11

SPE DISTINGUISHED LECTURER SERIESis funded principally

through a grant of the

SPE FOUNDATIONThe Society gratefully acknowledges

those companies that support the programby allowing their professionals

to participate as Lecturers.

And special thanks to The American Institute of Mining, Metallurgical,and Petroleum Engineers (AIME) for their contribution to the program.

Challenges and Opportunities for Challenges and Opportunities for Operating in Environmentally Operating in Environmentally

Sensitive BasinsSensitive Basins

Learning from the California Learning from the California ExperienceExperience

Marina Voskanian, PEMarina Voskanian, PECalifornia State Lands CommissionCalifornia State Lands Commission

The views expressed in this presentation are those of the authors, and do not necessarily reflect those of the State Lands Commission or its staff.

OverviewOverview

•• History of offshore oil operationsHistory of offshore oil operations

•• Challenges of operating in CaliforniaChallenges of operating in California

•• Creative solutionsCreative solutions

•• ExamplesExamples

•• Worldwide applicationsWorldwide applications

44

Significance of CaliforniaSignificance of California’’s s Oil & Gas IndustryOil & Gas Industry

•• Ranks 4th in the United States in productionRanks 4th in the United States in production

•• California Produces 702,000 BOPDCalifornia Produces 702,000 BOPD–– 113,000 BOPD from offshore113,000 BOPD from offshore–– 589,000 BOPD from onshore589,000 BOPD from onshore

•• California Consumption ~ 2MM BOPDCalifornia Consumption ~ 2MM BOPD–– Consumes ~10% of the United States oil Consumes ~10% of the United States oil

consumptionconsumption–– 40 % produced in California40 % produced in California–– 60 % imported (20% from Alaska)60 % imported (20% from Alaska)

Platforms/Facilities Offshore CaliforniaPlatforms/Facilities Offshore California

•• 23 Federal Platforms23 Federal Platforms

•• 4 State Platforms4 State Platforms

•• 5 Man5 Man--made Islandsmade Islands

ËË

Ë

ËËËË

Ë

Ë

ËËËË

ËË

Ë

Ë

ËËËËËËË

ËËË

ËË

Ë

Ë

Ë

AC

Eva

Gail

Holly

Edith

Gina

Grace

Hogan

Hondo

Irene

Gilda

Hermosa

Hidalgo

Habitat

HarmonyHeritage

Harvest

B

Hillhouse

Henry

Houchin

EurekaEllenElly

Emmy

Esther

Rincon

LOS ANGELES

ORA

State WatersFede ra l Waters

Pt.Conception

VENTURA

SANTA BARBARA

Offshore Platforms / IslandsFederalË

StateË

State 3 mile limit

Legend

1903 1903 -- SummerlandSummerland

CALIFORNIA’S FIRST – A view of Summerland oil field near

Santa Barbara as it appeared in 1903. Discovered in 1894, Summerland was the first

offshore field developed in the United States.

California Offshore Oil & Gas HistoryCalifornia Offshore Oil & Gas History

•• 1894 1894 –– Natural gas & crude oil discovered in SummerlandNatural gas & crude oil discovered in Summerland

•• 1938 1938 –– California State Lands Act is signed into lawCalifornia State Lands Act is signed into law

–– State Lands Commission is createdState Lands Commission is created

–– Under the Act leases issued to the highest bidderUnder the Act leases issued to the highest bidder

•• 1969 1969 –– Blowout on federal Platform A, Santa Barbara ChannelBlowout on federal Platform A, Santa Barbara Channel

–– Thousands of barrels of oil from seafloor rupture (caused Thousands of barrels of oil from seafloor rupture (caused

during well kick kill procedure)during well kick kill procedure)

–– Offshore drilling moratorium is instituted in State watersOffshore drilling moratorium is instituted in State waters

California Offshore Oil & Gas HistoryCalifornia Offshore Oil & Gas History

•• 1970 1970 –– Environmental legislation enactedEnvironmental legislation enacted

–– Congress passes the National Environmental Policy Act (NEPA)Congress passes the National Environmental Policy Act (NEPA)

–– Legislature passes the California Environmental Quality Act Legislature passes the California Environmental Quality Act

(CEQA)(CEQA)

–– NEPA/CEQA require environmental analysis and public inputNEPA/CEQA require environmental analysis and public input

–– Environmental organizations (NGO) become vocalEnvironmental organizations (NGO) become vocal

