More than 10 billion barrels of oil have been found in the small yet incredibly prolific Los Angeles Basin. And, despite being one of the most urbanized areas in the nation, drilling and production still endure, tucked as inconspicuously as possible in and among southern California's freeways and manicured landscapes. Exploration has been ongoing in the Los Angeles Basin since Brea-Olinda Field was discovered in 1880. The basin's heyday was in the 1920s and '30s, when the supergiant Huntington Beach, Long Beach and Wilmington fields were found, holding reserves of 1.3 billion, 1.1 billion and 3 billion barrels of oil equivalent (BOE), respectively. Discoveries continued to mount through the following decades, culminating with the 1976 find of the 220-million-barrel Beta Field, the last major discovery. Amazingly, despite more than a century of activity, few deep wells have been drilled in the Los Angeles Basin. The immense discoveries made during the first half of the 1900s were mainly from shallow, structurally controlled reservoirs, and deeper zones were deemed to be too tight to produce at the same prodigious rates. Also, exploration activity slowed tremendously after the 1960s, so such newer technologies as 3-D seismic were not applied to the old fields. In addition, major companies that operated most of the basin's production had a wealth of opportunities to choose from in other basins, and the hassle of operating in such a densely populated area was not offset by their assessments of the remaining potential. In a story repeated throughout the oil patch, independent operators have changed that dynamic. Majors have been shedding their aging Los Angeles Basin properties in recent years, and independents are looking hard at bypassed zones and deeper reservoirs in their acquired fields. A deeper-pool discovery Plains Exploration & Production Co. has done just that. The independent's parent company, Plains Resources Inc., from which it was spun off in December 2002, had entered the Los Angeles Basin in 1992 when it purchased assets including Inglewood, East Beverly Hills, San Vicente and South Salt Lake fields from Chevron U.S.A. Inc. It later added Montebello Field to its portfolio. Plains had already done quite well in the basin, jumping its production from 6,700 BOE per day in 1992 to 12,200 per day in 2002, thanks to a strategy of fine-tuning and production enhancement. During 2003, the new firm spent $34 million in the Los Angeles Basin, drilling 15 production and 10 injection wells on its properties, and conducting a number of recompletions. These activities raised its average net daily production to 14,400 BOE. Plains also acquired the first 3-D seismic survey in the onshore Los Angeles Basin. It shot 21.5 square miles of seismic at Inglewood, a venerable field that dates back to 1924. During 80 years of production, 900-acre Inglewood has made some 400 million barrels of oil, three-quarters of that from shallow Pliocene Vickers and Rindge reservoirs. At the time of its 3-D shoot, Plains was producing about 7,000 BOE per day from some 250 shallow wells and 60 deeper Miocene wells at Inglewood. All of that production was from reservoirs under waterflood; average API oil gravity was 23 degrees. The company's interest was piqued by the deeper Miocene turbidites, which it saw as underexploited. Deep is relative in this part of the world-Inglewood's shallow Vickers-Rindge production occurs at depths of less than 3,500 feet, and the "deep" targets occur down to basement at 10,500 feet. The Deep Inglewood #1 was drilled to 8,000 feet by Plains and completed in February 2004 flowing approximately 800 BOE per day from Miocene zones. The discovery continues to produce in the neighborhood of 575 to 625 BOE per day. "The pressure is pretty steady at this point," James Flores, Plains E&P chairman, president and chief executive officer, told analysts and investors in a conference call in May. "For us to find porosity at depth in Inglewood and have a well hold up like this has truly changed our thinking on a lot of things." The company's economic projections on Deep Inglewood were calculated on rates of 130 BOE per day, with anticipated recoverable reserves of 400,000 to 500,000 per well. Needless to say, the first test has greatly surpassed initial expectations. Not only are the rates far higher than the predictions, the recovery is primary and the oil gravity is 42 degrees. Plains has been keeping one rig busy at Inglewood, drilling a program of wells designed to test different exploratory concepts and fault blocks in the field. To date, each of the wells has encountered multiple pay sands, it says. The reservoirs in the #2 and #3 DI wells are tighter than those encountered in the #1 and #4 DI wells, however, and Plains has begun to fracture-stimulate several of those tighter intervals. "Thus far we have learned a great deal about Deep Inglewood, and we have gathered the necessary data to learn much more," said Thomas Gladney, executive vice president, exploration and production. "We learned via the drillbit that the geological model of Deep Inglewood we derived from the 3-D seismic data is valid, and this model is an understanding that is significantly different than that believed by literally several generations of geologists." The company uses the 3-D data to predict fault intersections, formation tops and areas of vertical bedding that can create drilling problems. It has also collected whole core, bottomhole pressure measurements, formation fluid samples, and modern well-log suites. It is now close to bringing on a second rig for offset development work. This year, Plains expects to drill about 15 deep wells at Inglewood; in 2005, it could drill as many as 35 wells in the play. "It's going to be very difficult to drill a dry hole in this program," said Gladney. "There are so many different sand packages that you can complete in many zones. The wells cost $1- to $1.5 million to drill, and the economics are phenomenal." Squeezing more Another independent active in the Los Angeles Basin is BreitBurn Energy Co. LLC. The firm, headquartered in downtown Los Angeles, was formed in 1988 by co-chief executive officers Hal Washburn and Randy Breitenbach. The private company focuses on operating mature, geologically complex oil fields in challenging urban environments. It aggressively exploits these older fields, using its reservoir engineering expertise to ratchet up recovery rates. (At press time, Calgary-based Provident Energy Trust purchased BreitBurn, which will continue as a stand-alone business unit.) BreitBurn made its first large purchase in 1993, acquiring Sawtelle Field and the West Pico Unit of East Beverly Hills Field from Occidental Petroleum. Both accumulations