Oxy Libya: Giant Strides For a Small Company

When Occidental Petroleum Corporation was reorganized in 1959, its total oil production was some 100 barrels per day. By the time Moammar Gaddaffi nationalized the industry in 1969, Oxy Libya, the wholly-owned subsidiary, was producing 800,000 barrels per day. Such an amount made Oxy Libya the eighth largest producer in the world – exceeded only by the “Seven Sisters.”

Beginnings

In 1959 the old Occidental Petroleum was becoming defunct, but Armand Hammer, a recent investor from Beverly Hills, invested with Oxy as a last gasp and the company discovered several modest California oil wells. Hammer got excited by the ingenuity and grit of the owner of the drilling company – the ever-colorful Gene Reid.

The irascible Bakersfield driller wasn’t too sure about teaming up with anybody from Beverly Hills, but after a year of courtship and encouragement from Reid’s geologist son Bud, who liked one of my plays, I became the first hire of the newly reorganized Oxy.

Our exploration company consisted of a dusty, galvanized metal office in the oil patch of Bakersfield, a tad larger than a typical drill rig doghouse. Our first drilling success, based on the play I brought was in the Arbuckle gas field, in California’s Sacramento valley. Western Gulf Oil Co. (WGO) had discovered the Cretaceous age Forbes turbidite sand gas field, but WGO stopped their development drilling program after several dry holes. Oxy farmed-in and drilled several wells on WGO-selected locations as the price of admission to take over their leases.

These initial wells were dry holes. However, they were followed by ten successful gas producers, which started Oxy on a successful series of gas discoveries in the Sacramento valley. We grew out of our little office and started to add friends and old schoolmates we knew and trusted.

The Question

Hammer, as Oxy’s chairman, flew to Arbuckle to see his new gas wells among the walnut orchards.

On the way home he asked me an unusual question: “If you could operate any place in the world where would it be?”

This was not a question a young California geologist would have a well-thought-out answer to on the tip of his tongue. However, the Oil and Gas Journal and other trade publications were reporting with some regularity the discovery of major new oil fields in the Sirte Basin of Libya.

Please log in to read the full article

When Occidental Petroleum Corporation was reorganized in 1959, its total oil production was some 100 barrels per day. By the time Moammar Gaddaffi nationalized the industry in 1969, Oxy Libya, the wholly-owned subsidiary, was producing 800,000 barrels per day. Such an amount made Oxy Libya the eighth largest producer in the world – exceeded only by the “Seven Sisters.”

Beginnings

In 1959 the old Occidental Petroleum was becoming defunct, but Armand Hammer, a recent investor from Beverly Hills, invested with Oxy as a last gasp and the company discovered several modest California oil wells. Hammer got excited by the ingenuity and grit of the owner of the drilling company – the ever-colorful Gene Reid.

The irascible Bakersfield driller wasn’t too sure about teaming up with anybody from Beverly Hills, but after a year of courtship and encouragement from Reid’s geologist son Bud, who liked one of my plays, I became the first hire of the newly reorganized Oxy.

Our exploration company consisted of a dusty, galvanized metal office in the oil patch of Bakersfield, a tad larger than a typical drill rig doghouse. Our first drilling success, based on the play I brought was in the Arbuckle gas field, in California’s Sacramento valley. Western Gulf Oil Co. (WGO) had discovered the Cretaceous age Forbes turbidite sand gas field, but WGO stopped their development drilling program after several dry holes. Oxy farmed-in and drilled several wells on WGO-selected locations as the price of admission to take over their leases.

These initial wells were dry holes. However, they were followed by ten successful gas producers, which started Oxy on a successful series of gas discoveries in the Sacramento valley. We grew out of our little office and started to add friends and old schoolmates we knew and trusted.

The Question

Hammer, as Oxy’s chairman, flew to Arbuckle to see his new gas wells among the walnut orchards.

On the way home he asked me an unusual question: “If you could operate any place in the world where would it be?”

