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Independent to drill offshore California Plains receives hard-to-get permits to develop Rocky Point accumulation Petroleum News
In what would have to be considered a major victory, independent Plains Exploration & Production has managed to acquire the necessary government permits to drill for new oil on its own acreage offshore environmental-minded California.
Plains said that over the next three to four years the company intends to drill eight extended reach wells from existing Point Arguello unit platforms about 15,000 feet into the never-produced Rocky Point structure, estimated to hold 20 to 30 million barrels of reserves. Development will require $120-$140 million in investment, the company said.
Point Arguello operator Plains initially applied for its Rocky Point permits more than three years ago against a backdrop of public opposition to offshore drilling in California that began to grow after a massive platform blowout that fouled Santa Barbara beaches more than 30 years ago. In 1989, exploration drilling was halted in California waters.
“The appeals have run their course and the permits are final,” John Raymond, Plains' chief operating officer, said in an Oct. 9 conference call with analysts. “We are now in receipt of all permits and approvals. This was not a result easily attainable.”
Raymond, the 32-year-old son of ExxonMobil chairman Lee Raymond, said Plains has lined up a drilling rig and hopes to spud the first well in early 2004. “We will move forward as rapidly as possible,” he added.
And none too soon for Plains and its partners, including ChevronTexaco, Devon Energy and Kerr-McGee. From its early 1990 peak of 300-million barrels of reserves and 92,000 barrels of production per day, Point Arguello reserves have declined to roughly 4.5 million barrels and production to 12,000 to14,000 bpd.
The Rocky Point oil accumulation, in federal waters on the eastern half of Block P-0451, was actually discovered and delineated in the mid-1980s by former Point Arguello operator Chevron. Plains acquired a 52.6 percent interest in Point Arguello in July 1999. Company expects to arrest production decline Plains, depending on how quickly new wells are brought on stream, said at a minimum it can arrest the production decline at Point Arguello and possibly double output over time. The company estimates that combined oil volumes from Point Arguello and Rocky Point would peak at 31,000 barrels per day in 2006 and then quickly decline.
“This doesn't extend the (unit's) life but increases the volume,” Raymond said.
Plains said Rocky Point oil previously tested in exploratory wells was high quality light, low sulfur crude, and superior in quality to Point Arguello crude. Oil from Rocky Point would provide "extremely compelling returns," Raymond said.
Extended reach drilling will be conducted from two of the three Arguello platforms, Hermosa and Hidalgo. And all production from Rocky Point would be transported to shore through an existing pipeline and exported away from Plains' onshore Santa Barbara County metering facility via the Plains All America Pipeline.
Except for the eight new wells, developing the eastern half of Block P-0451 will not require any new subsea infrastructure or new equipment at the onshore Gaviota facility. The oil and gas would be commingled with Point Arguello production and processed offshore at the existing platforms.
Because the Rocky Point drilling proposal stayed within bounds of the original Point Arguello Unit plan, the powerful California Coastal Commission concluded it would "not cause effects on California's coastal zone resources" and would require not require further review by the commission.
Plains' working interest in Rocky Point will depend on issues including well proposals, "but in no event will be less" than its current 52.6 percent stake, the company said.
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