What do you do if there is an ever-increasing competition for an ever-decreasing amount of old oil?
One solution is to go after new oil -- and to look deep.
That's been the strategy of Tri-Valley Oil and Gas, a subsidiary of the Bakersfield, Calif., based Tri-Valley Corp. and the operator of the EKHO project consortium.
Tri-Valley is currently involved in a well that, if successful, could become America's deepest oil producer.
The well is the EKHO No. 1 test well, spudded Feb. 7, which at press time had drilled past 14,000 feet on its way to the projected total target depth of 19,500 feet.
The well is located 40 miles northwest of Bakersfield, and is the first of three wells scheduled to test a large, hinge line trap that was identified by geologists and confirmed by seismic data 25 years ago, the company reports.
"EKHO" was named in reference to the nearby Elk Hills Oilfield, first drilled and developed 90 years ago, and in anticipation that results in this deep prospect will "echo" the 1.3 billion barrels of crude oil and one trillion cubic feet of natural gas produced from this nearby famed supergiant.
The primary target is the Tremblor sand sequence, a thick package of Middle and Lower Miocene horizons where hydrocarbon bearing sections were identified by previous drilling.
The drill site is located in California's Great Central Valley, which sweeps for 450 miles down the state's central section between the Coast Ranges and the Sierra Nevada Mountains and hosts one of North America's richest and deepest petroleum basins.
The San Joaquin Valley, according to EKHO reports, has produced 13 billion barrels of oil and 7.1 trillion cubic feet of gas.
But, as explains Tri-Valley's president Joseph R. Kandle, only about 13 percent of the economically viable oil remains.
"The primary emphasis had been on buying production," Kandle said. "This is the highest priced oil you can buy. There's a lot of competition.
"So about two years ago, we began asking ourselves, why don't we find new oil?"
Deep Horizons
Whereas the major oil companies have been going abroad to look for new oil, Tri-Valley decided to look close to home, but at a deeper level than was generally sought before. The heart of the energy wealth in the San Joaquin Basin has been in Kern County, which has been responsible for six billion barrels of the crude oil and two trillion cubic feet of the natural gas extracted from the Great Central Valley.
As the company likes to point out, if Kern County were a state, it would rank as the fourth largest oil producer in the United States, behind Alaska, Texas and Louisiana. In fact, Kern County alone produces more than twice as much oil per day as the whole state of Oklahoma.
However, of the over 100,000 wells drilled in Kern County, only 65 have been drilled below 15,000 feet. And only 6-10 have been drilled down into significant structures.
Since the San Joaquin Valley is one of the deepest basins on the continent with thicknesses of 35,000 to 45,000 feet, Tri-Valley figured there might very well be plenty of oil down there.
Tri-Valley was not the first company to suspect these deep reserves. And there had, in fact, been previous attempts that failed because, at the time, the technology was not sufficiently developed to complete the job.
In 1972, Great Basins Petroleum drilled a well down to 21,640 feet, which, at one point, resulted in flows of 1,000 barrels of oil per day. The trouble, Kandle explained, was that below 12,000 feet, for every foot drilled deeper there was a gradient pressure of 0.9 psi.
"So at 20,000 feet you have 18,000 pounds of pressure," he said. "This imposed considerable engineering difficulties."
Ultimately, the well had to be abandoned due to mechanical problems.
Simultaneously, in 1972, Mobil Oil drilled a well into the same structure eight miles to the south. It went to 20,753 feet. It encountered the same formation -- the same hydrocarbon-bearing Miocene sandstones -- but also failed because of the completion problems.
In 1974 Tenneco had a similar experience, getting down to 18,876 feet that produced 10,000 barrels of oil during testing, but eventually was abandoned for the same reasons.
Kandle's point is that it's not just a relatively small independent like Tri-Valley that believes significant reserves are deep below ground, but companies like Great Basins, Mobil, and Tenneco thought so, too.
"There were completion problems," he said, "not exploration problems."
Familiar Territory
So why does Tri-Valley want to return to plowed ground?
"There have been many advances in technology over the past 25 years that can help us solve the engineering problems," Kandle said. "We can drill almost twice as fast as we could over 25 years ago, there are better drilling muds, and many more tools available for completion alternatives."
But Tri-Valley has had trouble getting the project kicked off. During 1997 and 1998 it worked to put together 10,000 to 20,000 acres of lease blocks, a very slow and laborious process since about 99 percent of the land in the area is privately held, often in small parcels.
During that same period, as oil prices dropped, Tri-Valley had trouble attracting investors. Especially in view of the fact that the previous failures closed many minds to the possibility that there was oil there to be recovered.
However, on November 23, 1998, a Canadian consortium probed the Temblor sands below 17,600 feet where they took a "kick" and the well blewout and ignited.
What resulted was the largest blow-out in recent California history. The fireball exploded 300 feet into the air, and took six months to put out. For the two weeks the well flowed out of control, it spewed forth an estimated 100 million cubic feet per day, ranking it highly among the top 10 percent of wells ever drilled onshore in North America.
"Until this blow-out, the paradigm was that there was not enough porosity and permeability to have a deep commercial well in this area," Kandle said. "This blow-out changed the paradigm."
Tri-Valley then formed partnerships with a number of Canadian companies. Tri-Valley had leased up all or part of 26 sections of land, comprising 9,800 acres not far from the blowout.
Tri-Valley always intended to drill a new well and raised $9.5 million for the initial test, but last October, it obtained ownership of the Tenneco 66x-3 well and then decided to determine if the well was re-enterable, which would have saved millions of dollars.
However, upon very initial re-entry it was determined the deep intermediate casing had too much casing wall wear to allow Tri-Valley to carry out its potential re-entry or re-drill. Tri-Valley then returned to its original plan to drill a new well.
Based on a volumetric calculation, if the EKHO acreage is prolific and the trap full, it could contain four billion barrels of oil and a trillion cubic feet of gas in place.