This was not a question a young California geologist would have a well-thought-out answer to on the tip of his tongue. However, the Oil and Gas Journal and other trade publications were reporting with some regularity the discovery of major new oil fields in the Sirte Basin of Libya.

When Libya was created by the United Nations after World War II and opened up to concessions, the industry initially concentrated in the western portion of the country adjacent to the gas producing areas of Algeria. It was years later that Esso opened the discovery of the Sirte Basin. Thereafter, all of the operators, i.e., Mobil, Amoseas, Oasis and BP, were making billion barrel discoveries. By the terms of the original concessions, they were going to have to relinquish the majority of their acreage without having thoroughly explored it. Another round of concession granting was coming up and a grand scramble was obviously going to take place. Hammer realized this and in 1963 created the wholly owned subsidiary - Oxy Libya.

International Exploration Company

Oxy Libya (made up of geologist C. James “Jim” Blom, geophysicist Jim Mercer and I) scrounged up 12 electric logs, five core histories and zero seismic data. We were off to the races! We were not likely to obtain any seismic data or any other data from the major companies already competing there. We did, however, have some regional, non-proprietary gravity and magnetic mapping.

It became apparent to us that most of the discoveries were related to old structural highs: horst blocks, granitic and/or volcanic islands and arches of various sorts in the ancestral seas. Mobil’s billion-barrel Amal Field was located on one of the old island type ridges. They followed up the field discovery with a few wells further along the ridge, which were all dry holes on top of a barren ridge.

The Clue

A truly fortuitous bit of information came in one of our five core histories from a Pan American well way off the crest of the Amal Ridge, almost in the trough. The core descriptions noted numerous remains of reefoid fossils. Reef material certainly did not migrate uphill to get this far off the ancient island and it hadn’t come from the barren granitic high itself. It had to have come from someplace in between, i.e., off the flank of the old basement high.

Needless to say, Oxy Libya was not taken very seriously by the existing majors in Libya. Those who cared to talk to us learned we had next to no data and had never drilled, operated or even bid on any properties outside of California. We concluded that we would have to somehow make a big impression when bidding day came a little over a year later.

Friends in a Foreign Land

I met Frank Fuller, the regional manager for Geophysical Service Incorporated (GSI), a worldwide seismic contractor active at that time across the Middle East. He casually mentioned one day that the first digital seismic crew other than two that were operating currently in Saudi Arabia would be coming available. Two of the Aramco partners had two years of proprietary rights to these crews for financing the study of this new digital seismic with Texas Instruments – GSI’s parent company. He stated that the new digital seismic would revolutionize the industry as it was a night and day difference in quality over the old analog. So we signed Oxy up for a digital crew a year before the first concessions would even begin. From back home, our three-man Oxy Libya team was viewed as a bit rogue.

We befriended a young attaché at the U.S Embassy in Tripoli who appreciated our David vs. Goliath relationship with the major companies. We learned that King Idris was a fair and honorable man from a remote, tiny village named Kufra deep in the Sahara Desert. Kufra was defined by a small, but very fresh water oasis with several palm trees and some 150 people. King Idris greatly wanted to improve his village by introducing modern forms of agriculture if there was more water. We also learned that he did not like how the existing producers had been flaring all the associated natural gas.

Bidding Day

Bidding day, July 31, 1965, was coming up and we wanted to place bids on two concessions. Concession 102 we knew would be heavily sought after as it was a previously defined basement high and many players were openly talking about it. Concession 103 was off the Amal Ridge where we had our core data revelation and the old Mobil dry holes.

We came up with a game plan and had an ornately crafted, Italian leather-bound binder draped with silk ribbons in the color of the Libyan flag to present on bidding day. As the oil minister, Faud Kabazi, picked up our handsome binder among all the plain paper stacks, he smiled and let out an audible sigh of admiration. I happened to be sitting at the table with the large Mobil contingent and heard the manager scold their lawyer, “Why the hell didn’t you think of that?”

