Chevron Squeezes New Oil from One of World's Oldest Fields

Kern County, California
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BAKERSFIELD, Calif. (THE WALL STREET JOURNAL via Dow Jones), Oct. 9, 2009

Chevron Corp. is employing new technologies in hopes of extending the life of one of the world's oldest and most prolific oil fields, a process that is being replicated elsewhere to help the energy industry squeeze more out of aging oil basins.

The Kern River field has produced more than 2 billion barrels of oil in its 110-year history, but Chevron estimates it still holds another 1.5 billion barrels.

Chevron is using the Kern River field as a real-world laboratory, testing enhanced recovery techniques and bringing in engineers from around the world to learn them. "The thing about being in this old oil field," said Chevron engineer Joe Fram, "you can try stuff."

To get as many of those barrels as possible out of the ground -- and do so cheaply enough to turn a profit -- Chevron is deploying high-tech temperature sensors to monitor its production, using three-dimensional computer models to plan its wells and filtering waste water from the fields through walnut shells so it can be re-used.

Chevron's renewed focus on Kern River shows both the opportunities and the challenges facing the oil industry as the giant discoveries of the last century, from Alaska's Prudhoe Bay to Mexico's Cantarell, begin to dry up. Prudhoe Bay, for example, has suffered production declines even though more than half its 25 billion barrels of oil remain in the ground.

To get the oil out of the Kern River field, Chevron injects steam into the ground, which heats the rock and thins out the gooey liquid so that it flows more easily to the surface. The process is far more expensive than conventional oil production, with thin profit margins that can disappear entirely when oil prices drop or costs rise.

It has drilled 660 observation wells equipped with sensors to track the temperature of the reservoir so engineers can see where heat is most needed, and has developed its own equipment to direct the steam there.

Those techniques have allowed Chevron to use half as much steam to produce a barrel of oil -- for an annual savings of about $300 million, according to the company.

"By turning the burner down, we save a lot of money," said Paul Harness, a senior staff geologist in the Kern River field.

Giants Exxon Mobil Corp. and Royal Dutch Shell PLC are showing interest in such projects. Occidental Petroleum Corp. has extended the lives of fields in Oman, Colombia, and West Texas by injecting carbon dioxide, steam and other substances into the oil reservoirs.

Occidental President Steve Chazen said that with fewer new fields being discovered, maintaining production at old fields is the only way the industry will be able to meet demand for oil.

"In the long term, it's not how many fields get discovered. It's keeping the base decline under control," Mr. Chazen said.

Chevron hasn't reversed the Kern River's decline, but it has managed to slow it. Production is falling at a rate of about 2% per year, compared to an average of 7% per year from 1998 to 2005 -- which will mean millions of extra barrels of oil this year.

The company hopes eventually to coax out as much as 80% of the field's oil compared with the 30% that is typical in many fields around the world. Kern River had 628 million barrels of estimated reserves at the end of 2007, according to state data, up 16% from 2004.

Its longevity is already remarkable. In 1899, a father-and-son team of oil prospectors, digging by hand, struck oil by the bank of the Kern River, 100 miles northwest of Los Angeles. Within four years, more than 400 different companies were pumping 45,000 barrels of oil a day there, more than anywhere else in the country at that time.

Today, the Kern River field is a sea of pipelines, storage tanks and about 9,000 slowly bobbing pumpjacks that still pull nearly 79,000 barrels of oil a day from the rock below down from 140,000 barrels a day at its peak.

If companies can squeeze more oil out of their old fields, they don't need to find as many new ones -- lessening the risk of expensive failures.  

Copyright (c) 2009 Dow Jones & Company, Inc.

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