Hopes for huge oil field grow in California valley

Associated Press

SHAFTER, Calif. -- A mile and a half beneath the almond groves and rose fields of the Central Valley lies what may be the biggest onshore oil find in two decades in the Lower 48.

That is, assuming it can be pumped to the surface at a price that pays -- a big assumption, even in a business often built on speculation. Texas Crude Energy Inc., a Houston independent, has Texaco Inc. backing its bets that it can.

"We know there's a tremendous amount of oil in place," said Peter J. Fluor, Texas Crude's chief executive. "The question is, what's the best way of producing it?"

By Texas Crude's estimate, the North Shafter field near Bakersfield holds 120 million barrels. If the company is right, the oil could fulfill not only the hopes of this independent producer, but the dreams of Shafter, a town struggling amid the uncertainties of farming.

The field, located near Bakersfield, also is an example of how the major oil companies, which are focused on huge foreign prospects and the outer Gulf of Mexico, are leaving the onshore domestic arena to the independents.

It makes sense for the Exxons of the world to spend their billions in exploration money seeking huge returns, while leaner companies "go after the `jackrabbit fields,' the fields still left here in America," said Jeff Eshelman, spokesman for the Independent Petroleum Association of America.

But the majors' capital, expertise, pipelines and refineries can make them perfect partners for the little guys in smaller niches.

"We're doing things with independents throughout the United States. It can be a variety of situations," said Stephen J. Hadden, Texaco exploration and production division manager.

In the case of Texas Crude's North Shafter operation, it has meant Texaco drilling and operating five test wells in a 50-50 venture, using workers and equipment from existing Texaco operations at big nearby fields.

"We are encouraged," Hadden said, though he's making no predictions yet.

A big find could enrich not just the companies but Shafter itself. With a population of 11,000 and a recent unemployment rate of 18 percent, it's in soul and spirit about as far from Hollywood and Silicon Valley as any Oklahoma farm town could be.

Elsewhere in Kern County, oil has long been king, but Shafter's fortunes rise and fall with crops. Life is often difficult -- last year, a windstorm all but ruined the almond crop.

Economic diversification has mainly meant trying kiwi fruit, Fuji apples and food processing. When an asphalt shingle roofing company that employs 110 opened, it was a big economic coup. And the 65 jobs that came with the town's first McDonald's were "significant for us," City Economic Officer Paul Saldana said.

It's no surprise, then, that the Bakersfield Californian headlined its story "Field of Hope" when examining how an inkling of oil money held the promise of an escape from the farming cycles.

Texas Crude's hopes began with an exploration well that Amoco Production Co. drilled 12 years ago, then abandoned as too meager. But the old pump kept creaking away, producing a steady 15 barrels a day, day after day, year after year.

That record and results from other test wells led Texas Crude to buy up drilling rights and announce last January that it projected the potential from two reservoirs at 120 million barrels of light crude.

Over 100 million barrels is considered a giant. So the projection attracted attention even in Kern County, where the Midway-Sunset field has produced 2 billion barrels over the last 100 years and the Kern River field 1.4 billion -- the two biggest U.S. onshore fields outside Alaska. Two other fields, South Belridge and Elk Hills, have topped 1 billion barrels.

"You hear a lot of people say there aren't any hundred millions fields left -- onshore," said Vincent W. White, spokesman for Oklahoma City-based Devon Energy Corp., a successful independent that also has partnered with Texaco.

Indeed, Texas Crude's bold news release was questioned by many in the area, said Bill Rintoul, a longtime oil columnist and author.

"It might be a little bit early in the game. It's a situation where the oil is there -- but how do you get it out?" Rintoul said.

The most promising strategy is "fracking," trying to fracture channels in the shale that holds the oil by pumping sand and liquid in at high pressure. In the test wells here so far, Rintoul noted, that technique has produced heavy flows that quickly tapered off.

Texas Crude's Fluor and Texaco's Hadden hope a combination of fracking and horizontal drilling may pay off. New steering tools have made it far easier to turn a drill sideways deep in the ground, creating "L" and "T" shaped wells, Fluor said.

If all goes well, a smaller number of those wells will probably be drilled instead of the forest of 400 or so conventional wells Fluor initially envisioned for the field.

The horizontal wells could cost nearly double the $650,000 to $700,000 paid for the conventional wells, but expose far more of the horizontal-running oil formations. The extra cost will seem cheap if the technique produces anything like what Texas Crude hopes for.

Texaco recently dropped off big permanent storage tanks to replace the temporary ones that had been used at the well sites.

Texas Crude has struck more oil wildcatting 4 1/2 miles from the North Shafter field. And for now, at least, their dreams are intact.

"There's certainly more than 100 million barrels of oil," Fluor said.

"Can we recover 100 million barrels? That's what we're going to find out."

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