Within the bid, we included terms to drill for water at the Kufra Oasis and bring in a knowledgeable farmer to experiment with growing different crops nearby. We also included a pledge to submit designs on how to use the natural gas to be beneficial in a fertilizer plant.

We won both bids – Oxy Libya was in business!

Send Money and Farmers

With our newly won concessions we got to work. We hired a friend and well-respected farmer from back home, Archie Frick, to come to Libya to start experimenting with crops at the Kufra Oasis. We also deconstructed and flew over a water-drilling rig to Libya. With Archie overseeing the water well drilling at Kufra, he reported that they kept bailing fresh water from deeper and deeper, drastically surpassing any expectations we had. In fact, Archie found a 2,500 foot fresh water column in the middle of the Sahara Desert that was recognized as the largest unknown aquifer in the world. Aluminum irrigation pipe was flown over from home and every crop Archie planted seemed to thrive. Grains, vegetables, alfalfa and fruit trees flourished at Kufra which greatly pleased the king. We also followed through and developed and submitted to the oil minister plans for a fertilizer plant.

Spud Time

Oxy Libya’s first exploratory drilling activity was in 1966 on Concession 102, which was geologically dominated by a large granitic knob that had been an island in the Paleocene sea. The prior operator drilled the crest of the granitic high and found nearly dead oil shows, but no reservoir quality rock. Oxy’s discovery well D-102 was located on the westerly flank of the knob and encountered porous, coarse granitic wash sediments fringing the old island. The discovery well was tested at a rate of 14,860 barrels per day of clean 36.2 gravity oil and became the second largest discovery in Libya’s history. Eight subsequent follow-up wells tested at an average of nearly 10,000 BOPD each. The field was named Augila after a nearby very small desert village. We were on the map and any grumblings from back home turned to excitement!

One Line Wonder

After the discovery of Augila, we commenced with our seismic program based on our concept of exploring off the structural highs to see if we could find where the reef material had come from on the Block 103 concession. Through mostly dumb luck, we located our first and only digital seismic line parallel to and along the flank of the Amal Ridge. GSI’s Frank Fuller called a bit breathlessly from London and informed us he would hand deliver our very first seismic line shot on Concession 103 the next morning. Upon arrival at our office before saying hello, the very first question he asked was why we had located the line where we did. He then asked if we had ever seen a pinnacle reef on a seismic line. “No!” was the answer from the two California geologists and lone geophysicist. He then produced an example analog line from Mexico in the Tampico area that had a well-defined pinnacle reef.

Then he unrolled our first flank, digital seismic line: there were five, quite prominent pinnacle reefs jumping off the page and staring us in the face. What are the odds of that happening on our one and only flank seismic line? With the help of several subsequently shot dip lines, these reefs were determined to be about one mile in diameter and about 1,000 feet thick. With all the subsequent seismic we shot, we did not find any additional reefs. They were all imaged on our first line. Another curious aspect of these reefs was that they all had a seismic “sag” beneath them. We surmised this could be due to high porosity, possibly slowing the seismic waves down. The average porosity of these reefs would turn out to be about 34 percent.

The Reef

After the seismic discovery of the pinnacle reefs, the drilling rig was contracted and the first well was spud in 1967. The top of the reef was contacted around 9,300 feet, as detected by the mud loggers with a big drilling rate break. The wait for “bottoms up” to give us our first physical evidence of what might lurk beneath ticked by with the mud pump counter diligently clicking away. The ink-filled pens finally began to inch to the right then abruptly shot off the chart on every back-up scale with the gas alarm singing and coring commenced. Every day more boxes of core were air-freighted off for analysis at Robertson’s Research facility in Wales. One thousand feet of oil saturated, porous reef was penetrated in all, matching our seismic estimate closely. The recoverable reserve calculations were in the order of one billion barrels.

