Drilling for Oil in Downtown L.A.

LOS ANGELES, May 11, 2008 -- Record prices are prompting oil prospectors to renew interest in drilling in Los Angeles, where urban sprawl, environmental opponents and decades of production make for one of the world's toughest oil fields.

"We're more active than ever," says Tim Marquez, CEO and founder of Venoco, which is running wells and reviving old ones in the city and elsewhere in California.

"That increase in oil prices has caused expansion of exploration and production throughout the country and especially in California," says Steve Rusch, vice president of a Texas oil company that does extensive drilling in and around Los Angeles. "There's a huge incentive."

Oil has been produced in Los Angeles since the early 1900s, directly offshore as well as along city streets. To meet the demands of environmental opponents and gain needed permits, oil drillers have come up with a variety of methods to disguise oil wells so that most passersby don't even know oil drilling is going on.

Among the sites: on the campus of Beverly Hills High School, where students have decorated the panels that hide drilling from public view, and along Pico Street in one of L.A.'s busiest areas, where Rusch's company has hidden its rigs and drills behind facades that appear to be 14-story buildings.

At Long Beach, whose harbor adjoins Los Angeles' harbor, more than 2,000 wells are working on a small island immediately offshore, the production all hidden behind what looks like a condominium building. The wells are drilled diagonally for miles out to sea.

"It's built to resemble a resort island (and) blend in with the surroundings," says Richard Kline, vice president of Occidental Petroleum Corp., one of the big operators in Southern California and owner of the disguised harbor site.

California is the nation's biggest consumer of gasoline and is fourth among oil-producing states behind Texas, Alaska and Louisiana, according to the state's division of oil, gas and geothermal resources.

Higher prices have prompted oil companies to seek permits to reopen wells where drilling had been halted when lower prices made the expensive and difficult drilling not worth pursuing, says Hal Bopp, California's oil and gas supervisor. Most of the new activity involves old abandoned or capped wells because it is so difficult to obtain permits to start new wells in dense urban areas, he said.

That difficulty, he says, means California hasn't seen the major oil boom that Texas and Rocky Mountain states are seeing as world oil prices top $120 a barrel. Other factors limiting California production, he said, are the lower-grade nature of the crude found here, and the fact the oil operations here are mature and, frequently, under concrete. After decades of producing the easy-to-obtain oil, Bopp said, drillers now must inject water or steam into the wells to bring up remaining oil.

Still, he says, "There's still a lot of oil in the L.A. Basin — there's a lot of oil."

There are 3,164 wells in production in Los Angeles County, according to the state. Annual production has been around 27 million barrels for several years, down from the peak in 1969 of more than 133 million barrels.

Production showed a slight increase in 2007, Bopp said. And in the first four months of 2008, state applications to renew work on existing wells in the Los Angeles area total 129, compared with 50 at the same point in 2007, according to documents published by the state oil office.

High prices make drilling economical where it wasn't before, and that is attracting new players. In the L.A. area, Bopp says, there are at least a couple thousand wells still plugged with cement that have the potential to be reopened without much difficulty.

Rusch's company, Plains Exploration & Production, known as PXP, hopes to tap a new oil field under Culver City, which is surrounded by Los Angeles, with slant drilling from nearby Baldwin Hills. It is seeking government approval.

PXP agreed last month to set a date to prematurely end drilling off the coast at Santa Barbara in exchange for approval to drill new undersea reserves with sophisticated slanted drilling operations farther offshore. The company is donating nearly 4,000 acres of coastal property for public parkland in a deal with environmentalists who agreed to drop opposition to the company's exploration.

"We've been able to double our production in the last 15 years," Rusch says. "As prices go higher, we drill deeper. The play over Culver City becomes accessible. I think we're all hopeful there's potential. And there's more out there we don't know about today."