Urban Oil Boom in Tinseltown?

LOS ANGELES, May 27, 2008— -- You find oil wells in the unlikeliest places around Los Angeles -- next to the McDonald's drive-through, across the street from a gas station, right in view of brand new homes.

Most of these fields have been pumping a few barrels a day for years, amounting to about 27 million barrels a year in Los Angeles County. But beneath this crowded city are some of the largest reserves in the United States, and with the price of oil continuing to skyrocket, there's an urban oil boom underway as drillers renew these aging oil fields.

"I can pretty well say across the board, for the industry, that the higher price has rejuvenated these older fields," said Thomas Dahlgren, who works for one of the small oil companies in the Los Angeles area.

"This field has been producing since the 1920s, and probably it's produced about 20 percent of the oil in place," he said. "So there's a lot of oil left in these reservoirs, it just takes new technology, which we have now, and it takes a higher price to be able to recover the oil."

Dahlgren's company, Warren E&P, has embarked on an elaborate plan to disable old low-producing wells scattered through the Wilmington fields near Long Beach, and replace them with a web of new wells under the neighborhood drilled from a central facility. The wells will be more accurately located in productive pools of oil.

It costs about $1 million to drill just one well, but the current price of oil makes it profitable.

"The oil industry has got every rig available drilling right now," Dahlgren said. "Everything we can do to bring these fields back on is being done."

Nearly 100 years ago this part of Southern California was the Saudi Arabia of its time. The city has grown among the wells, but plenty of oil is still down below. The challenge is getting to it.

"Oh, it's not easy," said Kevin Laney, the operations manager for Signal Petroleum, a company that drills in the Los Angeles area. "No, no. The easy barrels, they were taken out a long time ago."

Laney acknowledges that his company is making more money, but adds, "we're putting a lot of money back into the business. That's where a lot of the money goes."