•• 19901990’’s s –– Exodus of major oil companiesExodus of major oil companies

–– Opens up new opportunities for smaller operatorsOpens up new opportunities for smaller operators

Offshore Facility StatusOffshore Facility Status

•• 42 platforms/islands constructed 42 platforms/islands constructed offshoreoffshore

•• Today, 32 remainToday, 32 remain

•• Rincon Island constructed in 1958, Rincon Island constructed in 1958, oldest platforms constructed in early oldest platforms constructed in early 19601960’’ss

Map of 4H areaMap of 4H area

Ë Ë

ËË

Ë

Ë

Ë ËËËËËË

Hilda Hazel

Heidi

Hope

S.B

. Co u

n ty

V ent

u ra

Co

N

4 0 4 8 Miles

Offshore Platforms / IslandsFederalË

StateË

DecommissionedË

State 3 mile limit

Offshore Platforms / Islands

1212

Drill Mud & Cutting DisposalDrill Mud & Cutting Disposal••Historically drill cuttings disposed beneath platformsHistorically drill cuttings disposed beneath platforms

–– Mixed with marine growth cleaned from platform Mixed with marine growth cleaned from platform legs, creating legs, creating ““shell moundsshell mounds””––Drill Drill mudsmuds contained some heavy metals and toxins contained some heavy metals and toxins associated with the chemicals from the mining processassociated with the chemicals from the mining process

••CSLC policy since mid 1980CSLC policy since mid 1980’’ss–– No drill cutting disposal in marine environmentNo drill cutting disposal in marine environment–– Cuttings are contained in tanks and transported to Cuttings are contained in tanks and transported to shore for proper disposal, or liquefied and injected into shore for proper disposal, or liquefied and injected into nonnon--producing formations.producing formations.

1313

Oil Field Operation Impacts on Oil Field Operation Impacts on FishingFishing

•• Platforms reduce area available for commercial Platforms reduce area available for commercial and recreational fishingand recreational fishing

•• Majority of rigs possess abundant sea life (fish, Majority of rigs possess abundant sea life (fish, sea stars, anemones, etc.)sea stars, anemones, etc.)

•• Post 9/11: No boats allowed near platformsPost 9/11: No boats allowed near platforms

•• Shell mounds not Shell mounds not trawlabletrawlable after platform after platform removalremoval

•• Shell mound issue subject of current EIR studyShell mound issue subject of current EIR study

1414

1515

1616

1717

1818

Oil Facility AbandonmentOil Facility Abandonment•• 6 platforms, one island removed since 19806 platforms, one island removed since 1980’’ss

–– All were scrapped, no rigs to reefs to dateAll were scrapped, no rigs to reefs to date

–– Pipelines generally abandoned in place due to burial, Pipelines generally abandoned in place due to burial,

environmental impact of removalenvironmental impact of removal

•• Rigs to Reefs debate since 1986 4H platform removalRigs to Reefs debate since 1986 4H platform removal

–– State legislative efforts unsuccessfulState legislative efforts unsuccessful

–– Controversy over fish production versus attractionControversy over fish production versus attraction

–– New momentum for CA Rigs to Reefs ProgramNew momentum for CA Rigs to Reefs Program

Challenges of Operating Challenges of Operating Offshore CaliforniaOffshore California

•• Aging facilitiesAging facilities

•• Regulatory Regulatory constraintsconstraints

•• Increased Increased stakeholder stakeholder vigilancevigilance–– State, Counties, LocalState, Counties, Local

–– Environmental groupsEnvironmental groups

–– PoliticiansPoliticians

2020

Overcoming ChallengesOvercoming Challenges

•• Use existing legislationUse existing legislation–– A new oil and gas lease can be issued if A new oil and gas lease can be issued if

drainage is occurring from adjacent drainage is occurring from adjacent federal landsfederal lands

–– The boundaries of an existing lease can The boundaries of an existing lease can be expanded to encompass all of a field be expanded to encompass all of a field partially contained in the leasepartially contained in the lease

–– Revenue sharing incentiveRevenue sharing incentive

–– Advanced technologyAdvanced technology•• 3D seismic3D seismic•• Horizontal, Extended Reach, Horizontal, Extended Reach,

& Multi& Multi--Lateral DrillingLateral Drilling

–– Use of existing infrastructure to Use of existing infrastructure to develop new resourcesdevelop new resources

–– Identify common goals/benefits for different jurisdictionsIdentify common goals/benefits for different jurisdictions