had been discovered by Occidental in the 1960s, and were urban fields developed with special drillsites. The independent made another whopping addition to its portfolio in 1999, buying Texaco's assets in the basin. As part of this deal, BreitBurn acquired the 770-million-BOE Santa Fe Springs, an aging mammoth of a field. Today, the company operates nine fields in the Los Angeles Basin, including giants Brea-Olinda and Seal Beach. It produces 3,500 BOE net per day from some 325 wells, and owns proved reserves of around 40 million BOE. "A lot of people are afraid to come to California because of the environmental issues," says Thurmon Andress, Houston-based managing director. "But California has already gone through the problems-and solved them-that other states will eventually have to go through. We're very comfortable with operating out there." BreitBurn saw tremendous opportunities in what some would consider tired old assets just a step from abandonment. "We're very focused on engineering and geoscience," says Washburn. "We try to buy interests in a very large field and add 2% to 3% to ultimate recovery." This year, the company plans to drill 15 wells, each running in the range of $1 million to drill and complete. The company's average finding and development cost is under $2 per barrel; typically, its capital spending runs about $20 million per year. "In every case, we have increased production from the properties that we have purchased, and sometimes the increase has been dramatic," he says. "We have also flattened declines." Its strategy is to employ highly experienced people and work the fields hard. "We do the same things that most independents do when we first get in the door in an old field," says Breitenbach. "We cut costs, look for low-hanging fruit, resize equipment, change pump methods and perform many of the physical tasks that can be done quickly." At the same time, the company's technical team puts together a full 3-D model on the geology and the reservoir fluid flow of the field. Using that, it makes decisions on such capital-intensive investments as reconfiguring waterfloods, downspacing and redrilling wells. "We also recomplete behind-pipe reservoirs, perforate unswept zones, and return shut-in wells to production," says Washburn. Certainly, the Plains discovery at Inglewood has been a positive for BreitBurn, as it operates a number of similar fields. Santa Fe Springs, for instance, has 2.8 billion barrels of oil in place. This structural trap, discovered in 1919, produces from stacked high-energy turbidites ranging in depth from 2,000 to more than 9,000 feet. Sediments occur down to 30,000 feet, but only a handful of wells have been drilled below 10,000 feet, notes Breitenbach. In addition to its subsurface assets, BreitBurn also controls more than 180 acres of real estate in the basin. "We are very much in the real estate business in downtown Los Angeles," says Andress. When the company acquired its portfolio of aged fields, it took on the associated plugging and abandonment obligations. It also received title to the lands, which in this part of California were often owned in fee by the oil operators. That accompanying real estate has proven to be very valuable, and subsidiary BreitBurn Land Co. focuses on these holdings. On one purchase, BreitBurn assumed a $1-million plug-and-abandonment obligation. It abandoned the production, rebuilt the infrastructure and sold the property for $5 million. "We control close to $50 million worth of real estate," says Breitenbach. "The land value is significantly more than the cost of abandonment." Discreet drilling Naturally, working in southern California brings with it some special considerations, says Breitenbach. Although the regulatory agencies have not presented problems, there are people who oppose the industry's operations. "Some people have their minds made up, and you can't do anything about that. But within the confines of our properties, we haven't had problems at all. We've never been shut down, but we do try to come into a project with the rational understanding of what is acceptable." Certainly, the industry is circumspect in Los Angeles, and many people don't even realize that they are living and working in and amongst producing oil fields. After BreitBurn acquired Occidental's interests in the 460-acre West Pico Unit, it spent four years planning a major modernization of the drillsite, which lies just a block south of Beverly Hills and eight miles from downtown Los Angeles. Occidental had disguised its drilling rig, built in the 1960s, inside the facade of a 10-story office building. BreitBurn conducted public hearings and environmental reviews, and commissioned a Norwegian company to build a totally enclosed and electrified custom rig. The rig, one of only a few such in the world, features a rack-and-pinion drive that is much quieter than a conventional drawworks. The loading area is accessed by a series of sliding doors, and the derrick and rig floor move along a track system from wellhead to wellhead. The rig sits on five city lots, enclosed in a soundproof building that mimics a clock tower. BreitBurn also installed a sound- and video-monitoring system to ensure compliance with the strict local ordinances. "It is an engineering marvel," says Andress. "You can be standing right outside the wall and you can't hear a thing." The company can now drill 24 hours a day, seven days a week; previously, it was restricted to operating only during daylight hours, five days a week. BreitBurn is currently redrilling the fourth well in a multi-well program at West Pico. The wells are on five-acre spacing and reach depths between 6,000 and 9,000 feet in the Pliocene and Miocene. Of the unit's 60-plus existing wells, 38 are on production and are making approximately 1,000 BOE per day. The company expects to eventually more than double its production from the site, both from redrills and from reworks of existing wells. Generally, the cost associated with environmental issues is the cost associated with raising standards, says Washburn. All of BreitBurn's field equipment is electrified; it all features 100% vapor-recovery and zero-discharge systems. "Once you've spent the capital to raise the standard, the ongoing maintenance for running the field operations is relatively low. "Our costs are not dramatically more than those of a Permian Basin operator with high water-cut production, and we don't see environmental expenses as being a big part of our cost structure at all." Truly, a considerable amount of oil can still be withdrawn from this part of the Golden State. As these independents know, the Los Angeles Basin is far from depleted, and working in its urban areas is challenging but feasible.