergin, author of “The Quest: Energy, Security, and the Remaking of the Modern World,” the newly released sequel to his Pulitzer Prize-winning book “The Prize.”
Bruce Bullock, executive director of the Maguire Energy Institute at Southern Methodist University, was more specific: “Three-dimensional seismic technology has become much more sophisticated. New drilling methods allow them to penetrate formations that were once thought to be impenetrable. So we’ve seen a lot of investment dollars going back into areas that had appeared very unpromising.”
Orcutt is one example.
In 1901, wildcatters found “brown shale,” a sign that oil was present in exploitable quantities. But they bypassed that shallow layer and went straight down; various operators eventually drilled nearly 2,000 vertical wells that averaged about 3,000 feet in depth. Breitburn acquired the field in 2004 and determined that the shallow layer of diatomite — a very porous, lightweight rock — contained more oil than any other part of the formation.
“They didn’t have the science. They didn’t have a clue,” said Breitburn’s William S. Fong, senior staff reservoir engineer. “We have doubled the oil production in this field, and it is all coming from the shallow layer, no more than 900 feet deep.”
Monthly oil production at Orcutt has climbed to nearly 90,000 barrels from 50,000 barrels.
In Santa Fe Springs, another Breitburn oil field is delivering about 2,000 barrels a day rather than the 700 barrels a day it would have using old vertical well techniques. The gains have come from offset angle drilling, where the wells are dug at angles between 45 degrees and 80 degrees, into areas between old vertical wells where crude still remains, said Chuck Hawkins, Breitburn’s project manager.
Breitburn isn’t the only California oil company looking to reverse California’s long decline in oil production. Over the last five years, privately held Signal Hill Petroleum has buried 6,000 small yellow canisters around Long Beach and Signal Hill that contain sophisticated equipment so sensitive it can record the vibrations of a person walking past.
The devices work in tandem with the company’s fleet of “vibroseis” trucks, 68,000-pound vehicles that use hydraulics to bounce. The bouncing trucks produce vibrations that create images of formations as far as 3 miles underground, said Dave Slater, chief operating officer for Signal Hill Petroleum.
Slater says his small, 110-employee company and a subsidiary, the 70-employee Nodal Seismic, have sunk “tens of millions of dollars” into the effort.
“When we import oil, we really get no jobs out of it, no taxes from that oil. It’s just a huge suction on the economy,” Slater said. “And down below us, we believe there is a lot of oil that hasn’t been tapped.”
The leading edge of the production boom has come in parts of Texas, such as the Eagle Ford shale formation and the Permian Basin, as well as the Bakken formation, a huge reservoir under parts of North Dakota, South Dakota, Montana and Saskatchewan, said Fadel Gheit, senior energy analyst for Oppenheimer and Co. Gheit added that much of the work is from smaller oil companies that few people are familiar with.
There’s so much oil coming out of the Bakken formation that it has outstripped the existing pipeline capacity to move it to refineries for processing. Railroads such as BNSF and Canadian National have been pressed into service to move some of the crude.
New production isn’t the only reason for the drop in foreign oil dependency. Ethanol now accounts for a larger share of every gallon of gasoline, reducing the amount of refined oil needed. In addition, U.S. demand for gasoline and other refined products has declined, in part from the global recession and subsequent weak economic recovery. Refineries also have gotten more efficient and waste less oil in processing fuels.
But the most important change has been “the ability to make the ground below seem transparent,” said Jonathan G. Kuespert, Breitburn’s senior geoscience advisor. “We were never able to do that before.”
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