–– Innovative legislation to promote revenue sharing among Innovative legislation to promote revenue sharing among stakeholdersstakeholders

4 miles2 Miles

Solutions to Operating in Solutions to Operating in Offshore CaliforniaOffshore California

•• Drilling into Abandoned FieldsDrilling into Abandoned Fields–– BelmontBelmont–– CarpinteriaCarpinteria

•• Drilling into Undeveloped FieldsDrilling into Undeveloped Fields–– South EllwoodSouth Ellwood–– TT--Ridge/Ridge/VahevalaVahevala

Use of Existing InfrastructureUse of Existing Infrastructure

Examples of Drilling From Existing Facilities Examples of Drilling From Existing Facilities into Previously Abandoned Fieldsinto Previously Abandoned Fields

Carpinteria

Belmont

Belmont

Esther

Drilling From Existing Facilities intoDrilling From Existing Facilities intoPreviously Abandoned FieldsPreviously Abandoned Fields

•• Belmont OffshoreBelmont Offshore–– Belmont Island abandoned by Exxon (28MMBO)Belmont Island abandoned by Exxon (28MMBO)–– Drilling from existing THUMS Island ChaffeeDrilling from existing THUMS Island Chaffee–– 8 production wells and 4 injector wells drilled to date8 production wells and 4 injector wells drilled to date

•• Measured depth ~ 8000Measured depth ~ 8000--90009000’’•• Horizontal displacement ~ 6000Horizontal displacement ~ 6000’’•• Kickoff angle ~ 87 degreesKickoff angle ~ 87 degrees•• Formation depth 3000Formation depth 3000’’, thickness at least 300, thickness at least 300’’

–– Lease production is approximately 1500 BOPDLease production is approximately 1500 BOPD–– Potential for additional 4 Potential for additional 4 -- 6 MMBO6 MMBO–– Revenue to State since 6/2005 exceeds $6.7MMRevenue to State since 6/2005 exceeds $6.7MM

Belmont Offshore Belmont Offshore

•• Oxy agreementsOxy agreements–– City of Long Beach gets a percentage for City of Long Beach gets a percentage for

passpass--thru, overriding royalty, tax/bblthru, overriding royalty, tax/bbl

–– Long Beach Unit is compensated for use Long Beach Unit is compensated for use of facilities, equipment, and personnelof facilities, equipment, and personnel

–– State of California receives royaltyState of California receives royalty

2727

Belmont Field: Top M1 Structure Belmont Field: Top M1 Structure

C-332A

C-232

C-237I

C-234I

C-230IC-301

C-247

Possible injector

C-236 Drilling

Redrillinjector

Map supplied by OXYMap supplied by OXY

2828

33--D View of Long Beach Unit & D View of Long Beach Unit & Belmont Offshore Field WellpathsBelmont Offshore Field Wellpaths

Pier J

Grissom White

Chaffee

Belmont

Freeman

2929

Two Dimensional Well PlansTwo Dimensional Well Plans

C-234I C-230IC-237I

Drilling From Existing Facilities intoDrilling From Existing Facilities intoPreviously Abandoned FieldsPreviously Abandoned Fields

•• Carpinteria OffshoreCarpinteria Offshore

–– Two platforms abandoned by Two platforms abandoned by

Chevron in the 1990Chevron in the 1990’’s s

–– DOE study confirmed 10DOE study confirmed 10--25 MMBO 25 MMBO

recoverable oil left in placerecoverable oil left in place

–– Up to 25 extended reach wells Up to 25 extended reach wells

from federal platform Hogan into 3 from federal platform Hogan into 3

state leasesstate leases

Carpinteria RedevelopmentCarpinteria Redevelopment

•• Status:Status:

–– State and Feds reviewing latest structural analysis State and Feds reviewing latest structural analysis

to determine platform stability and recertificationto determine platform stability and recertification

–– State CEQA review in progressState CEQA review in progress

–– MMS NEPA reviewMMS NEPA review

Examples of Drilling From Existing Facilities intoExamples of Drilling From Existing Facilities intoUndeveloped FieldsUndeveloped Fields

Tranquillon

Ridge

South Ellwood

South Ellwood Field ExtensionSouth Ellwood Field Extension

Ë

Holly

SANTA BARBARA

32423120

421

Drilling From Existing Facilities Drilling From Existing Facilities Into Undeveloped FieldsInto Undeveloped Fields