Big Campfire

Five separators were as many as we could beg and borrow from the local operators for the production test. We plumbed them up to every conceivable valve on the Christmas tree and hammered anchors over the flow lines out into the Libyan Desert. The initial production test easily maxed out the five separators at over 40,000 barrels per day. The ground roll was so dramatic that it temporarily shut down a seismic crew operating 20 miles away.

The best of the reefs was selected for initial development. Gas from an adjoining reef was injected into the top of the reservoir. Water from an underlying, higher pressured zone was “dump-flooded” into the bottom to maximize rate and recovery.

Forty wells were drilled and completed in the first developed reef. The wells had oil/gas separators capable of processing 40,000 BOPD per two wells. One well was plumbed to handle 80,000 BOPD and exceeded that amount.

D.I.Y.

After the discovery of the pinnacle reef fields on Concession 103, it became even more imperative that some way had to be found to get all of this oil to market. Understandably, the other operators were less than thrilled to have this quantity of new oil competing in an already fully supplied market. They therefore refused to transport Oxy’s oil to the coast in their existing pipelines. Oxy at that point retained the Bechtel Corporation to design and build a pipeline to the coast and a marine loading facility where there had been nothing but miles of sandy beach. A 135-mile long 40-inch diameter pipeline was laid to the Mediterranean coast terminating at the small village of Zueitina. This was accomplished in record time by utilizing three pipe-laying spreads simultaneously. A harbor was created for the service vessels and an offshore facility was built for loading the tankers, the first of which arrived in February 1968. In addition to the pipeline and loading terminal, five large storage tanks each with a capacity of approximately half a million barrels were erected at Zueitina for storage cushion between tanker arrivals. Additionally, a desalination plant was built to provide fresh water for the nearby villages.

We Get Our Own Stamp!

A giant ceremony was made to commemorate the opening of the Zueitina terminal. The new sand “freeway” through the desert would first be driven on by a car carrying King Idris followed by dozens of others in a grand procession. As the king’s car passed, sheep were sacrificed (which apparently was not fully appreciated by our wives, who were in the non-air-conditioned and very last car with the king’s wife). Once again the king was very pleased with Oxy Libya and presented us with a national postage stamp of our joint accomplishment.

By the summer of 1969, those 40 wells were producing 800,000 BOPD. At that time Oxy Libya became the eighth largest producer in the world. Gaddaffi spoiled the party on Sept. 9, 1969, after leading a coup d’état on Sept. 9. All of the other Oxy fields were never or only partially developed. One million barrels a day had been within sight.

I’ve been extraordinarily privileged to have worked with the amazing friends that comprised our team that forged Oxy. In the ensuing 15 years we went on to discover 10 BBOE. Not too bad for a little company from Bakersfield!

crvzseeceweqftawfxrxswxeadzavcbaq

Comments (1)

Great story
In the late 1960's I was General Manager of the Planet Group of Exploration Companies (www.planetgeo.org) in Australia and I spent Christmas in Bakersfield working with Oxy on a joint tender for two offshore exploration permits at the northern end of the Great Barrier Reef. This was during the full excitement of the Libyan discoveries and development of the fields, pipeline and port. Dr Armand Hammer was indeed a visionary and provided support and advice for our tender. Well, we won the tender, but the next item on the Queensland Government's meeting agenda was the Great Barrier Reef. This resulted in the Great Barrier Royal Commission and they recalled the secretary who was to send us the telex confirming that we had won the tender, and the rest is history. Oil drilling on the Great Barrier Reef is banned. It was a real thrill to share in the excitement of Oxy at this time. We later did feasibility studies with Oxy on some mining projects including iron ore, rail lines and port facilities in Western Australia, but unfortunately did not succeed in a deal. Graham Brown, AAPG Member since 1962
Show more
7/10/2016 10:43:43 PM
crvzseeceweqftawfxrxswxeadzavcbaq

You may also be interested in ...