•• South Ellwood ExtensionSouth Ellwood Extension

–– Drilling up to 40 new wells & Drilling up to 40 new wells & redrillsredrills from State from State

Platform Holly into adjoining State tidelandsPlatform Holly into adjoining State tidelands

–– Construction of onshore oil pipelineConstruction of onshore oil pipeline

–– Decommission of marine terminalDecommission of marine terminal

–– Upgrade Ellwood Onshore FacilityUpgrade Ellwood Onshore Facility

South Ellwood ExtensionSouth Ellwood Extension

•• The CEQA EIR process is in action The CEQA EIR process is in action and may be completed by the end and may be completed by the end of the yearof the year

•• MultiMulti--jurisdictional project involving jurisdictional project involving the State, County of Santa Barbara, the State, County of Santa Barbara, and the City of Goletaand the City of Goleta

Drilling Drilling Into Undeveloped FieldsInto Undeveloped Fields

•• TT--Ridge / Ridge / VahevalaVahevala

–– Drilling from Federal Platform Irene into Drilling from Federal Platform Irene into State tidelandsState tidelands

–– Drilling from onshore Air Force base into Drilling from onshore Air Force base into State TidelandsState Tidelands

Examples of Drilling From Existing Facilities intoExamples of Drilling From Existing Facilities intoUndeveloped FieldsUndeveloped Fields

Tranquillon

Ridge

South Ellwood

PXP TPXP T--Ridge ProjectRidge Project

•• Development adjacent to Pt. Development adjacent to Pt. PedernalesPedernales from federal from federal

platform Irene platform Irene

•• Requires new offshore lease Requires new offshore lease

•• Possible drainage from federal sidePossible drainage from federal side

•• Project calls for 22 extended reach wells Project calls for 22 extended reach wells

•• Processing oil at the existing onshore facility at LompocProcessing oil at the existing onshore facility at Lompoc

•• MultiMulti--jurisdictional CEQA/NEPA review jurisdictional CEQA/NEPA review –– State, County of State, County of

Santa Barbara and MMSSanta Barbara and MMS

•• Proposes to develop the same structure of Proposes to develop the same structure of TT--Ridge, but from an onshore location on Ridge, but from an onshore location on Vandenberg Air Force BaseVandenberg Air Force Base

•• Requires new lease, and Base approvalRequires new lease, and Base approval

•• Project calls for 30 extended reach wellsProject calls for 30 extended reach wells with with up to 30,000 feet horizontal displacementup to 30,000 feet horizontal displacement

Exxon/Sunset Exxon/Sunset -- VahevalaVahevala

•• Calls for 25 acre onshore drillsite and Calls for 25 acre onshore drillsite and production facility production facility

•• Construction of onshore processing facility Construction of onshore processing facility to the Lompoc facilityto the Lompoc facility

•• MultiMulti--jurisdictional EIR/EIS jurisdictional EIR/EIS –– State, County State, County of Santa Barbara, Air Forceof Santa Barbara, Air Force

•• Application filed and under reviewApplication filed and under review

Exxon/Sunset Exxon/Sunset -- VahevalaVahevala

New Project PotentialNew Project Potential

•• Additional production for StateAdditional production for State–– Potential recovery of 150 to 300 MMBOPotential recovery of 150 to 300 MMBO

•• Additional royalty revenue to StateAdditional royalty revenue to State–– Potential to generate $1.5 billion to Potential to generate $1.5 billion to

$3 billion$3 billion

Worldwide ApplicationsWorldwide Applications

•• EnvironmentalEnvironmental–– Use existing infrastructureUse existing infrastructure–– Reduce environmental upsetsReduce environmental upsets

•• Legislative/GovernmentalLegislative/Governmental–– Increase local government stakeIncrease local government stake–– Maintain a safe and secure operation Maintain a safe and secure operation

•• generates goodwill and trustgenerates goodwill and trust

•• OpportunitiesOpportunities–– High oil prices High oil prices

•• sustains infrastructuresustains infrastructure•• creates new economic opportunities creates new economic opportunities •• promote innovationpromote innovation

Innovative and creative methods used to Innovative and creative methods used to enhance production while minimizing enhance production while minimizing

environmental impacts have proven to be environmental impacts have proven to be successful in Californiasuccessful in California’’s constrained s constrained

operating environments operating environments ----and our experience can be applied in and our experience can be applied in

other parts of the world.other parts of the world.

SummarySummary

4444

www.slc.ca.govwww.slc.ca.gov